HILS Hillstream BioPharma Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported) July 5, 2023

 

HILLSTREAM BIOPHARMA, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		001-41210		84-2642541
(State or other jurisdiction		(Commission		(I. R. S. Employer
of incorporation)		File Number)		Identification No.)

 

1200 Route 22 East, Suite 2000

Bridgewater, NJ 08807

(Address of principal executive offices, including zip code)

 

(908) 955-3140

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, $0.0001 par value		HILS		The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

On July 5, 2023 (the “ABSI Effective Date”), Hillstream BioPharma, Inc. (the “Company”) entered into a Research and Development Collaboration and License Agreement (the “ABSI Agreement”) with Applied Biomedical Science Institute (“ABSI”) pursuant to which ABSI granted the Company an exclusive royalty-bearing, sublicensable license to the ABSI Patents (as defined in the ABSI Agreement) and a non-exclusive, royalty-bearing, sublicensable license to the ABSI Know-How (as defined in the ABSI Agreement) to Exploit (as defined in the ABSI Agreement) the ABSI Products (as defined in the ABSI Agreement) for the treatment, diagnosis, prediction, detection or prevention of disease in humans and animals worldwide (the “Territory”).

 

Pursuant to the ABSI Agreement, the parties shall form a committee to manage the preclinical, investigational new drug enabling studies and such other activities as shall lead to the initiation of a Phase 1 clinical trial of the ABSI Product. The parties will collaborate on a Target-by-Target basis to identify and evaluate ABSI Products directed against such Target with a view to identifying or generating suitable Products (as defined in the ABSI Agreement) for the Company to Exploit. “Target” means ErB2 (Her2) and ErbB3. Upon completion of the Discovery Timeline (as defined in the ABSI Agreement) for a Target, subject to the terms and conditions of ABSI Agreement, the Company shall exclusively own any ABSI Products against such Target. In the event the committee determines that the discovery activities are unsuccessful with respect to a Target, the Company may propose an additional target, which, upon approval by ABSI, shall replace a failed Target.

 

Pursuant to the ABSI Agreement: (i) within 30 days of the ABSI Effective Date, the Company will issue ABSI such number of shares of its common stock in an amount equal to $250,000 based on the ten day trailing volume weighted-average price; (ii) in the event the Company closes a financing pursuant to which it receives more than $10 million in Net Proceeds (as defined in the ABSI Agreement), the Company shall pay ABSI a mid six digit amount; (iii) upon the achievement of certain milestones as set forth in the ABSI Agreement, the Company shall pay ABSI up to an aggregate of $8,250,000; (iv) after the second anniversary of the ABSI Effective Date, the Company shall pay ABSI a low five digit amount for the first year and a mid five digit amount thereafter during the Royalty Term (as defined in the ABSI Agreement); and (v) during the Royalty Term for each Product, the Company shall pay ABSI a quarterly royalty on the Net Sales (as defined in the ABSI Agreement) with royalties at percentages which range from the low to mid single digits, with high Net Sales being subject to lower royalty rates, subject to adjustment as set forth in the ABSI Agreement. In addition, in the event the Company transfers all or substantially all of its rights to a Product to a third party, the Company shall pay to ABSI the percentage of Net Proceeds attributable to the transfer of the Product. Specifically, the Company shall pay ABSI amounts at percentages which range from the mid single digit to low double digits depending on the Company Expenses (as defined in the ABSI Agreement), with higher Company Expenses being subject to lower rates.

 

On a Product by Product basis, upon the expiration of the last Royalty Term of such Product in the Territory, licenses granted to the Company with respect to such Product shall be deemed non-exclusive, fully paid, royalty-free, perpetual and irrevocable. The ABSI Agreement shall expire upon the expiration of the last Royalty Term of the last Product, unless such agreement is terminated earlier pursuant to its terms. The ABSI Agreement may also be terminated (i) by either the Company or ABSI for (A) a material breach of the ABSI Agreement or (B) bankruptcy, (ii) ABSI may terminate the ABSI Agreement upon the commencement of a Challenge Proceeding (as defined in the ABSI Agreement) or (iii) the Company may terminate the ABSI Agreement at any time upon 90 days prior written notice to ABSI. Upon termination or expiration of the ABSI Agreement other than as a result of a bankruptcy or Challenge Proceeding, all licenses granted to the Company pursuant to such agreement will terminate and all rights under such licenses shall revert to ABSI.

 

 

The foregoing description of the ABSI Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to the full text of the ABSI Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

On July 6, 2023, the Board appointed Sireesh Appajosyula, the Company’s director, as Chief Operating Officer of the Company effective immediately. In connection with his appointment as Chief Operating Officer of the Company, Mr. Appajosyula resigned as Chair and a member of the Company’s nominating and corporate governance committee.

 

Sireesh Appajosyula has served as a member of the Company’s board of directors since July 2021. Since April 2020, he has served as SVP, Corporate Development and Operations of 9 Meters Biopharma, Inc. (Nasdaq: NMTR) (“9 Meters”), a company focused on rare and unmet needs in gastrointestinal patient populations developing compounds with unique gastrointestinal biology, and since 2018 he has served as Managing Member of Highpoint Pharmaceuticals, LLC, a pharmaceutical research and development company. In addition, since 2015, Mr. Appajosyula has served as Managing Partner of Channel BioConsulting, LLC, a company that assists in enhancing search and evaluation efforts for complementary assets to be added to existing portfolios of biopharmaceutical companies. Prior to joining 9 Meters, Mr. Appajosyula spent approximately eight years at Salix Pharmaceuticals, Inc. (“Salix”) (Nasdaq: SLXP) in various roles in medical affairs, product commercialization and business development until its acquisition by Bausch Health (Nasdaq: BHC). Prior to Salix, he was involved in various roles at Amgen Inc., Critical Therapeutics, Inc. and Sanofi (formerly Aventis). Mr. Appajosyula received his Bachelor of Science and Doctor of Pharmacy from Rutgers University.

 

In connection with Sireesh Appajosyula’s appointment as Chief Operating Officer of the Company, on July 11, 2023 (the “Appajosyula Effective Date”), the Company entered into an employment agreement (the “Appajosyula Employment Agreement”) with Mr. Appajosyula. The Appajosyula Employment Agreement shall continue for a period of five years and, thereafter, shall automatically renew for successive one year terms unless either party provides the other party with written notice of non-renewal at least 60 days prior to the last day of the then current term. Pursuant to the Appajosyula Employment Agreement, Mr. Appajosyula shall: (i) receive a base salary of $400,000 per year, which may be increased by the Board; (ii) be eligible to receive an annual bonus equal to 50% of his then base salary based upon the achievement of Company and individual targets to be established by the Board, in its sole discretion; (iii) shall be eligible to receive equity-based compensation awards as determined by the Company; (iv) receive reimbursement of reasonable business expenses; and (v) receive such other benefits that the Company may make available to its senior executives from time to time along with vacation, sick and holiday pay in accordance with the Company’s policies established and in effect from time to time.

 

In the event Mr. Appajosyula’s employment is terminated, the Company shall pay him his base salary through the last day of his employment, payment for any unused vacation time in accordance with the Company’s policies established and in effect from time to time, any reimbursable business expenses and any earned but unpaid bonuses (collectively, the “Accrued Compensation”). In the event Mr. Appajosyula’s employment is terminated as a result of his death or Disability (as defined in the Appajosyula Employment Agreement), Mr. Appajosyula shall receive, in addition to the Accrued Compensation, (i) his base salary through the date which is 90 days after his death or Disability and (ii) such other or additional benefits, if any, as may be provided under applicable employee benefit plans, programs and/or arrangements of Company. In addition, all shares of capital stock of Company held by Mr. Appajosyula that are subject to vesting (“Restricted Shares”) and all options to purchase shares of capital stock of Company (“Stock Options”) that are scheduled to vest on or before the next succeeding anniversary of the Appajosyula Effective Date shall be accelerated and deemed to have vested as of the termination date. All Restricted Shares and Stock Options that have not vested as of the date of termination shall be forfeited as of such date. Stock Options that have vested as of Mr. Appajosyula’s termination shall remain exercisable until the earlier of (i) 60 months following such termination and (ii) the expiration date of such Stock Options. In connection with Mr. Appajosyula’s Disability, all payments, benefits and/or grants pursuant to the Appajosyula Employment Agreement shall be subject to Mr. Appajosyula’s execution and delivery within 21 days of separation from service of a general release of the Company, its parents, subsidiaries, and affiliates and each of its officers, directors, employees, agents, successors and assigns in a form that is acceptable to Company. In the event Mr. Appajosyula’s employment is terminated for Cause (as defined in the Appajosyula Employment Agreement), Mr. Appajosyula shall receive, in addition to the Accrued Compensation, such other or additional benefits, if any, as may be required under applicable employee benefit plans, programs and or arrangements of Company or by law; provided, however, all Restricted Shares that have not vested as of the date of termination shall be forfeited and all unexercised Stock Options vested as of the termination date shall remain exercisable for 90 days following such termination. In the event Mr. Appajosyula’s employment is terminated by the Company other than as a result of his death or Disability and other than for Cause, or if Mr. Appajosyula terminates his employment for Good Reason (as defined in the Appajosyula Employment Agreement), then, in addition to the Accrued Compensation, the Company shall (i) continue to pay Mr. Appajosyula’s base salary and provide health benefits for a period of 12 months following the termination date or, in the case of benefits, such time as Mr. Appajosyula receives equivalent coverage and benefits under plans and programs of a subsequent employer; and (ii) provide such other or additional benefits, if any, as may be provided under applicable employee benefit plans, programs and/or arrangements of the Company (other than any severance plans or programs). In addition, all Restricted Shares and Stock Options that have not vested as of the date of termination shall be forfeited and outstanding unvested time-based equity awards shall be accelerated in accordance with the applicable vesting schedule as if Mr. Appajosyula had been in service for an additional six months as of the termination date. Moreover, Stock Options that have vested as of the termination date shall remain exercisable until the earlier of (i) 60 months following such termination and (ii) the expiration date of the Stock Option. The foregoing payments shall be subject to Mr. Appajosyula’s execution of a separation agreement within 60 days from his termination date. In addition, the Company and Mr. Appajosyula may terminate the Appajosyula Employment Agreement for any reason or no reason at any time by written notice to the other party, in which case, if terminated by Mr. Appajosyula, he shall not receive payments or benefits other than the Accrued Compensation. Lastly, in the event Mr. Appajosyula’s employment is terminated (i) by the Company without Cause at any time within 12 months prior to the consummation of a Change of Control (as defined in the Appajosyula Employment Agreement), if, prior to, or as of such termination, a Change of Control transaction was Pending (as defined in the Appajosyula Employment Agreement) at any time during such 12 month period, (ii) by Mr. Appajosyula for Good Reason at any time within 12 months after the consummation of a Change of Control, or (iii) by the Company without Cause at any time upon or within 12 months after the consummation of a Change of Control, then, Mr. Appajosyula shall be entitled to (A) the acceleration and vesting in full of any then outstanding and unvested portion of any time-vesting equity award with, options continuing to be exercisable for 60 months following termination (or, if earlier, their expiration date); (B) his base salary; and (C) any bonus and equity awards he is entitled to; provided, however, that the severance amount shall equal two times the sum of his base salary and target bonus and the severance period shall be 24 months. The Appajosyula Employment Agreement also contains covenants prohibiting Mr. Appajosyula from disclosing confidential information with respect to the Company and non-competition, non-solicitation and non-disparagement restrictions.

 

 

The foregoing description of the Appajosyula Employment Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to the full text of the Appajosyula Employment Agreement, a copy of which is attached hereto as Exhibit 10.2 and is incorporated herein by reference.

 

There are no family relationships between Mr. Appajosyula and any of our directors or executive officers. Except as set forth herein, there is no arrangement or understanding between Mr. Appajosyula and any other persons pursuant to which Mr. Appajosyula was appointed as Chief Operating Officer of the Company. There are no related party transactions involving either Mr. Appajosyula that are reportable under Item 404(a) of Regulation S-K.

 

In addition, on July 6, 2023, the Company entered into an amended and restated employment agreement (the “Milby Employment Agreement”) with Randy Milby, the Company’s Chief Executive Officer. The Milby Employment Agreement has the same terms as of the Appajosyula Employment Agreement except, Mr. Milby shall (i) receive a base salary of $500,000 per year, which may be increased by the Board; and (ii) be eligible to receive an annual bonus equal to 60% of his then base salary based upon the achievement of Company and individual targets to be established by the Board, in its sole discretion. In addition, in the event Mr. Milby’s employment is terminated by the Company other than as a result of his death or Disability (as defined in the Milby Employment Agreement) and other than for Cause (as defined in the Milby Employment Agreement), or if Mr. Milby terminates his employment for Good Reason (as defined in the Milby Employment Agreement), then, in addition to the Accrued Compensation, the Company shall continue to pay Mr. Milby’s base salary and provide health benefits for a period of 18 months following the termination date and all Restricted Shares and Stock Options that have not vested as of the date of termination shall be forfeited and outstanding unvested time-based equity awards shall be accelerated in accordance with the applicable vesting schedule as if Mr. Milby had been in service for an additional 12 months as of the termination date.

 

The foregoing description of the Milby Employment Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to the full text of the Milby Employment Agreement, a copy of which is attached hereto as Exhibit 10.3 and is incorporated herein by reference.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No.		Description
10.1#		Research and Development Collaboration and License Agreement by and between the Company and Applied Biomedical Science Institute dated July 5, 2023
10.2 +		Employment Agreement by and between the Company and Sireesh Appajosyula dated July 11, 2023
10.3 +		Amended and Restated Employment Agreement by and between the Company and Randy Milby dated July 6, 2023
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

# Pursuant to Item 601(b)(10) of Regulation S-K, certain confidential portions of this exhibit were omitted by means of marking such portions with an asterisk because such information is both not material and is the type that the Company treats as private or confidential.

 

+ Indicates a management contract or any compensatory plan, contract or arrangement.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: July 11, 2023	Hillstream BioPharma, Inc.
	/s/ Randy Milby
	Randy Milby
	Chief Executive Officer

 

 

Exhibit 10.1

 

[*] CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.

 

RESEARCH AND DEVELOPMENT COLLABORATION AND LICENSE AGREEMENT

 

This Research and Development Collaboration and License Agreement (the “Agreement”) is entered into as of July 5, 2023 (the “Effective Date”) by and between Applied Biomedical Science Institute (ABS Institute), a 501(c)(3) non-profit organization, having a place of business at 11011 Via Frontera, Building D, San Diego, CA 92127 (“ABSI”), and Hillstream BioPharma Inc., a Delaware corporation having an address at 1200 Route 22 East, Suite 2000, Bridgewater, NJ 08807 (“HSB”). HSB and ABSI may be referred to herein individually as a “Party” or collectively as the “Parties”.

 

Recitals

 

Whereas, ABSI focuses on life science research, antibodies, antibody-related biologics, peptides, and peptide-related research and development;

 

Whereas, HSB possesses expertise in the research, development, manufacturing, and commercialization of human biopharmaceuticals;

 

Whereas, HSB and ABSI desire to engage in a collaborative agreement in which ABSI will carry out initial discovery and development work funded by HSB to generate ABSI Products (defined herein) and conduct Discovery and Characterization Studies; and

 

Whereas, the ABSI Products and research data would be transferred to HSB for evaluation and potential to formulate and develop the Products (as defined below) which would be used by HSB (or ABSI as the case may be) to conduct Feasibility Studies and IND-Enabling Studies, which if successful, would potentially progress the Products for clinical development and commercialization by HSB.

 

Agreement

 

Now, Therefore, in consideration of the foregoing premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, HSB and ABSI hereby agree as follows:

 

1. Definitions

 

1.1 “ABSI IP” means any and all Intellectual Property Rights in ABSI Know-How and ABSI Patents.

 

1.2 “ABSI Know-How” means (a) any and all Know-How that is Controlled by ABSI and (b) any and all Collaboration Know-How that is owned (solely or jointly) by ABSI, each of (a) and (b) to the extent necessary or reasonably useful for the Exploitation of a Product, including among other things discovery, engineering, libraries, and analysis technology such as processes and methods to discover and generate and evaluate ABSI Products. All ABSI Know-How shall be deemed ABSI Confidential Information.

 

 

1.3 “ABSI Patents” means (a) any and all Patents Controlled by ABSI and (b) any and all Collaboration Patents that are owned (solely or jointly by ABSI) by ABSI, each of (a) and (b) to the extent Covering the Exploitation of ABSI Products or Products; provided, however, that ABSI Patents shall exclude all Patents that come into ABSI’s Control as a result of a change of control of ABSI or through Third Party collaborative arrangements unless expressly included herein.

 

1.4 “ABSI Product” means Antibodies as are identified, engineered, generated, or characterized by or on behalf of ABSI during the performance of this Agreement using the ABSI Know-How directed against Targets pursuant to a Discovery and Characterization Study Plan.

 

1.5 “Accounting Standards” means generally acceptable accounting practices (GAAP) consistently applied.

 

1.6 “Affiliate” means, with respect to a Party, any entity that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with such Party, but for only so long as such control exists. As used in this Section 1.6, “controlled by” and “under common control with” means (a) to possess, directly or indirectly, the power to direct the management or policies of an entity, whether through ownership of voting securities, by contract relating to voting rights or corporate governance; or (b) direct or indirect beneficial ownership of more than fifty percent (50%) (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) of the voting share capital or other equity interest in such entity.

 

1.7 “Antibody” means a molecule, or a gene encoding a molecule, comprising or containing one or more immunoglobulin variable domains or parts of such domains, or any existing or future fragments, variants, fusion proteins, sequences, modifications or derivatives of (or in a series beginning with) such molecule or gene.

 

1.8 “Applicable Law” means the applicable provisions of any and all national, supranational, regional, state, and local laws, treaties, statutes, rules, regulations, administrative codes, guidance, ordinances, judgments, decrees, directives, injunctions, orders, permits of or from any court, Regulatory Authority, or other Governmental Authority having jurisdiction over or related to the subject item.

 

1.9 “Background IP” means with respect to a Party, any and all Know-How and Intellectual Property Rights (a) Controlled by such Party prior to the Effective Date or (b) Controlled or Generated by such Party during the Term, but independent of the performance of the activities contemplated under this Agreement and without the use of, reliance on or access to the other Party’s Confidential Information.

 

 

1.10 “Biosimilar Product” means, with respect to a Product and on a country-by-country basis, any product that is not produced, licensed or owned by HSB or any of its Affiliates or any Sublicensee (including a “generic product,” “biogeneric,” “follow-on biologic,” “follow-on biological product,” “follow-on protein product,” “similar biological medicinal product,” or “biosimilar product”) approved by way of an abbreviated regulatory mechanism by the relevant Regulatory Authority in a country in reference to such Product that (a) is sold in the same country as the applicable Product by any Third Party that is not a Sublicensee or an Affiliate of HSB or any Sublicensee; (b) has been granted Regulatory Approval with reference to, or in reliance on, in whole or in part, a prior Marketing Approval of such Product; and (c) has been granted Regulatory Approval as a biosimilar or interchangeable biological product with such Product by the applicable Regulatory Authority, in each case, as is necessary to permit substitution of such product for the Product under Applicable Law in such country.

 

1.11 “Budget” means, with respect to a Discovery and Characterization Study Plan, the budget set forth therein for the conduct of Discovery Activities.

 

1.12 “Calendar Quarter” means each respective period of three (3) consecutive months ending on March 31, June 30, September 30, and December 31, except that the first Calendar Quarter of the Term (defined herein) shall commence on the Effective Date and end on the day immediately prior to the first to occur of January 1, April 1, July 1 or October 1 after the Effective Date, and the last Calendar Quarter shall end on the last day of the Term.

 

1.13 “Calendar Year” means each respective period of twelve (12) consecutive months ending on December 31, except that the first Calendar Year of the Term shall commence on the Effective Date and end on December 31 of the year in which the Effective Date occurs, and the last Calendar Year of the Term shall commence on January 1 of the year in which the Term ends and end on the last day of the Term.

 

1.14 “Collaboration IP” means any and all Collaboration Know-How and Intellectual Property Rights in Collaboration Know-How, including any Collaboration Patents.

 

1.15 “Collaboration Know-How” means any and all Know-How that is Generated by or on behalf of a Party in the performance of the activities contemplated under this Agreement (whether alone or in collaboration with others).

 

1.16 “Collaboration Patents” means any and all Patents Controlled by a Party (or by the Parties jointly) that Cover an invention within Collaboration Know-How Generated by or on behalf of a Party (whether alone or in collaboration with others).

 

1.17 “Combination Product” means any pharmaceutical product containing (a) an ABSI Product and (b) at least one other active pharmaceutical ingredient, either co-formulated or packaged together and sold as a single unit.

 

 

1.18 “Commercialization” means the conduct of all activities undertaken before and after Regulatory Approval relating to the promotion, sales, marketing, medical support, and distribution (including importing, exporting, transporting, customs clearance, warehousing, invoicing, handling, and delivering Products to customers) of Products in the Field in the Territory, including sales force efforts, detailing, advertising, market research, market access (including price setting and reimbursement activities), medical education and information services, publication, scientific and medical affairs, advisory and collaborative activities with opinion leaders and professional societies including symposia, marketing, sales force training, and sales (including receiving, accepting, and filling Product orders) and distribution. “Commercialize” and “Commercializing” have correlative meanings.

 

1.19 “Commercially Reasonable Efforts” means, with respect to the efforts and resources to be expended by a Party with respect to an objective under this Agreement, that level of efforts and resources customarily used by similarly-situated companies in the pharmaceutical or biopharmaceutical industry to achieve a similar objective in similar circumstances, taking into account all relevant factors including efficacy, safety, product profile, expected and actual approved labelling, the expected and actual competitiveness of alternative products in development and in the marketplace, supply chain management considerations, and the proprietary position of the product (including with respect to patent or regulatory exclusivity).

 

1.20 “Company Expenses” mean the aggregate expenses incurred or accrued in accordance with Accounting Standards relating to the Development (including regulatory and intellectual property related expenses) and Exploitation of a Product and operations of HSB, including, without limitation, all direct expenses and indirect and overhead expenses in support of such activities.

 

1.21 “Competing Product” means a biopharmaceutical product that has the same mechanism of action, targeting moiety (e.g., epitope), and is pharmacologically interchangeable with a Product for the same therapeutic indication.

 

1.22 “Confidentiality Agreement” means that certain Mutual Confidential Disclosure Agreement by and between the Parties dated as of February 4, 2023, as it may be amended.

 

1.23 “Control” or “Controlled” means, with respect to any Know-How or Intellectual Property Rights, possession of the right, whether directly or indirectly, and whether by ownership, license, or otherwise (but without taking into account any rights granted by one Party to the other Party pursuant to this Agreement) to grant access, a license, or a sublicense of or under such Know-How or Intellectual Property Right to the other Party, without breaching the terms of any agreement with a Third Party, or misappropriating the proprietary or trade secret information of a Third Party.

 

1.24 “Contract Year” means each respective period of three hundred sixty-five (365) days ending on the anniversary of the Effective Date.

 

 

1.25 “Cover” means, with respect to a Patent in reference to a Product, a Valid Claim would be infringed by an unauthorized individual or entity making, having made, selling, offering to sell, using or importing such Product (or a generic or biosimilar version of such Product) in such jurisdiction; provided, however, that in determining whether a Valid Claim that is a claim of a pending application would be infringed, it shall be treated as if issued in the form then currently being prosecuted. Cognates of the word “Cover” shall have correlative meanings.

 

1.26 “Data Package” means, (a) with respect to the Target, a list of all ABSI Products; and (b) with respect to each ABSI Product listed the assessments, testing, and analyses agreed in the Discovery and Characterization Study Plan for such Target.

 

1.27 “Development” means all development activities for a Product (whether alone or for use together, or in combination, with another active agent or pharmaceutical product as a Combination Product or combination therapy) that are directed to obtaining Regulatory Approval(s) of a Product and lifecycle management of a Product in any country in the world, including all non-clinical, preclinical, and clinical testing and studies of a Product; toxicology, pharmacokinetic, and pharmacological studies; statistical analyses; assay development; protocol design and development; the preparation, filing, and prosecution of any MAA for a Product; development activities directed to label expansion and/or obtaining Regulatory Approval for one or more additional indications following initial Regulatory Approval; development activities conducted after receipt of Regulatory Approval, including Phase 4 studies; and all regulatory affairs related to any of the foregoing. “Develop” and “Developing” have correlative meanings.

 

1.28 “directed against” means, as used in connection with a Target, that the product or agent at issue is designed to interact or bind with such Target as its primary mechanism of action.

 

1.29 “Discovery Activities” means, with respect to a Discovery and Characterization Study Plan, the research activities contemplated by such Discovery and Characterization Study Plan and any associated manufacturing or supply activities contemplated under Section 3 (Discovery Activities).

 

1.30 “Discovery and Characterization Study Plan” means the discovery and development work for the purpose of generating Data Package(s) to be conducted and the concomitant Discovery Timelines and budget with respect to ABSI Products, including any mechanistic proof-of-concept in vitro studies to characterize ABSI Products, each as outlined in reasonable detail in Exhibit B.

 

1.31 “Discovery Timeline” means, on a Target-by-Target basis, the mutually agreed time period required to conduct the Discovery Activities necessary to generate the Data Package for such Target, expiring on the date of delivery to HSB of the Data Package; for clarity, the Discovery Activities shall specifically exclude research activities that are not necessary to generate the Data Package.

 

1.32 “Dollars” or “$” means the legal tender of the U.S

 

 

1.33 “Exploit” means to make, have made, import, use, sell, offer for sale, 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 or otherwise dispose of. Cognates of the word “Exploit” shall have correlative meanings.

 

1.34 “Feasibility Evaluation Activities” means the research activities contemplated by the Feasibility Study Plan.

 

1.35 “Feasibility Study Plan” means the feasibility studies of ABSI Products to be performed by one or both of the Parties as described in reasonable detail in Exhibit C designed to inform a go or no-go decision by HSB to proceed with IND Enabling Studies for an ABSI Product.

 

1.36 “FDA” means the U.S. Food and Drug Administration, or any successor agency thereto.

 

1.37 “Field” means the treatment, diagnosis, prediction, detection or prevention of disease in humans and animals.

 

1.38 “First Commercial Sale” means, with respect to any Product or Biosimilar Product in any country in the Territory, the first sale, transfer, or disposition of such Product or Biosimilar Product, as applicable, to a Third Party after the applicable Regulatory Approvals have been granted by the applicable Regulatory Authority in such country for such sale, transfer, or disposition.

 

1.39 “GAAP” means the United States’ generally accepted accounting principles in effect from time to time.

 

1.40 “Generate” means, with respect to any Know-How, made, created, authored, or invented (as determined based on U.S. laws of inventorship), as applicable.

 

1.41 “GLP Studies” or “IND Enabling Studies” means those research studies required to be included in the filing of an IND for a Product in the U.S.

 

1.42 “Governmental Authority” means any national, international, federal, state, provincial, or local government, or political subdivision thereof, or any multinational organization or any authority, agency, or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power, any court or tribunal (or any department, bureau or division thereof, or any governmental arbitrator or arbitral body).

 

1.43 “HSB Capital Raise” means a financing completed by HSB which generates more than ten million Dollars ($10,000,000) in Net Proceeds to HSB.

 

1.44 “HSB IP” means any and all Intellectual Property Rights included in HSB Know-How and HSB Patents.

 

 

1.45 “HSB Know-How” means any and all Know-How (including Collaboration Know-How) that both (a) is Controlled by HSB or its Affiliates and (b) is Generated by HSB or its Affiliates in its research and development of the ABSI Product or Product pursuant to this Agreement and is reasonably useful for the Exploitation of a Product. All HSB Know-How shall be deemed HSB Confidential Information.

 

1.46 “HSB Patents” means all Patents (including Collaboration Patents) that HSB or its Affiliates Control as of the Effective Date or during the Term that (a) Cover any HSB Know-How or (b) would be infringed, absent a license or other right to practice granted under such Patents, by the Exploitation of any ABSI Product or Product provided, however, that HSB Patents shall exclude all Patents that come into HSB’s Control as a result of a change of control of HSB or through Third Party collaborative arrangements unless expressly included herein.

 

1.47 “Improvement” means, with respect to any Know-How, an advancement, modification, development, or improvement or derivative of, or enhancement to such Know-How.

 

1.48 “Intellectual Property Rights” means all rights in patents, rights to inventions, copyright and related rights, rights in trademarks, trade names and domain names, rights in designs, rights in computer software, database rights, rights in confidential information (including know-how) and any other intellectual property rights, in each case whether registered or unregistered and including all applications (or rights to apply) for, and renewals or extensions of, and supplementary protection certificates based on, such rights and all similar or equivalent rights or forms of protection which subsist or will subsist now or in the future in any part of the world.

 

1.49 “Jointly Owned Collaboration Patent” means any Patent included in Jointly Owned Collaboration IP.

 

1.50 “Know-How” means all proprietary technical information, know-how, and data, including inventions, discoveries, trade secrets, specifications, instructions, processes, formulae, compositions of matter, cells, cell lines, assays, animal models and other physical, biological, or chemical materials, expertise and other technology applicable to, development, manufacture, registration, use, or marketing or to methods of assaying or testing them, and including all biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical, and analytical, safety, nonclinical, and clinical data, regulatory documents, data and filings, instructions, processes, formulae, expertise and information.

 

1.51 “Marketing Approvals” means, with respect to a Product, all approvals, licenses, registrations, or authorizations, including emergency use authorizations, of the Regulatory Authorities in a country that are necessary for the commercial marketing and sale of such Product in such country.

 

 

1.52 “Net Sales” mean, with respect to a Product in a country in the Territory, the gross sales amount invoiced for sales of such Product by HSB or its Affiliates or any of their Sublicensees (each, a “Selling Party”) to a Third Party in a bona fide arm’s length transaction during such time period, less reasonable and customary deductions in each case related to such Product and to the extent actually incurred and allocated by the applicable Selling Party in accordance with GAAP, consistently applied, in connection with the sale of the Product to such Third Party (“Permitted Deductions”):

 

(1) Normal and customary trade, cash and quantity discounts;

 

(2) Price discounts, refunds, rebates actually taken, chargebacks, or retroactive price adjustments which effectively reduce the net selling price granted to Medicaid, other Governmental Authorities, managed health care organizations, healthcare payors, and pharmacy benefit managers (other than such which have already diminished the gross amount invoiced);

 

(3) Credits or allowances granted on returns or rejections of Product actually sold as determined by the Selling Party in good faith;

 

(4) Amounts invoiced for Product sales that are not collected but are actually written off in good faith as uncollectible (“Bad Debts”);

 

(5) Shipping, handling, freight, postage, insurance and transportation charges, but all only to the extent included in the gross amount invoiced (“Transportation-Related Charges”); and

 

(6) Any tax imposed (and not recovered by the Selling Party) on the production, sale, delivery or use of the Product, including, without limitation, import, export, sales, use, excise or value added taxes and customs and duties, but all only to the extent included as a separate line item (e.g., “taxes”) in the gross amount invoiced.

 

Annual deductions for Bad Debts shall not exceed an aggregate maximum of five percent (5%) of the total annual sales of the applicable Product.

 

With respect to the gross amounts invoiced (or otherwise charged) and Permitted Deductions not denominated in Dollars, Licensee shall convert the gross amounts invoiced (or otherwise charged) and Permitted Deductions from the applicable foreign currency into Dollars at the exchange rate reported in The Wall Street Journal, Eastern United States Edition, for the last trading day of the applicable Calendar Quarter. Based on the resulting gross amounts invoiced (or otherwise charged) and Permitted Deductions in Dollars, the then applicable Net Sales and Net Sales payments shall be calculated.

 

In the case of any transfer or disposition of Products between and among HSB and its Affiliates and Sublicensees for resale, Net Sales shall be determined based on the sale made by such Affiliate or Sublicensee to a Third Party.

 

 

HSB agrees that it shall not, and it shall not permit any other Selling Party to, dispose of any Product for any consideration other than monetary consideration and on bona fide arm’s length terms unless: (i) HSB has obtained the express prior written consent of ABSI, such consent not to unreasonably be withheld, conditioned or delayed (and which consent shall describe in reasonable detail the basis for calculation of Net Sales based on such a transaction); or (ii) such dispositions are for “IND treatment sales,” “expanded access programs,” “compassionate use sales,” “emergency use sales,” “named patient sales” or other similar sales, or are used for clinical study or other research purposes or for charitable donations in such country; or (iii) such dispositions are by way of samples provided as customary to business in the applicable country.

 

The Net Sales for Combination Products shall be calculated as follows:

 

In the event a Product is sold as part of a Combination Product in a country, the Net Sales with respect to the Combination Product in such country shall be determined for each applicable Calendar Quarter as follows:

 

(a) If any Selling Party separately sells in such country or other jurisdiction, (A) a product containing as its sole active ingredient an ABSI Product (the “Mono Product”) and (B) products containing as their sole active ingredients the other active ingredients in such Combination Product or other products (each, an “Other Active Ingredient”), the Net Sales attributable to such Combination Product shall be calculated by multiplying the Net Sales amount for the Combination Product during the applicable reporting period, calculated as set forth above, by the fraction A/(A+B), where A is HSB’s (or its Affiliate’s or Sublicensee’s, as applicable) average Net Sales price during the period to which the Net Sales calculation applies to the Mono Product in such country when sold separately, and B is the average sales price of the Other Active Ingredient(s) or product(s) in the Combination Product during the period to which the Net Sales calculation applies in such country or other jurisdiction when sold separately.

 

(b) If any Selling Party separately sells in such country or other jurisdiction the Mono Product but all the Selling Parties do not separately sell Other Active Ingredient(s) during the applicable reporting period, Net Sales shall be calculated by multiplying actual Net Sales of such Combination Product by a fraction A/C where A is the average sale price (by sales volume) of the Mono Product in such country when sold separately, and C is the weighted average sale price (by sales volume) of the Combination Product in such country.

 

(c) If the Selling Parties do not sell in such country or other jurisdiction the Mono Product but at least one Selling Party separately sells products containing Other Active Ingredients in such country or other jurisdiction, the Net Sales attributable to such Combination Product shall be calculated by multiplying the Net Sales of such Combination Product by the fraction (D-E)/D where: “D” is the average Net Sales price during the period to which the Net Sales calculation applies for such Combination Product in such country or other jurisdiction and “E” is the average Net Sales price during the period to which the Net Sales calculation applies for products that contain Other Active Ingredients.

 

 

(d) In the event that the Selling Parties do not separately sell the Mono Product and products that contain Other Active Ingredients in a given country or jurisdiction during which the Net Sales calculation applies, then the average Net Sales prices attributable to such Combination Product shall be negotiated and agreed upon by both Parties in good faith based on the relative fair market value of such Mono Product and such Other Active Ingredients, and if the Parties cannot agree upon such proxy country, or no such comparable sales figures are available in an appropriate proxy country, Net Sales for the applicable Combination Product shall be allocated based on the relative value contributed by each component (such relative value to be agreed upon by the Parties or, if the Parties cannot agree, to be determined by the dispute resolution procedures set forth in Section 14.3 (Dispute Resolution).

 

HSB covenants that (i) neither it nor any of its Affiliates or Sublicensees shall, when pricing a Product and any other product or active ingredient that are sold separately but used in combination, unfairly allocate the prices between such Product and such other product or active ingredient and (ii) HSB and its Affiliates and Sublicensees shall not manipulate the prices of such Product or any of such other product or active ingredient to avoid or reduce royalty payments or obligations that would otherwise be due for sales of such Product in combination form or otherwise.

 

1.53 “Patent” means (a) all patents, certificates of invention, applications for certificates of invention, priority patent filings, and patent applications, and (b) any renewals, divisions, continuations (in whole or in part), or requests for continued examination of any of such patents, certificates of invention and patent applications, and any all patents or certificates of invention issuing thereon, and any and all reissues, reexaminations, extensions, supplementary protection certificates, divisions, renewals, substitutions, confirmations, registrations, revalidations, revisions, and additions of or to any of the foregoing.

 

1.54 “Product” means a pharmaceutical or biopharmaceutical product (a) incorporating an ABSI Product generated pursuant to the activities under this Agreement, and (b) that is Covered by an ABSI Patent.

 

1.55 “Regulatory Approval” means, with respect to a country, final approval of a biologic license application pursuant to and/or as defined by Section 351(i)(4) of the United States Public Health Service Act (42 United States Code Section 201 et seq.) or a new drug application, an abbreviated new drug application or a 505(b)(2) application, pursuant to and/or as defined in the United States Food, Drug and Cosmetic Act and the regulations promulgated thereunder, or similar application (i.e., an application which, if approved, would have the same kind of effect in such other country or multinational region as approval of such a United States application would have in the United States) filed with an equivalent regulatory body in another country or multinational region, by the FDA or comparable final approval of a comparable document filed with an equivalent health regulatory authority in any other country or in the European Union (using the centralized process, decentralized process or mutual recognition or member state national authorization), without regard to any other Marketing Approvals such as pricing and reimbursement approvals; provided, that if a First Commercial Sale for use or consumption by a member of the general public of a Product has occurred in any country in compliance with that country’s Applicable Law, it shall be conclusively deemed for purposes of this Agreement that such approval in such country has been obtained.

 

 

1.56 “Regulatory Authority” means the European Medicines Agency, the FDA, any successor agencies thereto, and any equivalent health regulatory authorities in any applicable country or territory.

 

1.57 “Regulatory Filing” means all applications, filings, submissions, approvals, licenses, registrations, permits, notifications, and authorizations (or waivers) with respect to the testing, Development, manufacture, or Commercialization of any Product made to or received from any Regulatory Authority in a given country.

 

1.58 “Senior Officers” the Chief Executive Officer of HSB and the Chief Executive Officer of ABSI.

 

1.59 “Sublicensee” means a Third Party to whom HSB or an Affiliate of HSB or a Third Party authorized by HSB grants a sublicense to Exploit any Product. In no event shall ABSI or any of its Affiliates be deemed a Sublicensee for the purposes of this Agreement. Cognates of the word “Sublicensee” shall have correlative meanings.

 

1.60 “Target” means a target used to generate ABSI Products and identified in Exhibit A.

 

1.61 “Territory” means worldwide.

 

1.62 “Third Party” means any entity other than HSB or ABSI or an Affiliate of HSB or ABSI.

 

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

 

1.64 “Valid Claim” means (a) a claim of an issued and unexpired Patent that has not been revoked or held unenforceable, unpatentable, or invalid by a decision of a court or other governmental agency of competent jurisdiction that is not appealable or has not been appealed within the time allowed for appeal, and that has not been abandoned, disclaimed, denied, or admitted to be invalid or unenforceable through reissue, re-examination, disclaimer, or otherwise, or (b) a claim of a pending patent application that has not been cancelled, withdrawn, abandoned, or finally rejected by an administrative agency action from which no appeal can be taken and that has not been pending for more than five (5) years from the date of filing of the earliest priority date from which such claim takes priority (unless and until a Patent issues with such claims from and after which time the same would be deemed a Valid Claim).

 

 

2. Governance

 

2.1 Overview. Within fifteen days (15) days after the Effective Date, the Parties shall establish a cross-functional, Research Steering Committee (“Research Steering Committee” or the “RSC”) which shall manage the preclinical research, IND enabling studies and other activities leading to initiation of a Phase 1 clinical trial of the Parties with respect to ABSI Products.

 

2.2 Research Steering Committee. The Research Steering Committee shall be composed of at least two (2) representatives from each Party to oversee and guide the strategic direction of the collaboration with respect to the activities conducted under the Discovery and Characterization Study Plan and Feasibility Study Plan. The RSC shall act as a joint consultative body. The RSC in particular shall:

 

(a) generate reasonable Discovery Timelines;

 

(b) oversee and monitor all Discovery Activities under each Discovery and Characterization Study Plan;

 

(c) discuss, review, comment on, and propose research activities and budgets for Discovery Activities;

 

(d) review and discuss the status of each Target and data generated against the same pursuant to the activities contemplated by this Agreement;

 

(e) discuss, review, comment on, and prepare any proposed Plan Revisions;

 

(f) discuss the completeness of the Data Package(s);

 

(g) advise on GLP and non-GLP Studies required to file an IND for a given Product;

 

(h) discuss and advise on Feasibility Evaluation Activities as necessary;

 

(i) discuss and approve a transfer process and format for disclosure of certain ABSI Know-How and Collaboration IP to HSB;

 

(j) perform such other functions as appropriate to further the purposes of the Discovery and Characterization Study Plans and Feasibility Study Plans, as expressly set forth in this Agreement or allocated to it by the Parties’ written agreement;

 

(k) discuss and advise on a regulatory strategy, meetings with Regulatory Authorities, and pre-IND and early-stage clinical meetings; and

 

(l) discuss and advise on most effective path to early-stage clinical data from a phase 0 or phase 1 clinical trial.

 

 

2.3 RSC Membership and Meetings.

 

(a) RSC Members. Each RSC representative shall have appropriate knowledge and expertise and sufficient seniority within the applicable Party to make decisions arising within the scope of the RSC’s responsibilities. Each Party may replace its representatives on the RSC on written notice to the other Party. The initial members of the RSC shall be determined by the Parties promptly following the Effective Date.

 

(b) Meetings. The RSC shall hold meetings at such times as it elects to do so, but in no event less frequently than once per calendar month so long as ABSI is performing Discovery Activities under a Discovery and Characterization Study Plan, and, absent mutual agreement of the Parties, no less frequently than once per Calendar Quarter after completion of the Discovery Activities. Meetings may be by telephone or video conference or in person. The first RSC meeting shall be held within thirty (30) days after the Effective Date. Each Party shall be responsible for all of its own expenses of participating in any RSC meeting. No action taken at any meeting of the RSC shall be effective unless at least one (1) representative of each Party is participating.

 

(c) Non-Member Attendance. Each Party may from time to time invite a reasonable number of participants, in addition to its representatives, to attend the RSC meetings in a non-voting capacity; provided that if either Party intends to have any Third Party (including any consultant) attend such a meeting, such Party shall provide reasonable prior written notice to the other Party and obtain the other Party’s approval for such Third Party to attend such meeting, which approval shall not be unreasonably withheld or delayed. Such Party shall ensure that such Third Party is bound by written confidentiality and non-use obligations consistent with the terms of this Agreement.

 

(d) Decision-Making of the RSC. All RSC decisions shall be made by consensus. If after reasonable discussion and good faith consideration of each Party’s view on a particular matter, the representatives of the Parties cannot reach an agreement as to such matter within fifteen (15) days, then either Party at any time may refer such issue to the Senior Officers for resolution. If the Senior Officers are unable to reach agreement within thirty (30) days, the Senior Officer for HSB shall have the casting vote, provided however, notwithstanding the foregoing, HSB shall not have the right to make the final determination with respect to allocation of ABSI’s resources.

 

2.4 Limitations on Authority. The RSC shall have only such powers as are expressly assigned to it in this Agreement, and such powers shall be subject to the terms and conditions of this Agreement. Without limiting the generality of the foregoing, the RSC shall not have the power to amend, interpret, or waive compliance with this Agreement, and no RSC decision may be in contravention of any terms or conditions of this Agreement.

 

2.5 Discontinuation of the RSC. The activities to be performed by the RSC shall solely relate to governance under this Agreement and are not intended to be or involve the delivery of services. The RSC shall continue to exist until the first to occur of: (a) the Parties mutually agree to disband the RSC or (b) on a Target-by-Target basis, until the first (1st) anniversary of the approval of an IND of the last Product directed against such Target.

 

 

3. Discovery Activities

 

3.1 Collaboration Overview. The Parties will collaborate on a Target-by-Target basis in accordance with a mutually agreed written Discovery and Characterization Study Plan to identify and evaluate ABSI Products directed against such Target with a view to identifying or generating suitable Products therefrom to be Exploited by HSB. Upon completion of the Discovery Timeline for a Target, as between the Parties, subject to the terms and conditions of this Agreement, HSB shall exclusively own any ABSI Products against such Target.

 

3.2 Targets. As of the Effective Date, the Targets that are the subject of this Agreement are listed in Exhibit A. If the RSC determines that the Discovery Activities are unsuccessful with respect to a Target on Exhibit A, HSB may propose an additional target, which upon approval by ABSI shall be a Target and replace such failed Target. In the event that additional targets are added by mutual agreement, the Parties will discuss and effectuate necessary changes to the budget, financial terms (if appropriate), Discovery and Characterization Study Plan, and Feasibility Study Plan.

 

3.3 Discovery and Characterization Study Plan and Discovery Timeline.

 

(a) General. The initial Discovery and Characterization Study Plan for each Target is attached as Exhibit B. To the extent that a Discovery and Characterization Study Plan for a Target is omitted from Exhibit B as of the Effective Date, the RSC shall promptly propose a Discovery and Characterization Study Plan for such Target, and such plan shall be effective only upon mutual written approval by the Parties. Each Discovery and Characterization Study Plan shall set forth (i) the Discovery Activities required to generate a Data Package for such Target; (ii) the Discovery Timeline for such Discovery Activities; and (iii) a budget for such research activities within the Discovery Timeline.

 

(b) Discovery and Characterization Study Plan Revisions.

 

(i) It is anticipated that in the course of conducting the Discovery Activities, either Party may request amendments to a Discovery and Characterization Study Plan to modify the Discovery Activities or to expand the Discovery and Characterization Study Plan by adding research activities (such proposed amendments or additional scope, “Plan Revisions”). The revising Party shall provide the other Party with a copy of any proposed Plan Revisions, the rationale for the change, and the anticipated impact on the duration of the Discovery Timeline. The revising Party shall allow the reviewing Party a reasonable opportunity (not to exceed fifteen (15) business days) to review and comment thereon and request additional information.

 

 

(ii) If the Plan Revision proposes additional research activities, ABSI shall provide a quote for the additional cost to perform such research activities and the anticipated impact on the duration of the Discovery Timeline. All Plan Revisions shall be implemented upon RSC approval; approved Plan Revisions and the new Discovery Timeline shall be documented in a revised Discovery and Characterization Study Plan and attached to a revised Exhibit B to this Agreement.

 

(c) Discovery Timeline. The Discovery Timeline for a Target shall be expressly set forth in the Discovery and Characterization Study Plan for such Target; provided however, the Parties intend and anticipate that the Discovery Timeline for each Target will be no longer than six (6) months and is unlikely to exceed twelve (12) months. If ABSI, in the course of conducting the Discovery Activities, reasonably believes that the Discovery Timeline for a Target will exceed the agreed Discovery Timeline agreed in the relevant Discovery and Characterization Study Plan, ABSI shall provide HSB with written notice thereof, including the grounds for any such delay or extension promptly upon making such determination and provide HSB with a good faith estimate for the revised Discovery Timeline.

 

3.4 Data Package Submission.

 

(a) Promptly following the completion of Discovery Activities sufficient to generate the Data Package with respect to a Target, ABSI shall prepare and submit to HSB a complete Data Package for the applicable Target, including description of the corresponding ABSI Products. Within fifteen (15) business days following HSB’s receipt of the Data Package, HSB may (i) identify any data or information required under the applicable Discovery and Characterization Study Plan that is missing from such Data Package, and request in writing that ABSI provide such missing information or data, and (ii) make any reasonable inquiries of ABSI for clarification regarding the data and information included in such Data Package.

 

(b) With respect to any data or information identified as required under the applicable Discovery and Characterization Study Plan but missing from such Data Package, ABSI shall promptly update such Data Package to include such missing data and information or provide a reasonable explanation for its absence and shall provide responses to HSB’s other inquiries. Following ABSI’s provision of such missing data or information to such Data Package (or if HSB does not identify missing data or information within the fifteen (15) business day period from receipt of the Data Package) such Data Package shall be deemed complete, and the Discovery Timeline for such Target shall expire (“Discovery Timeline Expiration Date”). The Data Package shall be deemed HSB Confidential Information.

 

3.5 Feasibility Evaluation Activities. On a Target-by-Target basis, HSB shall have a period of thirty-six (36) months from the Discovery Timeline Expiration Date to complete the Feasibility Evaluation Activities for the ABSI Products (“Evaluation Period”). During the Evaluation Period, HSB may conduct any additional analysis or evaluation in connection with a Target (and the applicable ABSI Products) consistent with the Feasibility Study Plan. Provided that HSB has used Commercially Reasonable Efforts to conduct the evaluation, but additional Feasibility Evaluation Activities are reasonably necessary to assess the ABSI Product’s potential, HSB shall provide a work plan outlining the additional Feasibility Evaluation Activities required and the RSC will agree on a reasonable extension of the Evaluation Period to accommodate such Feasibility Evaluation Activities.

 

 

3.6 Performance of Discovery Activities.

 

(a) Performance. With respect to each Target and ABSI Product, each Party shall use Commercially Reasonable Efforts to perform the Discovery Activities and Feasibility Evaluation Activities assigned to it pursuant to this Section 3 (Discovery Activities). Each Party shall perform such activities in compliance with all Applicable Laws, including good scientific, laboratory, and clinical practices under the Applicable Laws of the country in which such activities are conducted. Without limiting the foregoing, ABSI (either itself or through its representatives or contractors) shall house and immunize the animals, and harvest tissues from the animals, in accordance with Applicable Law and in accordance with good industry practice.

 

(b) Development Records. Each Party shall maintain complete, current, and accurate records of all Discovery Activities and Feasibility Evaluation Activities conducted by it hereunder, and all data and other information resulting from such activities. Such records shall fully and properly reflect all work done and results achieved in the performance of such activities in good scientific manner appropriate for regulatory and patent purposes.

 

(c) Use of Subcontractors. Either Party may perform any Discovery Activities and Feasibility Evaluation Activities under this Agreement through one or more subcontractors with the other’s prior written consent (not to be unreasonably withheld, conditioned, or delayed) provided that (a) the subcontracting Party will remain responsible for the work allocated to, and payment to, such subcontractors to the same extent it would have been if it had done such work itself; (b) each subcontractor undertakes in writing obligations of confidentiality and non-use regarding Confidential Information that are substantially the same as those undertaken by the Parties pursuant to this Agreement; and (c) each subcontractor agrees in writing to assign all intellectual property developed in the course of performing any such work to the subcontracting Party; notwithstanding the foregoing, the subcontractors listed in Exhibit D are approved and will not require additional consent.

 

4. License Grants

 

4.1 Product License Grant to HSB. Subject to the terms and conditions of this Agreement, ABSI hereby grants to HSB (a) an exclusive (even as to ABSI), royalty-bearing, sublicensable through multiple tiers, license under ABSI Patents and (b) a non-exclusive, royalty-bearing, sublicensable license under the ABSI Know-How, in each case in (a) and (b), to the extent reasonably necessary to Exploit the ABSI Products or Products in the Field in the Territory during the Term. Notwithstanding the foregoing, the license to HSB under (b) of this Section 4.1 (Product License Grant to HSB) is exclusive (even as to ABSI) with respect to the materials constituting the Antibody of the applicable ABSI Product.

 

 

4.2 Right to Sublicense. HSB shall have the right to grant sublicenses to its Affiliates and other Third Parties, through multiple tiers of Sublicensees, on terms consistent with the terms and conditions set forth in this Agreement and HSB shall remain liable for all breaches of the relevant provisions of this Agreement by action of its Sublicensees or Affiliates. HSB shall provide to ABSI a copy of each sublicense agreement reasonably redacted to shield any confidential information but providing sufficient disclosure for ABSI to make a determination that such sublicense meets the sublicense obligations under this Agreement, within thirty (30) days following the execution of such agreement. In the event of a dispute over the level of redaction, the Parties will engage a mutually agreed, independent attorney with experience in the pharmaceutical industry to make a determination within fifteen (15) days.

 

4.3 ABSI Retained Rights. Subject to the terms and conditions of this Agreement, ABSI retains the right under the ABSI IP solely to: (a) conduct educational, research and clinical activities itself and (b) authorize academic Third Parties to conduct educational, research and clinical activities; provided in each case in (a) and (b) ABSI shall not authorize or grant the right, directly or indirectly, to make, have made, use or sell ABSI Products for the benefit of any commercial application.

 

4.4 Research License Grant to ABSI. Subject to the terms and conditions of this Agreement and during the Term of this Agreement, HSB hereby grants to ABSI a non-exclusive, worldwide, royalty-free, sublicensable (with HSB’s consent), license under the HSB IP solely to the extent necessary for ABSI to perform the activities assigned to it under this Agreement and for the benefit of the collaboration.

 

4.5 Covenant Not to Sue. ABSI hereby covenants, for itself and its Affiliates, not to sue HSB, its Affiliates, or its Sublicensees who Exploit Products or ABSI Products for their respective direct or indirect infringement with respect to making, having made, using selling, offering for sale, or importing Products or ABSI Products during the Term, subject to HSB’s and its Affiliates’ and its Sublicensees’ compliance with this Agreement. Nor will ABSI directly or indirectly challenge in a legal or administrative proceeding the patentability, enforceability or validity of any claim of any patent Covering an ABSI Product owned by HSB; provided that this provision shall not apply to the extent that such a provision is prohibited by Applicable Law.

 

4.6 Non-Compete. On a country by country basis, provided there is a Valid Claim of an ABSI Patent Covering any Product in such country, HSB and each of their respective Affiliates shall not, by itself or with or through any Third Party, directly or indirectly, Develop, manufacture or Commercialize any Competing Product.

 

4.7 No Implied License. Each Party acknowledges that the rights and licenses granted in this Agreement are limited to the scope expressly granted. Accordingly, except for the rights expressly granted under this Agreement, no right, title, or interest of any nature whatsoever is granted whether by implication, estoppel, reliance, or otherwise, by either Party to the other Party. All rights with respect to any Intellectual Property Rights that are not specifically granted herein are reserved to the owner thereof.

 

 

4.8 Ongoing Reporting Obligations. During the Term, within ten (10) days after each Contract Year, HSB will prepare and provide to ABSI a dossier (or update thereto) with respect to the progress of each Product and respond to any reasonable questions that ABSI may have in relation to the same. ABSI will treat all information contained in any dossier (or update thereto) provided to ABSI under this Section 4.8 (Ongoing Reporting Obligations) as HSB’s Confidential Information.

 

5. Responsibility For Exploitation of Products

 

5.1 General Responsibility. Following the Effective Date and at all times during the Term, HSB shall be responsible for, and shall bear all costs associated with, the preclinical development, Development and Commercialization of Products, including the clinical and regulatory strategy, design, sale, price and promotion of Products covered under this Agreement.

 

5.2 Regulatory Responsibility. HSB will be solely responsible for the preparation, submission and maintenance of all regulatory filings and for obtaining all Marketing Approvals with respect to Products. ABSI will cooperate with HSB, at its reasonable request, with respect to any regulatory matters related to Products. HSB will own all right, title and interest in and to any and all regulatory filings and Marketing Approvals directed to Products and all such regulatory filings and Marketing Approvals will be held in the name of HSB, and ABSI, to the extent reasonably necessary, will execute all documents and take all actions as are reasonably requested by HSB to vest such title in HSB. In addition, in order to address questions HSB may receive from Governmental Authorities (globally) in response to submissions of regulatory filings, ABSI will assist at HSB’s reasonable request in the preparation of responses based on information specific to ABSI Products that would be found in (to the extent applicable): various technical reports, notebooks, executed batch records, master batch records, SOPs, validation protocols and reports, vendor certificates, and Third Party study reports and other CMC related documents, if any, in its possession or control. HSB shall reimburse all ABSI’s costs and expenses incurred in connection with ABSI’s fulfillment of any request of HSB pursuant to this Section 5.2 (Regulatory Responsibility).

 

5.3 Diligence in Development and Commercialization. HSB will use Commercially Reasonable Efforts to promptly file for an IND for each Product upon the manufacture of a cGMP compliant Product; promptly pursue Development and in the event HSB is granted Marketing Approval, Commercialization of each Product; promptly obtain and maintain Regulatory Approvals and Marketing Approvals for each Product in all major market countries; and otherwise Exploit each Product throughout the Territory.

 

5.4 Patent Marking. HSB shall, and shall require its Affiliates and Sublicensees, to legibly mark, (a) each of the Products made, used, offered for sale or sold, or (b) its containers, and the product brochures and promotional and sales materials for the Products, with appropriate patent numbers or indicia in accordance with each country’ s patent marking laws, as applicable, including Title 35, U.S. Code. HSB shall provide ABSI with representative samples of Products upon ABSI’ s reasonable request to ensure compliance with this provision.

 

 

6. Technology Transfer. Upon HSB’s request and at its sole expense, ABSI will assist HSB in the disclosure or transfer of any ABSI Products and documentation related to ABSI Know-How that would be necessary or reasonably useful to aid HSB in the Exploitation of the ABSI Products or Products in accordance with a mutually agreed technology transfer plan and budget.

 

7. Financial Provisions

 

7.1 Up-Front Equity Grant. Within thirty (30) days of the Effective Date, HSB will issue to ABSI common stock in HSB in an amount equal to two hundred and fifty thousand Dollars ($250,000) based on the ten (10) day trailing volume weighted-average price (VWAP). This issuance and transfer of stock will be consistent with HSB’s articles of incorporation and corporate by-laws.

 

7.2 Contingent Payment. In the event HSB closes an HSB Capital Raise prior to the first anniversary of the Effective Date, HSB shall pay to ABSI a nonrefundable and non-creditable payment of [*] Dollars ($[*]) within thirty (30) days from the date of such closing.

 

7.3 Discovery and Characterization Study Plan Funding. HSB shall fund the Discovery and Characterization Study Plan performed by ABSI as set forth in this Section 7.3 (Discovery and Characterization Study Plan Funding).

 

(a) HSB shall pay to ABSI the amount set forth in the relevant Budget for each Calendar Quarter within three (3) business days of the first day of such Calendar Quarter. The fees for the tasks and deliverables set forth in a Budget for a Discovery and Characterization Study Plan may be on a fixed fee basis, a time and materials basis or a combination of both. Fixed fee amounts shall be paid in the amounts and according to the schedule as set forth in the Budget. With respect to all tasks and deliverables other than those for which a fixed fee is specified, the fees for such Discovery Activities shall be paid as set forth in Section 7.3(b).

 

(b) Within twenty (20) business days of the end of each Calendar Quarter, ABSI shall deliver to HSB a report, for each of the Discovery and Characterization Study Plans, detailing (and including all necessary supporting documentation) the Actual Spend for the Discovery Activities versus the budgeted amount paid to ABSI by HSB pursuant to Section 7.3(a) (each a “Budget Report”); provided, further, that the “Actual Spend” for Discovery Activities shall be determined as the sum of (i) the product of the number of actual hours expended by ABSI on such Discovery Activities and the agreed FTE rate set forth in the applicable Budget, (ii) one hundred percent (100%) of ABSI’s material costs to the extent actually used for such Discovery Activities, and (iii) one hundred percent (100%) of amounts incurred by ABSI for Third Party services of permitted subcontractors to the extent actually used in the performance of the Discovery Activities. Each Budget Report will be considered Confidential Information of ABSI. If the Actual Spend for a Calendar Quarter for a Discovery and Characterization Study Plan is lower than the amount paid to ABSI for such Calendar Quarter pursuant to Section 7.3(a), ABSI shall issue a credit to HSB in the amount of the difference, which credit shall be applied to the next Calendar Quarter payment owed with respect to the Discovery and Characterization Study Plan. If the Actual Spend exceeds the amount paid by HSB to ABSI pursuant to Section 7.3(a) for such Calendar Quarter, than ABSI shall invoice HSB for the difference and, provided that to the extent that the then total Actual Spend for all Discovery Activities for such Discovery and Characterization Study Plan is no more than one hundred fifteen percent (115%) of the total amount budgeted for the Discovery Activities for such Discovery and Characterization Study Plan in the Budget, HSB shall promptly pay such amount to ABSI.

 

 

(c) The Parties acknowledge that due to the uncertainties inherent in scientific research and changes in costs of necessary materials and services supplied by Third Parties, it may from time to time become necessary to adjust the Budget for a Discovery and Characterization Study Plan. In the event that either Party determines in good faith that the expected Actual Spend for the Discovery Activities under a Discovery and Characterization Study Plan may exceed the amounts set forth in the applicable Budget, such Party shall promptly advise the other Party of proposed revisions to the Budget. Upon mutual agreement by the Parties to any revision to a Budget, such revised Budget shall replace the prior Budget. In the event that the Parties are not able to agree with respect to proposed revisions to a Budget, ABSI shall not be obligated hereunder to perform any Discovery Activities to the extent that the total Actual Spend for such Discovery Activities for the applicable Discovery and Characterization Study Plan exceed the amount budgeted therefor.

 

7.4 Development and Regulatory Milestone Payments.

 

(a) Milestones. In further consideration of the license and other rights granted to HSB hereunder, and in addition to all other amounts payable pursuant to this Agreement, within ten (10) business days following the first achievement by HSB, any Affiliate of HSB or any Sublicensee of each or any of the milestone events listed below for any Product, HSB shall, in further consideration of the rights granted to HSB hereunder, provide written notice to ABSI of the achievement of such milestone event, accompanied by payment to ABSI of the applicable non-refundable, non-creditable cash milestone fee listed next to such event in the table in this Section 7.4 (Development and Regulatory Milestone Payments). Such written notice shall state the Product which has achieved the applicable milestone event. With respect to each Product, in the case any of milestone events (ii), (iii), or (iv), and with respect to the aggregate Net Sales of all Products, in the case any of the milestone events (vi) or (vii) is achieved before any “lower-numbered” milestone event in the table has been actually achieved for such Product or the aggregate Net Sales of all Products, as applicable, then every “lower-numbered” milestone event in the table which has not already been actually achieved for such Product or the aggregate Net Sales of all Products, as applicable, shall be deemed to have thereby been achieved, and the milestone payment(s) for such deemed-achieved milestone event(s) for such Product or the aggregate Net Sales of all Products shall also be payable within such ten (10) business day period. In the event that more than one of milestone events (v), (vi) and (vii) is achieved in the same Calendar Year, the milestone payments for each of such milestone events so achieved in the same Calendar Year shall all be payable within such ten (10) business day period.

 

 

	Milestone			Milestone Payment
(i)	Upon the first dosing of the last patient in the first Phase 2 Trial in the U.S. of any Product		$	[*]
(ii)	For the first time there is a determination (pre-NDA filing) that a Phase 3 Trial of any Product has met all its primary and secondary endpoints		$	[*]
(iii)	Upon receipt of the first Regulatory Approval of any Product in the U.S.		$	[*]
(iv)	Upon the First Commercial Sale of any Product in the U.S.		$	[*]
(v)	For all Products, the first Calendar Year in which Net Sales of all Products cumulatively exceed $[*]		$	[*]
(vi)	For all Products, the first Calendar Year in which Net Sales of all Products cumulatively exceed $[*]		$	[*]
(vii)	For all Products, the first Calendar Year in which Net Sales of all Products cumulatively exceed $[*]		$	[*]

 

7.5 Minimum Royalty Payments. After the second anniversary of the Effective Date, HSB will pay to ABSI an annual minimum royalty amount as follows: year 1: [*] Dollars ($[*]); year 2 and every Calendar Year thereafter: [*] Dollars ($[*]) for the Royalty Term (“Minimum Royalty”). HSB will pay ABSI the Minimum Royalty owed to ABSI for the prior year on or before February 28 of the current year. If the aggregate amount of the actual Royalty payments paid to ABSI in any Calendar Year pursuant to Section 7.6 (Royalty Payments) hereunder is less than the Minimum Royalty required for the applicable year, HSB shall pay to ABSI the difference between the aggregate amount of the actual Royalty payments for such year and the Minimum Royalty. Minimum Royalties may offset any Royalties due under Section 7.6 (Royalty Payments).

 

7.6 Royalty Payments.

 

(a) Royalty Rates. Subject to the remainder of this Section 7.6 (Royalty Payments), during the Royalty Term for each Product, HSB shall pay to ABSI a quarterly, non-refundable, non-creditable royalty on the Net Sales of such Product sold in the Territory (“Royalty”) calculated as follows:

 

Aggregate Annual Net Sales of such Product during a Calendar Year in the Territory less than or equal to [*] Dollars ($[*]): [*]%

 

 

Portion of Aggregate Annual Net Sales of such Product during a Calendar Year in the Territory greater than [*] Dollars ($[*]) and less than or equal to [*] Dollars ($[*]): [*]%

 

Portion of Aggregate Annual Net Sales of such Product during a Calendar Year in the Territory greater than [*] Dollars ($[*]) and less than or equal to f[*] Dollars ($[*]): [*]%

 

Portion of Aggregate Annual Net Sales of such Product during a Calendar Year in the Territory greater than [*] Dollars ($[*]): [*]%

 

If the level of competition, patent protection or general commercial environment affects in any material respect the commercial viability of a Licensed Product at the then applicable royalty rate due to ABSI from HSB for any country(ies) within the Territory, upon written request from HSB, ABSI may, at its sole discretion, consider negotiating in good faith with HSB to endeavor to reach mutual agreement on a reduction to such royalty rate for the applicable Product and applicable country(ies).

 

(b) Generic Competition. On a Product-by-Product and country-by-country basis, in the event a Biosimilar Product to a Product is sold in any country in the Territory, then on a Product-by-Product basis, following the First Commercial Sale of such Biosimilar Product in such country in a Calendar Quarter once (i) Net Sales of the applicable Product in such country decline by the percentage described below relative to the average quarterly Net Sales of the Product in such country achieved in four (4) Calendar Quarters immediately following such launch of such Biosimilar Product; and (ii) all Biosimilar Products in such country have a combined market share of twenty-five percent (25%) or more of the total market (i.e., Product and Biosimilar Products combined) in the Field in such country, then the Royalty rates applicable to Net Sales of the Product in such country set forth in the table in Section 7.6(a) (Royalty Rates) shall be reduced as follows:

 

Decline in Net Sales of the applicable Product				Royalty Reduction
0 – 25	%			None
>25	%			[*]	%
>50	%			[*]	%

 

(c) Lack of Patent Coverage. With respect to any Product that is Covered by an ABSI Patent, on a Product-by- Product and country-by-country basis and during the Royalty Term of such Product, if the applicable Product or its manufacture, importation, use, offer for sale or sale in such country is no longer Covered by a Valid Claim, then, the applicable Royalty rate for such country shall be reduced by fifty percent (50%) for purposes of the calculation of such Royalties payable under this Section 7.6 (Royalty Payments).

 

 

(d) Maximum Reduction. Notwithstanding the foregoing, in no event shall the operation of Sections 7.6(b) (Generic Competition) through 7.6(c) (Lack of Patent Coverage), whether separately or together, operate to reduce the Royalties otherwise payable to ABSI hereunder in any given Calendar Quarter by more than fifty percent (50%) of the amounts otherwise payable under Section 7.6(a) (Royalty Rates) for such Calendar Quarter. If the level of competition, patent protection or general commercial environment affects in any material respect the commercial viability of a Product at the then applicable royalty rate due to ABSI from HSB for any country(ies) within the Territory, upon written request from HSB, ABSI will negotiate in good faith with HSB to endeavor to reach mutual agreement on a reduction to such royalty rate for the applicable Product and applicable country(ies).

 

(e) Patent Challenge. If HSB or any of its Affiliates or a Sublicensee (each, a “Challenging Party”) commences an action in which it challenges the validity, enforceability or scope of any of the ABSI Patents (other than in defense of an action brought against HSB, its Affiliates or Sublicensee) (a “Challenge Proceeding”), the Royalty rates specified in Section 7.6(a) (Royalty Rates) shall be doubled with respect to Net Sales of the Challenging Party with respect to the Products invoiced during the pendency of such Challenge Proceeding. If the outcome of such Challenge Proceeding is a determination against the Challenging Party: (a) the Royalty rate specified in Section 7.6(a) (Royalty Rates) shall remain at such doubled rate; and (b) HSB shall reimburse ABSI for all expenses incurred by ABSI (including reasonable attorneys’ fees) in connection with such Challenge Proceeding. If the outcome of such Challenge Proceeding is a determination in favor of the Challenging Party, the Challenging Party shall have no right to recoup any Royalties paid before or during the pendency of such Challenge Proceeding.

 

(f) Royalty Term. Royalties shall be paid on a Product-by-Product basis in each country of the Territory from the First Commercial Sale of a Product in a country by or on behalf of HSB, its Affiliates, subcontractors, or Sublicensees until the later of (A) ten (10) years after the First Commercial Sale of such Product in such country and (B) the expiration of the last-to-expire Valid Claim of a Patent Covering an ABSI Product (the “Royalty Term”).

 

7.7 Product Out-license or Sale. In the event (on a Product-by-Product basis) that HSB transfers all or substantially all of HSB’s rights to a Product to a Third Party, HSB shall pay to ABSI the percentage of Net Proceeds attributable to the transfer of the Product in accordance with the table below. “Net Proceeds” means the gross amounts actually paid to HSB (or the HSB stockholders or Affiliates) in consideration of the transfer of such rights to a Product minus (a) all reasonable and customary transaction fees and expenses (including banking, legal and accounting fees and expenses) incurred in connection with such acquisition or out-license, and (b) any documented payments made specifically in consideration for services (including research, development, or manufacturing services) performed by HSB for such Third Party acquirer or HSB of rights to such Product. The fee shall be paid if and when Net Proceeds are paid (e.g., if a portion of the Net Proceeds are earn-out payments, the percentage applicable to such earn-out payments shall be paid only if and when such earn-out payment is received by HSB).

 

 

[*]% of Net Proceeds	if all of HSB’s rights to the Product are transferred to such Third Party prior to spending Company Expenses of $[*] million with respect to the Development of such Product. For clarity, no Company Expenses may be attributed to more than one Product and Company Expenses incurred with respect to multiple Products shall be allocated amongst all applicable Products according to Accounting Standards.
[*]% of Net Proceeds	if all of HSB’s rights to the Product are transferred to such Third Party after spending Company Expenses of at least $[*] million but no more than $[*] million with respect to the Development of such Product
[*]% of Net Proceeds	if all of HSB’s rights to the Product are transferred to such Third Party after spending Company Expenses of greater than $[*] million with respect to the Development of such Product.

8. Payment; Records; Audits

 

8.1 Payment; Reports. Royalty payments due by HSB to ABSI shall be calculated and reported for each Calendar Quarter during the Royalty Term. Royalty payments shall be paid within forty-five (45) days after the end of each Calendar Quarter and shall be accompanied by a report setting forth on a country-by country and Product-by-Product basis the Net Sales of the Products by HSB and its Affiliates, Sublicensees, and permittees in the Territory in sufficient detail to permit confirmation of the accuracy of the Royalty payment made, including the number of Products sold, the gross sales and Net Sales of Products, the method used to calculate the Royalties, details of the Permitted Deductions, and the exchange rates used.

 

8.2 Payment Method. Unless otherwise agreed by ABSI, all amounts due hereunder will be paid in Dollars by wire transfer in immediately available funds according to the instructions set forth in Exhibit E or such other bank account as ABSI may from time to time notify HSB. Any payments or portions thereof due hereunder which are not paid on the date such payments are due will bear interest from the due date until the date of payment calculated at the annual rate of one and one-half percent (1.5%) per month, the interest being compounded on the last day of each Calendar Quarter; provided, however, that in no event shall said annual interest rate exceed the maximum rate permitted by Applicable Law. Each such payment when made shall be accompanied by all interest so accrued.

 

 

8.3 Records; Audits. HSB will keep, and cause or procure to be kept by its Affiliates, Sublicensees, and permittees, for at least seven (7) years, accurate data, accounts and supporting documentation in respect of all Products Exploited by or on behalf of HSB, its Affiliates, Sublicensees, and permittees and the Net Sales thereof for the purposes of and to the extent such records are reasonably required for the computation and verification of Royalties and all other sums payable under this Agreement (collectively, “Records”). HSB will give to or procure for ABSI’s nominated representative, which shall be an independent accounting firm reasonably acceptable to HSB (the “Accounting Firm”), upon reasonable request in writing (provided that such request will provide HSB with not less than five (5) business days’ notice) and no more than once per Calendar Year (subject to any access reasonably necessary to clarify the issues), access to HSB’s Records kept in accordance with this Section 8.3 (Records; Audits) but only to the extent they are reasonably useful or necessary for computation and verification of Royalties and other sums payable under this Agreement; provided that such representative is subject to confidentiality obligations similar to those set out in this Agreement. ABSI’s nominated representative will not disclose to ABSI or any Third Party any Confidential Information belonging to HSB but will merely report on any under or over payment discovered as a result of inspection and ABSI will be liable for any breach of such requirement by its nominated representative. ABSI will bear all costs of such audit, unless the audit reveals an underpayment of more than five percent (5%) from payments otherwise due and payable hereunder, in which case HSB will bear the cost of the audit.

 

8.4 Payment of Additional Amounts. If, based on the results of any audit, additional payments are owed to ABSI under this Agreement, HSB will make such additional payments promptly after the Accounting Firm’s written report is delivered to both Parties. If, based on the results of any audit, payments made by HSB exceed payments indicated by the audit as being due thereunder, the cost of the audit will be credited against such excess and any remainder promptly credited to HSB against future Royalty payments due in accordance with Section 7.6 (Royalty Payments).

 

8.5 Confidentiality. ABSI will treat all information provided to it pursuant to any audit performed under Section 8.3 (Records; Audits) in accordance with the confidentiality provisions of Section 12 (Confidentiality) and will cause the Accounting Firm to enter into a reasonably acceptable confidentiality agreement with HSB obligating such firm or representative to maintain all such financial information in confidence pursuant to such confidentiality agreement.

 

 

8.6 Tax, Withholdings. Each Party shall be responsible for its own federal, state, county or municipal sales or use tax, excise or similar charge, or other tax assessment, assessed or charged on the activities contemplated by this Agreement. HSB shall be permitted to withhold any tax (including income tax, value added tax and surcharge) imposed on the payments from HSB to ABSI under this Agreement where required to do so by Applicable Law. The Parties shall cooperate with one another and use reasonable efforts to avoid or reduce tax withholding or similar obligations in respect of the payments made hereunder. Upon HSB’s request, ABSI shall use reasonable efforts to provide HSB any tax form that may be reasonably necessary in order for HSB to not withhold tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty. Each Party shall also provide the other with reasonable assistance and cooperation to enable the recovery, to the extent permitted by Applicable Laws, of withholding taxes or similar obligations resulting from the payments made under this Agreement.

 

9. Intellectual Property

 

9.1 Intellectual Property Ownership.

 

(a) Background IP. Each Party will own all right, title, and interest in its Background IP.

 

(b) Collaboration IP.

 

(i) Subject to the terms and conditions of this Agreement, ABSI shall own all right, title and interest related to any and all Collaboration IP which constitutes an Improvement of any Background IP of ABSI Generated during the performance of the activities under this Agreement (each, an “ABSI Improvement”). HSB hereby agrees to assign and transfer and hereby assigns and transfers to ABSI all of its rights, interest, and title in and to the ABSI Improvements (if any) to ABSI without any further consideration.

 

(ii) Subject to the terms and conditions of this Agreement, HSB shall own all right, title and interest related to any and all Collaboration IP which constitutes an Improvement of Background IP of HSB Generated during the performance of the activities under this Agreement (each, an “HSB Improvement”). ABSI hereby agrees to assign and transfer and hereby assigns and transfers to HSB all of its rights, interest, and title in and to the HSB Improvements (if any) without any further consideration.

 

(iii) Subject to the foregoing,

 

(1) each Party shall own any and all Collaboration IP that does not constitute an ABSI Improvement or HSB Improvement Generated solely by its Affiliates, employees, agents, representatives or independent contractors on its behalf during the course of performance of the activities hereunder and any and all Intellectual Property Rights therein (“Solely Owned Collaboration IP”); and

 

(2) ownership of any Collaboration Know-How that is not an ABSI Improvement or an HSB Improvement which is Generated jointly by ABSI and HSB (including their respective Affiliates, employees, agents, representatives or independent contractors) for which joint development shall be determined based on U.S. laws applicable to such Collaboration IP (“Jointly Owned Collaboration IP”) and the Intellectual Property Rights therein shall be owned jointly by both Parties in equal and undivided shares.

 

 

(c) Jointly Owned Collaboration IP. Except as expressly provided in this Agreement, it is understood that neither Party will have any obligation to obtain any approval or consent of, nor pay a share of the proceeds to or account to, the other Party to practice, enforce, license, assign or otherwise Exploit any Jointly Owned Collaboration IP, and any Intellectual Property Rights therein, and each Party hereby waives any right it may have under the laws of any jurisdiction to require such approval, consent or accounting. Each Party agrees to cooperate with the other Party, as reasonably requested, and to take such actions as may be required to give effect to this Section 9.1(c) (Jointly Owned Collaboration IP) in a particular country within the Territory.

 

9.2 Patent Prosecution.

 

(a) ABSI Solely Controlled Patents. ABSI will have the sole right, but not the obligation, at its own cost, to prepare, file, prosecute (including, but not limited to provisional, reissue, continuing, continuation-in-part, and substitute applications and any foreign counterparts thereof), and maintain all ABSI Patents that are not specific to any ABSI Products or Products (“ABSI Solely Controlled Patents”) generally, and conduct any interferences and oppositions or similar proceedings relating to ABSI Solely Controlled Patents. HSB acknowledges and agrees that (a) ABSI will have no liability of any kind relating to the preparation, filing, prosecution and maintenance of ABSI Solely Controlled Patents as provided in this Section 9.2(a) (ABSI Solely Controlled Patents); and (b) as between the Parties, ABSI and its Affiliates have the right to cease all activities relating to the preparation, filing, prosecution or maintenance of any ABSI Solely Controlled Patents as provided in this Section 9.2(a) (ABSI Solely Controlled Patents) for any reason, in which case ABSI will promptly inform HSB of such planned cessation.

 

(b) HSB Solely Controlled Patents. HSB will have the sole right, but not the obligation, at its own cost, to prepare, file, prosecute (including, but not limited to provisional, reissue, continuing, continuation-in-part, and substitute applications and any foreign counterparts thereof), and maintain all HSB Patents and Collaboration Patents other than ABSI Solely Controlled Patents (“HSB Solely Controlled Patents”) and conduct any interferences and oppositions or similar proceedings relating to HSB Solely Controlled Patents. For clarity, HSB Solely Controlled Patents includes those that are specific to ABSI Products or Products. ABSI acknowledges and agrees that (a) neither HSB nor any of its Affiliates will have any liability of any kind relating to the preparation, filing, prosecution and maintenance of HSB Solely Controlled Patents as provided in this Section 9.2(b) (HSB Solely Controlled Patents); and (b) as between the Parties, HSB and its Affiliates have the right to cease all activities relating to the preparation, filing, prosecution or maintenance of any HSB Solely Controlled Patents as provided in this Section 9.2(b) (HSB Solely Controlled Patents) for any reason.

 

(c) Jointly Owned Collaboration Patents. HSB will be primarily responsible, at its own cost, for preparing, filing, prosecuting (including, but not limited to provisional, reissue, continuing, continuation-in-part, and substitute applications and any foreign counterparts thereof), and maintaining all Jointly Owned Collaboration Patents constituting Collaboration Patents and conducting any interferences and oppositions or similar proceedings relating to such Patents.

 

 

(d) Duty to Cooperate. For all Collaboration Patents, the filing Party will provide the non-filing Party with copies of and an opportunity to review and comment upon the text of the applications relating to the applicable Collaboration Patents at least forty five (45) business days before filing; provided, however, that if it is not reasonably practicable to provide such application in such forty five (45) business day period, then the filing Party will provide either a draft copy of such application or a statement of intent to file such application in such forty five (45) business day period. Without limiting the foregoing, where there is substantial overlap in the material disclosure for the initial filing of the patent applications for two (2) or more Collaboration Patents where the filing Party is not the same, the Parties will reasonably cooperate in causing such applications to be filed on the same day and coordinate the course of prosecution. The filing Party will provide the non-filing Party with a copy of each submission made to and document received from a patent authority, court or other tribunal regarding any Collaboration Patent reasonably promptly after making such filing or receiving such document, including a copy of each application for each Collaboration Patent as filed together with notice of its filing date and application number. The filing Party will keep the non-filing Party advised of the status of all material communications, and actual and prospective filings or submissions regarding the Collaboration Patents and will give the non-filing Party copies of and an opportunity to review and comment on any such material communications, filings and submissions proposed to be sent to any patent authority or judicial body. The filing Party will consider in good faith the non-filing Party’s comments on such communications, filings, and submissions for the Collaboration Patents. With respect to any filings or other materials provided to the non-filing Party under this Section 9.2(d) (Duty to Cooperate), the filing Party will have the right to redact information relating to any product other than Products or any Know-How other than Collaboration Know-How from any such filings and materials. In the event either Party declines to file, prosecute or maintain any of the foregoing Collaboration Patents, elects to allow any Collaboration Patents to lapse in any country, or elects to abandon any Collaboration Patents (in each case to the extent contained in the Collaboration Patents) before all appeals within the respective patent office have been exhausted (each, an “Abandoned Patent”), then: (i) such Party shall provide the other Party with reasonable notice of such decision so as to permit the non-abandoning Party to decide whether to file, prosecute or maintain such Abandoned Patents and to take any necessary action (which notice shall, in any event, be given promptly and, in any event, no later than sixty (60) days prior to the deadline for any action necessary to avoid lapse or abandonment of such Abandoned Patent with the U.S. Patent & Trademark Office or any foreign patent office); (ii) the non-abandoning Party, at the non-abandoning Party’s expense, may assume control of the filing, prosecution or maintenance of such Abandoned Patents, except for Collaboration Patents that solely Cover any ABSI Improvements that ABSI has determined, in its reasonable discretion, not to file in light of the impact of such filings on ABSI’s overall patent strategy with respect to the ABSI Know-How or HSB Solely Controlled Collaboration Patents that HSB has determined, in its reasonable discretion, not to file in light of the impact of such filings on HSB overall patent strategy with respect to the ABSI Products or Product; (iii) the non-abandoning Party shall have the right, at its expense, to transfer the responsibility for such filing, prosecution and maintenance of such Abandoned Patents to patent counsel (outside or internal) selected by the non-abandoning Party; and (iv) the abandoning Party shall, at the non-abandoning Party’s reasonable request and at the non-abandoning Party’s expense, assist and cooperate in the filing, prosecution and maintenance of such Abandoned Patents.

 

 

9.3 Patent Term Extensions and Regulatory Exclusivities. The Parties will cooperate with each other in gaining term extension for any Collaboration Patent where applicable to Products and in the case of any disagreement following initiation of a Phase 2 Clinical Trial for a Product, HSB would have the final say as to term extension for any such Collaboration Patent Covering the Product.

 

9.4 Defense and Settlement of Third-Party Claims. If (a) any Product Exploited by or under authority of HSB becomes the subject of a Third Party’s claim or assertion of infringement of a patent, or (b) if a declaratory judgment action is brought naming either Party as a defendant and alleging invalidity of any of the Patents contained in Collaboration Patents, ABSI Patents or HSB Patents, the Party first having notice of the claim or assertion shall promptly notify the other Party, and the Parties shall promptly confer to consider the claim or assertion and the appropriate course of action. Unless the Parties otherwise agree in writing, each Party shall have the right to defend itself against a suit that names it as a defendant (the “Defending Party”). None of the Parties shall enter into any settlement of any claim described in this Section 9.4 (Defense and Settlement of Third-Party Claims) that admits to the invalidity or unenforceability of any Patent Controlled by the other Party (or otherwise effects the scope, validity or enforceability of such Patent), incurs any financial liability on the part of any other Party or requires an admission of liability, wrongdoing or fault on the part of the other Party without such other Party’s written consent. In any event, the other Party shall reasonably assist the Defending Party and cooperate in any such litigation at the Defending Party’s request and expense. Additionally, if the Defending Party is not the Party that Controls the Patent in question, then the other Party has the right to join any such action.

 

9.5 Enforcement.

 

(a) Notice of Infringement. The Parties hereto shall inform each other promptly of any infringement or colorable cause of action for infringement of any Collaboration Patent Covering ABSI Products or Products (an “Infringement”) and the Parties shall promptly confer to consider the best appropriate course of action.

 

(b) Enforcement. In the event that such Infringement is with respect to a product that has the same primary mechanism of action as an ABSI Product or Product, then HSB shall have the first right to enforce the applicable ABSI Patent or Collaboration Patents against any such Infringement or alleged Infringement thereof; provided, however, with respect to any Collaboration Patent that is an ABSI Solely Controlled Patent, enforcement of such Collaboration Patent shall require the prior written consent of ABSI. For such Infringements where HSB is permitted to enforce the relevant ABSI Patent or Collaboration Patents, HSB may, at its own expense, institute suit against any infringer or alleged infringer and control and defend such suit in a manner consistent with the terms and provisions hereof and recover any damages, awards or settlements resulting therefrom, subject to Section 9.6 (Recoveries). ABSI shall reasonably cooperate in any such litigation at HSB’s expense. HSB shall not enter into any settlement of any claim described in this Section 9.5(b) (Enforcement) that admits to the invalidity or unenforceability of any ABSI Patent or Collaboration Patents (or otherwise effects the scope, validity or enforceability of such ABSI Patents or Collaboration Patents), incurs any financial liability on the part of ABSI or requires an admission of liability, wrongdoing or fault on the part of ABSI without ABSI’s prior written consent. In the event that HSB does not elect to enforce any Patent within the ABSI Patents or Collaboration Patents in connection with an Infringement within ninety (90) days of notice thereof, then ABSI shall be entitled to do so, except where HSB is able to provide reasonable documentary proof and evidence that ABSI’s enforcement of any such Patent that Covers the Product or ABSI Product would be reasonably likely to jeopardize the Exploitation of the Product within thirty (30) days from the date of receipt of ABSI’s notice to elect to enforce the applicable Patent. Any dispute shall be handled in accordance with Section 14 (Dispute Resolution).

 

 

(c) Progress Reporting. The Party initiating any enforcement action (the “Enforcing Party”) shall keep the other Party reasonably informed of the progress of any such enforcement action, and such other Party shall have the individual right to participate with counsel of its own choice at its own expense.

 

9.6 Recoveries. Except as otherwise provided, the costs and expenses of the Party bringing suit under Section 9.5 (Enforcement) with respect to an Infringement shall be borne by such Party, and any damages, settlements or other monetary awards recovered shall be shared as follows: (1) the amount of such recovery actually received by the Party controlling such action shall first be applied to the out-of-pocket costs of each Party in connection with such action; and then (2) the remainder of the recovery shall be shared as follows: eighty percent (80%) to the Enforcing Party and twenty percent (20%) to the non-Enforcing Party.

 

10. Representations and Warranties

 

10.1 Mutual Representations and Warranties. Each Party represents and warrants to the other that, as of the Effective Date:

 

(a) it is a corporation duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation;

 

(b) it has full power and authority to execute, deliver, and perform under this Agreement, and has taken all action required by Applicable Law and its organizational documents to authorize the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement;

 

(c) this Agreement has been duly authorized, executed and delivered by such Party and constitutes a legal, valid and binding obligation of such Party enforceable against such Party in accordance with its terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent transfer, or other similar laws affecting the rights and remedies of creditors generally and by general principles of equity;

 

 

(d) all consents, approvals and authorizations from all Governmental Authorities or other Third Parties required to be obtained by such Party in connection with the execution and delivery of this Agreement have been obtained; and

 

(e) the execution and delivery of this Agreement and all other instruments and documents required to be executed pursuant to this Agreement do not, and the consummation of the transactions contemplated hereby and the Party’s due performance of its obligations hereunder would not (i) conflict with or result in a breach of any provision of its organizational documents, (ii) result in a breach of any agreement to which it is a party that would impair the performance of its obligations hereunder, or (iii) violate any Applicable Law.

 

10.2 Additional ABSI Representations and Warranties. As of the Effective Date, ABSI represents and warrants to HSB that ABSI has the rights necessary to grant the licenses to HSB to the ABSI IP that ABSI purports to grant pursuant to this Agreement.

 

10.3 Mutual Covenants.

 

(a) Employees, Consultants, and Contractors. Each Party covenants that it has obtained or will obtain written agreements from each of its employees, consultants, and contractors who perform any Development activities pursuant to this Agreement, which agreements will obligate such persons to obligations of confidentiality and non-use and to assign inventions in a manner consistent with the provisions of this Agreement.

 

(b) Compliance. Each Party covenants as follows:

 

(i) In the performance of its obligations under this Agreement, such Party shall comply and shall cause its and its Affiliates’ employees and contractors to comply with all Applicable Laws.

 

(ii) Such Party’s and its Affiliates’ employees and contractors shall not, in connection with the performance of their respective obligations under this Agreement, directly or indirectly through Third Parties, pay, promise, or offer to pay, or authorize the payment of, any money or give any promise or offer to give, or authorize the giving of anything of value to a public official or entity or other person for purpose of obtaining or retaining business for or with, or directing business to, any person, including such Party (and such Party represents and warrants that as of the Effective Date, such Party, and to its knowledge, its and its Affiliates’ employees and contractors, have not directly or indirectly promised, offered, or provided any corrupt payment, gratuity, emolument, bribe, kickback, illicit gift, or hospitality or other illegal or unethical benefit to a public official or entity or any other person in connection with the performance of such Party’s obligations under this Agreement, and such Party covenants that it and its Affiliates’ employees and contractors shall not, directly or indirectly, engage in any of the foregoing).

 

 

(iii) Such Party and its Affiliates, and their respective employees and contractors, in connection with the performance of their respective obligations under this Agreement, shall not cause its indemnitees to be in violation of any Applicable Laws or otherwise cause any reputational harm to the other Party.

 

(iv) Such Party shall immediately notify the other Party if such Party has any information or suspicion that there may be a violation of any Applicable Laws in connection with the performance of this Agreement or the Development, manufacture, or Commercialization of any Product.

 

(v) In connection with the performance of its obligations under this Agreement, such Party shall comply, and shall cause its and its Affiliates’ employees and contractors to comply, with such Party’s own anti-corruption and anti-bribery policy.

 

(vi) In the event that a Party has violated or been suspected of violating any of the representations, warranties, or covenants in this Section 10.3 (Mutual Covenants), such Party will cause its or its Affiliates’ personnel or others working under its direction or control to submit to training that such Party will provide on anti-corruption law compliance.

 

10.4 Disclaimer. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS SECTION 10 (REPRESENTATIONS AND WARRANTIES), EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, WHETHER EXPRESS, IMPLIED, OR STATUTORY, INCLUDING WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE PRACTICES, IN ALL CASES WITH RESPECT THERETO. NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, THAT ANY OF THE DEVELOPMENT, MANUFACTURING, OR COMMERCIALIZATION EFFORTS WITH REGARD TO ANY PRODUCT WILL BE SUCCESSFUL.

 

11. Indemnification

 

11.1 Indemnification by HSB. HSB shall defend, indemnify and hold ABSI and its respective trustees, officers, faculty, students, employees, contractors and agents (the “ABSI Indemnitees”) harmless from and against any and all liability, damage, loss, cost or expense (including reasonable attorneys’ fees), including, without limitation, bodily injury, risk of bodily injury, death and property damage to the extent arising out of Third Party claims or suits related to (a) this Agreement or any sublicense, including (i) the Development, testing, use, manufacture, promotion, sale or other disposition of any Product (including any product liability claim), (ii) any enforcement action or suit brought by HSB against a Third Party for infringement of ABSI Patents (iii) any claim by a Third Party that the practice of ABSI Patents or the design, composition, manufacture, use, sale or other disposition of any Product infringes or violates any patent, copyright, trade secret, trademark or other Intellectual Property Right of such Third Party, (iv) any breach of this Agreement or laws by HSB, its Affiliates or Sublicensees and (b) HSB’s gross negligence, omissions or willful misconduct, provided that HSB’s obligations pursuant to this Section 11.1 (Indemnification by HSB) shall not apply to the extent such claims or suits result from the gross negligence or willful misconduct of any of the ABSI Indemnitees as determined by a court of law.

 

 

As a condition to a ABSI Indemnitees right to receive indemnification under this Section 11.1 (Indemnification by HSB), ABSI shall: (a) promptly notify HSB as soon as it becomes aware of a claim or suit for which indemnification may be sought pursuant hereto; (b) reasonably cooperate, and cause the individual ABSI Indemnitee to reasonably cooperate, with HSB in the defense, settlement or compromise of such claim or suit; and (c) permit HSB to control the defense, settlement or compromise of such claim or suit, including the right to select defense counsel. In no event, however, may HSB compromise or settle any claim or suit in a manner which (a) admits fault or negligence on the part of ABSI or any other ABSI Indemnitee; (b) commits ABSI or any other ABSI Indemnitee to take, or forbear to take, any action, without the prior written consent of ABSI, or (c) grant any rights under the ABSI Patents except for sublicenses permitted under Section 4 (License Grants). ABSI shall reasonably cooperate with HSB and its counsel in the course of the defense of any such suit, claim or demand, such cooperation to include without limitation using reasonable efforts to provide or make available documents, information and witnesses.

 

11.2 Insurance. During the Term, each Party will have and maintain such types and amounts of liability insurance as is normal and customary in the industry generally for parties similarly situated. Upon request, HSB will furnish to ABSI with valid certificates of insurance evidencing compliance with this Section 11.2 (Insurance).

 

11.3 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY OR ANY OF ITS AFFILIATES BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING LOSS OF PROFITS, WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREIN OR ANY BREACH HEREOF. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS AGREEMENT SHALL LIMIT OR RESTRICT (A) HSB’S INDEMNIFICATION OBLIGATIONS UNDER SECTION 11.1 INDEMNIFICATION BY HSB), (B) DAMAGES AVAILABLE FOR BREACH OF OBLIGATIONS UNDER SECTION 12 (CONFIDENTIALITY); (C) DAMAGES AVAILABLE FOR ANY INTELLECTUAL PROPERTY INFRINGEMENT OR MISAPPROPRIATION BY A PARTY, AND ITS AFFILIATES OR SUBLICENSEES; AND (D) DAMAGES AVAILABLE FOR A PARTY’S FRAUD, GROSS NEGLIGENCE, OR WILFUL MISCONDUCT.

 

 

 

 

12. Confidentiality

 

12.1 Definition. The Parties each recognize that during the Term, a Party (the “Disclosing Party”) may from time to time elect to or may be required by express provisions of this Agreement to provide its Confidential Information (as defined herein) to one or more parties to this Agreement (the “Receiving Party”). The disclosure and use of Confidential Information shall be governed by the provisions of this Section 12 (Confidentiality). For purposes of this Agreement, “Confidential Information” means (a) all information disclosed by the Disclosing Party to the Receiving Party during the Term and which reasonably ought to have been understood to be confidential and/or non-public information at the time disclosed to the Receiving Party, or which is designated in writing by the Disclosing Party as “Confidential” (or equivalent), or which when disclosed orally or visually to the Receiving Party is declared to be confidential by the Disclosing Party and is so confirmed in a writing delivered to the Receiving Party within thirty (30) days after such oral or visual disclosure, and (b) all such information disclosed by a Party before the Effective Date pursuant to the Confidentiality Agreement.

 

12.2 Third Party Information. The Parties acknowledge that the defined term “Confidential Information” (of a Disclosing Party) shall include not only the Disclosing Party’s own Confidential Information but also Confidential Information of an Affiliate or of a Third Party which is in the possession of such Disclosing Party.

 

12.3 Obligations. Each Party agrees to take such action to preserve the confidentiality of the other Party’s Confidential Information as it would customarily take to preserve the confidentiality of its own similar Confidential Information (but in no event less than a reasonable standard of care). No Party shall use Confidential Information of the other Party except as expressly allowed by and for the purposes of this Agreement. Each Party agrees and acknowledges that it may disclose the other Party’s Confidential Information to its own (or its controlled Affiliates’) directors, officers, employees, consultants, Third Party service providers, attorneys, accountants, bankers, lenders and agents (for purpose of this Section 12.3 (Obligations), “Representatives”), but in each case only if and to the extent necessary to carry out the Party’s responsibilities under this Agreement or in accordance with the exercise or enforcement of the Party’s rights granted or reserved to it under this Agreement, and such disclosure shall be limited to the maximum extent possible consistent with such responsibilities and rights. Except as set forth in the foregoing sentence, no Party shall disclose Confidential Information of the other Party to any person without the other Party’s prior written consent, except that a Party may, to the extent necessary, disclose the terms and existence of this Agreement to its actual and bona fide potential investors, acquirers, lenders, permittees, or collaborators on a confidential basis in connection with an actual or potential investment, acquisition, license or collaboration (as applicable). In all events, however, any and all disclosure shall be pursuant to the terms of a written non-disclosure/nonuse agreement with terms and conditions at least as protective of the Confidential Information as those set forth in this Section 12 (Confidentiality) (or, in the case of attorneys, to a duty and obligation of nondisclosure/nonuse pursuant to the applicable rules of the profession). The Receiving Party which discloses Confidential Information of the other to any Third Party (or to any Affiliate or other person) shall be responsible and liable to the Disclosing Party for any disclosure or use or other actions and omissions by such Third Party/Affiliate/other person (or its disclosees) which would be a breach of any of the Receiving Party’s obligations under this Agreement if such act were done or omitted by the Receiving Party itself; and any such act or omission by a Representative shall be deemed a breach of this Agreement by the Receiving Party. For avoidance of doubt: this Section 12 (Confidentiality) applies even to Representatives who, after the disclosure of Confidential Information to them by or for the Receiving Party, cease to be Representatives; and it also applies to every Representative whether or not such Representative is authorized to obtain or use Confidential Information under this Agreement.

 

12.4 Exceptions. The obligations under this Section 12 (Confidentiality) shall not apply to any information, or portion thereof, to the extent the Receiving Party can demonstrate by competent evidence that such information:

 

(a) is (at the time of disclosure) or becomes (after the time of disclosure) generally known to the public through no fault of and without violation of any duty of confidentiality of the Receiving Party or its disclosees;

 

 

(b) was at the time of disclosure already in the Receiving Party’s possession with no duty of confidentiality, and such prior possession can be demonstrated by the Receiving Party’s competent, contemporaneous written evidence (provided that this exception shall not apply to Confidential Information which was “already in the Receiving Party’s possession” by virtue of the fact that it had been disclosed between the Parties before the date of this Agreement in anticipation of an agreement such as this Agreement; and in such a scenario, the Confidential Information so previously disclosed shall be subject to the obligations under this Section 12 (Confidentiality));

 

(c) is rightfully received by the Receiving Party on a non-confidential basis from a Third Party who is entitled to disclose it without breaching any confidentiality obligation (directly or indirectly) to the Disclosing Party and who, to the Receiving Party’s best knowledge, did not obtain such information, directly or indirectly, from the Disclosing Party; or

 

(d) is independently developed by or for the Receiving Party, in either case solely by personnel without any access to or use of the Confidential Information provided by the Disclosing Party, as shown by Receiving Party’s contemporaneous written records.

 

12.5 Disclosure Pursuant to Law or Order. In the event that the Receiving Party or any of its Representatives is required by Applicable Law or a valid order of a court or arbitration tribunal or in any regulatory, judicial or governmental process having jurisdiction over the Receiving Party or such Representative to disclose the Confidential Information, the Receiving Party hereby agrees to notify the Disclosing Party of the request or requirement immediately and to make a reasonable effort (at the Disclosing Party’s expense) to obtain, or to assist the Disclosing Party in obtaining, confidential treatment or a protective order or any other reasonable measure preventing or limiting the disclosure (to the greatest possible extent and for the longest possible period), and/or requiring that the Confidential Information so disclosed be used only for the purposes for which the Applicable Law required, or for which the order was issued, which the Disclosing Party deems necessary to protect the confidentiality of the Confidential Information (or as much as possible of the Confidential Information). In any event, should the Receiving Party or such Representative be required by such compulsion to in the end disclose Confidential Information to the requiring authority (and, if so required thereby, to the public), (w) the Receiving Party hereby agrees to take reasonable steps to enable such confidential treatment, etc. for the Confidential Information (or as much as possible of the Confidential Information); (x) the Receiving Party hereby agrees to take reasonable steps to limit to the extent possible the disclosure to only that Confidential Information that it is required to disclose; (y) the Receiving Party or such Representative may provide that portion of the Confidential Information to the appropriate requiring authority (and, if so required thereby, to the public) as is ultimately so compelled (taking into account the results of all efforts contemplated in this Section 12.5 (Disclosure Pursuant to Law or Order)) without such disclosure being deemed a violation of this Agreement; and (z) such disclosure to the requiring authority as ultimately so compelled shall not deprive the disclosed information of Confidential Information status for any other purposes of this Agreement unless and until it falls under one of the exceptions set forth in Sections 12.4 (a)-(d).

 

In addition, the Receiving Party may disclose the Confidential Information of the Disclosing Party to the extent (and solely to the extent) that such disclosure is reasonably necessary to allow the Receiving Party to enforce its rights hereunder, subject to principles equivalent to those in the preceding paragraph of this Section 12.5 (Disclosure Pursuant to Law or Order).

 

12.6 Defend Trade Secrets Act / Whistleblowing. Pursuant to the United States Defend Trade Secrets Act of 2016, it is confirmed and agreed that no Party shall have, and each Party acknowledges that it shall not have, criminal or civil liability under any federal or state trade secret law for the disclosure of a trade secret that is made (a) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law or (b) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, if such Party files a lawsuit for retaliation by any other Party for reporting a suspected violation of law, then such Party may disclose the trade secret to its attorney and may use the trade secret information in the court proceeding if such Party (x) files any document containing the trade secret under seal and (y) does not disclose the trade secret, except pursuant to court order.

 

 

12.7 Publications. HSB shall have the sole right, in its sole discretion, to publish or otherwise disclose the results of or other information regarding any and all research and development activities performed hereunder with respect to the ABSI Products and Products corresponding to such Target, including all such Discovery Activities for such Target; provided however, unless specifically requested otherwise by ABSI, HSB must appropriately acknowledge ABSI’s role in the discovery of the ABSI Products.

 

12.8 Public Announcements.

 

(a) The Parties shall mutually agree on a press release to be issued announcing execution of this Agreement. Notwithstanding the above, once a public disclosure has been made without violation of this Section 12.8 (Public Announcements), a Party shall be free to disclose to Third Parties any information contained in said public disclosure, without further pre-review or pre-approval, so long as such public disclosure does not indicate that such information remains true and correct if in fact it is no longer true and correct. No Party shall make any subsequent public announcement concerning this Agreement or the terms hereof not previously made public without the prior written approval of the other Party with regard to the form, content, and precise timing of such announcement, except as may be required to be made by a Party (or its parent company) in order to comply with Applicable Law, court orders, or tax or securities filings, any of which disclosures shall be made in accordance with the other applicable requirements of this Section 12 (Confidentiality). Such approval shall not be unreasonably withheld, conditioned or delayed by such other Party. Before any such public announcement, the Party wishing to make the announcement shall submit a draft of the proposed announcement to the other Party sufficiently in advance of the scheduled disclosure to afford such other Party a reasonable opportunity to review and comment upon the proposed text and the timing of such disclosure, and the announcing Party shall consider all reasonable comments of the other Party regarding such disclosure.

 

(b) Without the express prior written consent of HSB, ABSI agrees not to make (and agrees to cause its personnel not to make) in any scientific publication, conference poster, press release or similar written or oral public disclosure any statement which bears negatively on HSB, HSB Affiliates, or the efficacy or value of the Quatramer technology or the Product.

 

12.9 Equitable Relief. Given the nature of the Confidential Information and the competitive damage that a Party would suffer upon unauthorized disclosure, use, or transfer of its Confidential Information to any Third Party, the Parties agree that monetary damages may not be a sufficient remedy for any breach of this Section 12 (Confidentiality). In addition to all other remedies, a Party shall be entitled to seek specific performance and injunctive and other equitable relief as a remedy for any breach or threatened breach of this Section 12 (Confidentiality).

 

12.10 Attorney-Client Privilege. Neither Party is waiving, nor will be deemed to have waived or diminished, any of its attorney work product protections, attorney-client privileges or similar protections and privileges recognized under the Applicable Law of any jurisdiction as a result of disclosing information pursuant to this Agreement, or any of its Confidential Information (including Confidential Information related to pending or threatened litigation) to the Receiving Party, regardless of whether the Disclosing Party has asserted, or is or may be entitled to assert, such privileges and protections. The Parties may become joint defendants in proceedings to which the information covered by such protections and privileges relates and may determine that they share a common legal interest in disclosure between them that is subject to such privileges and protections, and in such event, may enter into a joint defense agreement setting forth, among other things, the foregoing principles but are not obligated to do so.

 

 

12.11 Confidentiality Term. The Parties’ confidentiality and non-use obligations with regard to the Confidential Information as provided under this Section 12 (Confidentiality) shall continue for ten (10) years from the date of termination or expiration of this Agreement, except that obligations of confidentiality and non-use with respect to Confidential Information that constitutes trade secrets shall continue for as long as such Confidential Information is eligible for trade secret protection under Applicable Laws.

 

13. Term and Termination

 

13.1 Term. This Agreement shall commence on the Effective Date and, unless terminated earlier as provided in this Section 13 (Term and Termination) or by mutual written agreement of the Parties, shall continue in effect and shall expire on the last Royalty Term of the last Product (the “Term”). Upon the expiration of the last Royalty Term of a Product in the Territory, the licenses granted to HSB under Section 4.1 (Product License Grant to HSB) with respect to such Product in the Territory shall be deemed non-exclusive, fully paid, royalty-free, perpetual, and irrevocable.

 

13.2 Termination for Material Breach. Each Party shall have the right to terminate this Agreement immediately in its entirety upon written notice to the other Party if such other Party materially breaches this Agreement and has not cured such breach to the reasonable satisfaction of the other Party within sixty (60) days from the date of the notice of such breach from the non-breaching Party. If the breach is capable of being cured, but cure of such breach (other than non-payment) cannot reasonably be effected within such sixty (60) day period, the breaching Party shall deliver to the non-breaching Party a plan reasonably calculated to cure such breach within a reasonable timeframe, but in any event within an additional period of thirty (30) days. If the breaching Party fails to diligently carry out such plan and cure such breach as provided above within ninety (90) days from the date of the notice of such breach from the non-breaching Party, then the non-breaching Party may terminate this Agreement immediately upon written notice to the breaching Party.

 

13.3 Termination for Bankruptcy. Each Party shall have the right to terminate this Agreement immediately in its entirety upon written notice to the other Party if such other Party makes a general assignment for the benefit of creditors, files an insolvency petition in bankruptcy, petitions for or acquiesces in the appointment of any receiver, trustee, or similar officer to liquidate or conserve its business or any substantial part of its assets, commences under the laws of any jurisdiction any proceeding involving its insolvency, bankruptcy, reorganization, adjustment of debt, dissolution, liquidation, or any other similar proceeding for the release of financially distressed debtors or becomes a party to any proceeding or action of the type described above and such proceeding is not dismissed within sixty (60) days after the commencement thereof.

 

13.4 Patent Challenge. Other than a Challenge Proceeding brought in defense of an action brought against a Challenging Party by ABSI, ABSI may, at its sole discretion, terminate this Agreement upon thirty (30) days written notice to HSB upon the commencement of a Challenge Proceeding. In the event such Challenge Proceeding is not withdrawn or otherwise terminated within such notice period, this Agreement will terminate.

 

 

13.5 Termination at Will. HSB will have the right to terminate this Agreement at any time upon ninety (90) days’ prior written notice to ABSI.

 

13.6 Consequences of Expiration and Termination.

 

(a) Termination. In addition to all other available remedies, upon any termination or expiration of this Agreement pursuant to Section 13.1 (Term), by ABSI under Section 13.2 (Termination for Material Breach), or by HSB under Section 13.5 (Termination at Will) or Section 13.2 (Termination for Material Breach), all licenses granted to HSB pursuant to this Agreement (or the specific Target or Product as the case may be) will terminate entirely and immediately and all rights under such licenses shall revert to ABSI.

 

(b) Survival of Certain Sublicensing Arrangements. In the event of the termination of HSB’s license and if (x) a Sublicensee is not the cause of the default and (y) such Sublicensee is not in breach of its obligations under its sublicense agreement and this Agreement, then ABSI shall, upon the prompt request of such Sublicensee following notice of the termination of HSB’s license, negotiate a direct license with such Sublicensee conditioned upon its commitment to fully perform all obligations under, its sublicense agreement and any surviving provisions in this Agreement applicable to such Sublicensee, and to pay all Royalty and milestone payments set forth in Section 7 (Financial Provisions).

 

(c) Product Transfer. Upon termination of this Agreement other than due to material breach of ABSI pursuant to Section 13.2 (Termination for Material Breach), upon ABSI request and at HSB’s discretion, the Parties shall negotiate in good faith commercially reasonable terms for the transfer of rights to Exploit any Product then in Development or Commercialization to ABSI, including regulatory rights and Intellectual Property Rights; for clarity, neither Party shall be obligated to enter into such an agreement.

 

(d) Return of Confidential Information. Upon any expiration or termination of this Agreement, each Party will, at the other Party’s option, promptly return or destroy any of such other Party’s Confidential Information (including all Know-How) in its possession or control; provided, however, that each Party may retain: (a) a single archival copy of the Confidential Information of the other Party solely for availing itself of the rights accorded to it, or to perform its obligations, under the surviving provisions of this Agreement (including, without limitation any and all license or sublicense rights expressly made to survive termination or expiration hereof); and (b) any portion of the Confidential Information of the other Party which a Party is required by Applicable Law to retain.

 

 

13.7 Survival. Expiration or termination of this Agreement shall not relieve the Parties of any obligation or right accruing prior to such expiration or termination, nor preclude either Party from pursuing any rights and remedies it may have hereunder or at law or in equity which accrued or are based upon any event occurring prior to the effective date of such expiration or termination. Except as set forth below or elsewhere in this Agreement, the obligations and rights of the Parties under the following provisions of this Agreement shall survive expiration or termination of this Agreement: Sections 1 (Definitions) (to the extent necessary to give effect to the other sections listed in this Section 13.7 (Survival)), 7 (Financial Provisions) (to the extent applicable for payments accrued prior to the expiration or termination of this Agreement), 8 (Payment; Records; Audits), 9.1 (Intellectual Property Ownership), 11 (Indemnification), 12.11 (Confidentiality Term), 13.1 (Term), 13.6 (Consequences of Expiration and Termination), 13.7 (Survival), 14 (Dispute Resolution), and 15 (General Provisions).

 

14. Dispute Resolution

 

14.1 Objective. The Parties recognize that disputes as to matters arising under or relating to this Agreement or either Party’s rights or obligations hereunder may arise from time to time. It is the objective of the Parties to establish procedures to facilitate the resolution of such disputes in an expedient manner by mutual cooperation and without resort to litigation. To accomplish this objective, the Parties agree to follow the procedures set forth in this Section 14 (Dispute Resolution) to resolve any such dispute if and when it arises.

 

14.2 Negotiations. The Parties will try to settle any dispute, controversy, or claim that arises out of, or relates to, any provision of the Agreement (“Disputed Matter”) by first referring the Disputed Matter to the Parties’ Senior Officers. Either Party may initiate such informal dispute resolution by sending written notice of the Disputed Matter to the other Party, and, within twenty (20) days after such notice, the Senior Officers of the Parties will meet for attempted resolution by good faith negotiations. If the Senior Officers are unable to resolve such dispute within thirty (30) days after their first meeting (including any mutually agreed extensions, the “Resolution Period”) for such negotiations, either Party may seek to have such dispute resolved in accordance with Section 14.3 (Dispute Resolution) below.

 

14.3 Dispute Resolution. If the Senior Officers are not able to agree on the resolution of a Disputed Matter within the Resolution Period, then, if a Party wishes to pursue further resolution of such Disputed Matter, such Party shall notify the other Party of its intent within one hundred and twenty (120) days of the end of the Resolution Period and such Disputed Matter shall be finally resolved by binding arbitration in accordance with this Section 14.3 (Dispute Resolution). Such Disputed Matter shall be referred to and finally resolved by arbitration under the International Chamber of Commerce (“ICC”) Rules, as then in effect, by a tribunal of three (3) arbitrators. The seat and legal place of the arbitration shall be in New York City, New York. Each Party shall nominate one arbitrator and the third arbitrator shall be nominated by the two Party-nominated arbitrators within fifteen (15) days after the second arbitrator’s appointment. If a Party does not nominate its arbitrator within fifteen (15) days following the expiry of the allotted period, then such arbitrator shall be appointed by the ICC in accordance with its rules. Any arbitrator appointed by the ICC shall have at least ten (10) years’ experience in the industry, with experiential understanding of drug discovery, Development and Commercialization. The arbitration shall be conducted, and all documents submitted to the arbitrators shall be, in English. Each Party shall bear its own legal costs for its counsel and other expenses, and the Parties shall equally share the costs of the arbitration; provided that the arbitral tribunal shall have the discretion to provide that the losing party is responsible for all or a portion of such arbitration and legal costs, in such case the arbitral award will so provide. The arbitrators shall have no power to award damages excluded pursuant to Section 11.3 (Limitation of Liability). The award shall be final and binding upon the Parties and the Parties undertake to carry out any award without delay. Judgment on the award may be entered in any court of competent jurisdiction. Except to the extent necessary to confirm, enforce, or challenge an award of the arbitration, to protect or pursue a legal right, or as otherwise required by Applicable Law or regulation or securities exchange, neither Party nor any arbitrator may disclose the existence, content, or results of any arbitration hereunder without the prior written consent of both Parties. Notwithstanding anything to the contrary in the foregoing, in no event shall an arbitration be initiated after the date when commencement of a legal or equitable proceeding based on the dispute, controversy, or claim would be barred by the applicable New York statute of limitations. Any disputes concerning the propriety of the commencement of the arbitration shall be finally settled by the arbitral tribunal.

 

 

14.4 Interim Relief. Notwithstanding anything herein to the contrary, nothing in this Section 14 (Dispute Resolution) shall preclude either Party from seeking interim or provisional relief, including a temporary restraining order, preliminary injunction, or other interim equitable relief concerning a Disputed Matter in any court of competent jurisdiction before or after the initiation of dispute resolution as set forth in Section 14.3 (Dispute Resolution), if necessary to protect the interests of such Party.

 

15. General Provisions

 

15.1 Governing Law. This Agreement, and all questions regarding the existence, validity, interpretation, breach, or performance of this Agreement, shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, United States, without reference to its conflicts of law principles.

 

15.2 Entire Agreement; Modification. This Agreement, including the Exhibits, is both a final expression of the Parties’ agreement and a complete and exclusive statement with respect to all of its terms. This Agreement supersedes all prior and contemporaneous agreements and communications, whether oral, written, or otherwise, concerning any and all matters contained herein, including the Confidentiality Agreement. This Agreement may only be modified or supplemented in a writing expressly stated for such purpose, referencing this Section 15.2 (Entire Agreement; Modification), and signed by an authorized representative of each Party. If the terms of any Exhibit, Schedule or Discovery and Characterization Study Plan contradict, or create inconsistencies or ambiguities with, the terms of this Agreement, then the terms of this Agreement shall govern.

 

15.3 Relationship Between the Parties. The Parties’ relationship, as established by this Agreement, is solely that of independent contractors. This Agreement does not create any partnership, joint venture, or similar business relationship between the Parties. Neither Party is a legal representative of the other Party, and neither Party can assume or create any obligation, representation, warranty, or guarantee, express or implied, on behalf of the other Party for any purpose whatsoever.

 

 

15.4 Performance by Affiliates, Subcontractors and Sublicensees. HSB may discharge any obligations and exercise any right hereunder through any of its Affiliates, subcontractors, or Sublicensees. HSB hereby guarantees the performance by its Affiliates, subcontractors, and Sublicensees of its obligations under this Agreement and shall cause the same to comply with the provisions of this Agreement in connection with such performance.

 

15.5 Waiver. The waiver by either Party of any right hereunder or of the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by such other Party whether of a similar nature or otherwise. Any waiver by a Party of a particular term or condition will be effective only if set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition.

 

15.6 Assignment. Except as expressly provided hereunder, neither this Agreement nor any rights or obligations hereunder may be assigned or otherwise transferred by either Party without the prior written consent of the other Party (which consent shall not be unreasonably withheld). The Parties may assign or otherwise transfer this Agreement and its rights and obligations hereunder without the other Party’s consent as follows:

 

(a) by either Party, in connection with the transfer or sale of all or substantially all of the business or assets of such Party relating to this Agreement to a Third Party, whether by merger, consolidation, divesture, restructure, sale of stock, sale of assets, or otherwise, provided that in the event of any such transaction (whether this Agreement is actually assigned or is assumed by the acquiring party by operation of law (e.g., in the context of a reverse triangular merger)), intellectual property rights of the acquiring party to such transaction shall not be included in the technology licensed or assigned hereunder; or

 

(b) by either Party, to an Affiliate, provided that if the entity to which this Agreement is assigned ceases to be an Affiliate of the assigning Party, the Agreement shall be automatically assigned back to the assigning Party or its successor.

 

The rights and obligations of the Parties under this Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the Parties specified above, and the name of a Party appearing herein will be deemed to include the name of such Party’s successors and permitted assigns to the extent necessary to carry out the intent of this Section 15.6 (Assignment). Any assignment not in accordance with this Section 15.6 (Assignment) shall be null and void and of no legal force or effect.

 

 

15.7 Severability. If, for any reason, any part of this Agreement is adjudicated invalid, unenforceable, or illegal by a court of competent jurisdiction, such adjudication shall not affect or impair, in whole or in part, the validity, enforceability, or legality of any remaining portions of this Agreement. The Parties will in such an instance use their best efforts to replace the invalid, unenforceable, or illegal provision(s) with a valid, enforceable, and legal provision(s) that best implements the original intent of the Parties and purposes of this Agreement.

 

15.8 Notices. Any notice to be given under this Agreement must be in writing and delivered either (a) in person or (b) by (i) first class mail (postage prepaid) requiring return receipt, or (ii) recognized overnight courier, or (iii) e-mail requiring confirmation of receipt, in each case to the Party to be notified at its address given below, or at any other address such Party may designate by prior written notice to the other in accordance with this Section 15.8 (Notices). Notice shall be deemed sufficiently given for all purposes upon the earliest of: (w) if personally delivered, the date of actual receipt; (x) if mailed by first class mail, seven (7) business days after the date of postmark; (y) if delivered by overnight courier, the next day the overnight courier regularly makes deliveries; or (z) if sent by e-mail, the date of confirmation of receipt if during the recipient’s normal business hours, otherwise the next business day.

 

	If to ABSI, notices must be addressed to:
		Applied Biomedical Science Institute
		11011 Via Frontera, Building D, San Diego, CA 92127
		Attention: Chief Executive Officer
		Email: Vaughn.smider@absinstitute.org
	If to HSB, notices must be addressed to:
		Hillstream BioPharma Inc.
		1200 Route 22 East, Suite 2000, Bridgewater, NJ 08807
		Attention: Chief Executive Officer
		Email: admin@hillstreambio.com

 

15.9 Force Majeure. Each Party shall be excused from liability for the failure or delay in performance of any obligation under this Agreement by reason of any event beyond such Party’s reasonable control, including Acts of God, fire, flood, explosion, earthquake, pandemic, or other natural forces, war, civil unrest, acts of terrorism, accident, destruction, or other casualty, any lack or failure of transportation facilities, any lack or failure of supply of raw materials, or any other event similar to those enumerated above. Such excuse from liability shall be effective to the extent and duration of the event(s) causing the failure or delay in performance and provided that the Party has not caused such event(s) to occur. Notice of a Party’s failure or delay in performance due to force majeure must be given to the other Party as soon as reasonably practicable after its occurrence. All delivery dates under this Agreement that have been affected by force majeure shall be tolled for the duration of such force majeure. In no event shall any Party be required to prevent or settle any labor disturbance or dispute.

 

 

15.10 Interpretation. The headings of clauses contained in this Agreement preceding the text of the sections, subsections, and paragraphs hereof are inserted solely for convenience and ease of reference only and shall not constitute any part of this Agreement, or have any effect on its interpretation or construction. All references in this Agreement to the singular shall include the plural where applicable. Unless otherwise specified, references in this Agreement to any Section 15 (General Provisions) shall include all Sections, subsections, and paragraphs in such Section 15 (General Provisions), references to any Section shall include all subsections and paragraphs in such Section, and references in this Agreement to any subsection shall include all paragraphs in such subsection. The word “including” and similar words means including without limitation. The word “or” means “and/or” unless the context dictates otherwise because the subjects of the conjunction are or intended to be mutually exclusive. The words “herein”, “hereof”, and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision. All references to days in this Agreement mean calendar days, unless otherwise specified. Ambiguities and uncertainties in this Agreement, if any, shall not be interpreted against either Party, irrespective of which Party may be deemed to have caused the ambiguity or uncertainty to exist. This Agreement has been prepared in the English language and the English language shall control its interpretation. In addition, all notices required or permitted to be given hereunder, and all written, electronic, oral, or other communications between the Parties regarding this Agreement shall be in the English language.

 

15.11 Counterparts; Electronic or Facsimile Signatures. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. This Agreement may be executed and delivered electronically or by PDF and, upon such delivery, such electronic or PDF signature will be deemed to have the same effect as if the original signature had been delivered to the other Party.

 

{Signature Page Follows}

 

 

In Witness Whereof, the Parties hereto have caused this Research and Development Collaboration and License Agreement to be executed and entered into by their duly authorized representatives as of the Effective Date.

 

HILLSTREAM BIOPHARMA INC.			APPLIED BIOMEDICAL SCIENCE INST.
By:	/s/ Randy Milby		By:	/s/ Vaughn Smider
Name:	Randy Milby		Name:	Vaughn Smider
Title:	CEO		Title:	President

 

 

EXHIBIT A

 

TARGETS

 

No.		Target
1		ErB2 (Her2)
2		ErbB3

 

 

EXHIBIT B

 

DISCOVERY AND CHARACTERIZATION STUDY PLAN(s)

 

1.	Antibody Discovery. Discover unique fully human antibodies to the Her2 and ErbB3 targets. ABS will use its discovery systems to identify high affinity binders to recombinant protein targets. The process will include:

 

a. Library design and construction

 

b. Hit identification and validation

 

c. Sequence / Hit analysis and prioritization

 

2.	Antibody Characterization. Characterize binding affinity, epitope binding, cell-binding activities, and signaling inhibitory properties on cell lines in vitro. The process will include:

 

a. Antibody production (including purification)

 

b. In vitro characterization (affinity, epitope)

 

c. Cell line method development (FACS, ADCC, signaling, etc.)

 

3.	Bispecific Antibody Construction. Combine select antibodies to produce bispecific antibodies that simultaneously target Her2 and ErbB3 antigens. The process will include:

 

a. Base vector construction

 

b. Construction and in vitro validation

 

4.	Bispecific Characterization. Characterize binding properties, cell-binding activities, and signaling inhibitory or killing properties on cell lines in vitro. The process will include:

 

a. In vitro characterization

 

b. Cell line characterization (FACS, ADCC, signaling inhibition, etc.)

 

 

Applied Biomedical Science Institute

 

Hillstream Pharmaceuticals – Her2 and ErbB3 antibody and bispecific discovery

 

Applied

Biomedical

Science

Institute

 

Statement of Work/Quote Summary

Project Month

Time (FTE mo)

Cost

Materials

Time/Materials

20% mark-up

Subtotal

Comment

1. Antibody discovery (Her2 and ErbB3)

Library design and construction

[*]-[*]

[*]

$

[*]

$

[*]

$

[*]

$

[*]

$

[*]

Hit identification and validation

[*]-[*]

[*]

$

[*]

$

[*]

$

[*]

$

[*]

$

[*]

Sequence/hit analysis and prioritization

[*]

[*]

$

[*]

$

[*]

$

[*]

$

[*]

$

[*]

2. Antibody characterization

Antibody production

[*]

[*]

$

[*]

$

[*]

$

[*]

$

[*]

$

[*]

In vitro characterization

[*]-[*]

[*]

$

[*]

$

[*]

$

[*]

$

[*]

$

[*]

Cell line method development

[*]-[*]

[*]

$

[*]

$

[*]

$

[*]

$

[*]

$

[*]

Will need input from HSB on cell lines, assays, etc.

Cell line characterization

[*]-[*]

[*]

$

[*]

$

[*]

$

[*]

$

[*]

$

[*]

3. Bispecific antibody construction

Base vector construction

[*]-[*]

[*]

$

[*]

$

[*]

$

[*]

$

[*]

$

[*]

Construction and in vitro validation

[*]-[*]

[*]

$

[*]

$

[*]

$

[*]

$

[*]

$

[*]

4. Bispecific Characterization

In vitro characterization

[*]-[*]

[*]

$

[*]

$

[*]

$

[*]

$

[*]

$

[*]

Will need input from HSB on cell lines, assays, etc.

Cell line characterization

[*]-[*]

[*]

$

[*]

$

[*]

$

[*]

$

[*]

$

[*]

$

[*]

$

[*]

$

[*]

TOTAL

$

[*]

 

 

EXHIBIT C

 

FEASIBILITY STUDY PLAN

 

 

EXHIBIT D

 

SUBCONTRACTORS

 

Below is a list of subcontractors routinely used by ABSI for molecular biology services:

 

1. [*]. DNA synthesis, library construction.

2. [*]. DNA sequencing and DNA synthesis.

3. [*]. DNA synthesis.

4. [*]. DNA synthesis.

5. [*]. DNA synthesis and protein production.

 

 

EXHIBIT E

 

WIRE INSTRUCTIONS

 

Incoming Federal Funds Wiring Instructions:

 

Bank of America, N.A.

[*]

 

Client Account Name:	APPLIED BIOMEDICAL SCIENCE INSTITUTE
	11011 VIA FRONTERA STE D
	SAN DIEGO, CA 92127-1752
Client Account Number:	[*]
ABA Routing #:	[*]

International Banks can use SWIFT address:  [*]

 

 

 

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made as of July 11, 2023 (the “Effective Date”) by and between Hillstream BioPharma Inc., a Delaware corporation with principal executive offices at 1200 Route 22 East, Suite 2000, Bridgewater, NJ 08807 245 Main Street, Suite 204, Chester, New Jersey 07930 (“Company”), and Sireesh Appajosyula, residing at [        ] (“Executive”). Each of Company and Executive is referred to herein as a “Party” and together they are referred to as the “Parties.”

 

WHEREAS, the Company desires to employ Executive, and Executive desires to be employed by the Company, in each case effective as of the Effective Date; and

 

WHEREAS, in connection with the foregoing, Executive shall be required to perform Executive’s duties and obligations hereunder on behalf of the Company, as appropriate, and such duties and obligations shall be enforceable by the Company.

 

TERMS

 

NOW THEREFORE, in consideration of such employment and mutual covenants and promises herein contained, and for other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive agree that the above recitals are hereby incorporated by reference into this Agreement and are binding upon the parties hereto and agree as follows:

 

1. EMPLOYMENT. The Company hereby agrees to employ Executive, and Executive hereby agrees to be employed with the Company, upon the terms and conditions contained in this Agreement. Unless earlier terminated by either party in accordance with Section 5, Executive’s employment with the Company shall continue for an initial term commencing on the Effective Date and continuing until the fifth (5th) anniversary of the Effective Date (the “Initial Term”) and thereafter shall automatically renew for successive one year terms (each a “Renewal Term”) unless either party provides written notice of non-renewal to the other party at least sixty (60) days prior to the last day of the then-current term (such Initial Term and subsequent Renewal Term(s) or portions thereof occurring prior to termination, collectively the “Employment Period”).

 

2. DUTIES.

 

(a) During the Employment Period, Executive shall serve the Company on a full-time basis and perform services in a capacity and in a manner consistent with Executive’s position for the Company. Executive shall have the title of Chief Operating Officer of the Company and shall have such duties, authorities and responsibilities as are consistent with such position, as the Chief Executive Officer (“CEO”) and the Board of Directors of the Company (the “Company Board”) may designate from time to time. Executive will report directly to the CEO. Notwithstanding the foregoing, Executive may (i) serve as a director officer and/or advisor of one (1) for-profit company without the prior approval of the Company Board; (ii) perform and participate in charitable, civic, educational, professional, community and industry affairs and other related activities; and (iii) manage Executive’s personal investments, provided, however, that such activities do not materially interfere, individually or in the aggregate with the performance of Executive’s duties hereunder or conflict or compete with the interests of the Company.

 

 

3. LOCATION OF EMPLOYMENT.

 

(a) Place of Performance. The duties to be performed by Executive hereunder shall (subject to reasonable travel requirements on behalf of Company) be performed remotely or at the executive offices of the Company in Bridgewater, New Jersey, or wherever the principal executive offices of the Company shall hereafter be located, or such other place as the Board may reasonably designate.

 

4. COMPENSATION.

 

As full compensation for the performance by Executive of the Services, Company shall pay Executive as follows:

 

(a) Base Salary. In consideration of all services rendered by Executive under this Agreement, the Company shall pay Executive a base salary (the “Base Salary”) at an annual rate of $400,000 (as it may be increased from time to time, the “Base Salary”) during the Employment Period. The Base Salary shall be paid in such installments and such times as the Company pays its regularly salaried employees, but no less than once per month, less applicable withholding and deductions. The Board shall annually review the Base Salary to determine whether an increase in the amount thereof is warranted.

 

(b) Annual Discretionary Bonus. During each fiscal year of the Executive’s employment with the Company (commencing with the 2023 fiscal year), Executive will be eligible to receive an annual discretionary bonus (“Cash Bonus”). Executive’s target Cash Bonus shall be equal to 50% of Base Salary (the “Target Bonus”). The Cash Bonus amount will be based upon achievement of Company and individual performance targets established by the Company Board, in its sole and absolute discretion, for the fiscal year to which the bonus relates. The payment of any Cash Bonus described herein will be made at the same time annual bonuses are generally paid to other senior executives of the Company (generally the first regular payroll date following the Company Board’s certification of achievement of applicable performance targets). If Executive is eligible to receive a Cash Bonus, such bonus will not be deemed to be fully “earned” unless Executive is (i) employed by the Company and in good standing on the date the Cash Bonus is paid, and (ii) has not given notice of Executive’s intention to resign Executive’s employment as of, or prior to, the date the Company pays the applicable Cash Bonus. The Cash Bonus shall be paid to Executive no later than March 15th of the year following the year for which the bonus is payable.

 

(c) Equity Award. Upon termination of Executive’s employment, the treatment of any portion of outstanding equity-based compensation awards (“Awards”) shall be determined in accordance with the terms of any agreements (and/or Company incentive plan) governing such Awards (“Award Agreement”). Executive shall remain eligible to receive additional Awards as the Company may grant from time to time.

 

(d) Withholding. Company shall withhold all applicable federal, state, local taxes and social security and such other amounts as may be required by law, including withholding and/or deductions properly elected by Executive, from all amounts payable to Executive under this Section 5.

 

 

(e) Expenses. Company shall reimburse Executive for all reasonable business expenses incurred by Executive in furtherance of the business and affairs of Company, including without limitation reasonable travel, lodging, meals, and entertainment, in each case, upon timely receipt by Company of appropriate vouchers or other proof of Executive’s expenditures and otherwise in accordance with any expense reimbursement policy as may from time to time be adopted by Company. In any case, any claim by Executive for reimbursement of expenses for a calendar year must be submitted by the Executive by March 15^th of the following year, and payment of the reimbursement shall be made by the Company within ninety (90) days after Executive’s submission of request for reimbursement.

 

(f) Other Benefits. Executive shall be entitled to benefits for which he shall be eligible under any benefit or other plans of the Company (including, without limitation, dental, medical, medical reimbursement and hospital plans, pension plans, employee stock purchase plans, profit sharing plans, bonus plans, prescription drug reimbursement plans, short and long term disability plans, life insurance and other so-call “fringe” benefits) as Company shall make available to its senior executives from time to time. Executive shall be designated as a named insured on directors’ and officers’ liability insurance for Company.

 

5. VACATION. During the Employment Period, Executive shall be entitled to vacation benefits consistent with Company policy, as may be in effect from time to time, except to the extent such policy is inconsistent with this Agreement.

 

6. CONFIDENTIAL INFORMATION AND INVENTIONS.

 

(a) Confidential Information; Non-Use. Executive recognizes and acknowledges that in the course of his duties he is likely to receive confidential or proprietary information of Company, its affiliates or third parties with whom Company or any such affiliates has an obligation of confidentiality. Accordingly, during and after the Term, Executive agrees to keep confidential and not disclose or make accessible to any other person or use for any other purpose other than in connection with the fulfillment of his duties under this Agreement, any “Confidential and Proprietary Information” (defined below) owned by or received by or on behalf of Company or any of its affiliates. The term “Confidential and Proprietary Information” shall include, but shall not be limited to, confidential or proprietary scientific or technical information, data, formulas and related concepts, business plans (both current and under development), client lists, promotion and marketing programs, trade secrets, or any other confidential or proprietary business information relating to development programs, costs, revenues, marketing, investments, sales activities, promotions, credit and financial data, manufacturing processes, financing methods, plans or the business and affairs of Company or of any affiliate or client of Company. Executive expressly acknowledges that the Confidential and Proprietary Information constitutes a protectable business interest of Company. Executive agrees: (i) not to use any such Confidential and Proprietary Information for himself or others; and (ii) not to take any Company material or reproductions (including but not limited to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) thereof from Company’s offices at any time during his employment by Company, except as required in the execution of Executive’s duties to Company, unless and until such Confidential and Proprietary Information has become public knowledge without fault by Executive. Executive agrees to return immediately all Company material and reproductions (including but not limited, to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) thereof in his possession to Company upon request and in any event immediately upon termination of employment.

 

 

Notwithstanding any other provisions of this Agreement, Executive may be entitled to immunity and protection from retaliation under the Defend Trade Secrets Act of 2016 for disclosing a trade secret under certain limited circumstances. Specifically, pursuant to 18 U.S.C. 1833(b), Executive shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, Executive who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the Executive and use the trade secret information in the court proceeding, if Executive (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

 

(b) Non-Disclosure. Except with prior written authorization by Company, Executive agrees that during the Term and thereafter, he will not disclose or publish: (i) any of the Confidential and Proprietary Information; or (ii) any confidential, scientific, technical, or business information of any party to whom the Executive knows, or should reasonably know, that Company or any of its affiliates owes an obligation of confidence.

 

(c) Inventions. Executive agrees that all inventions, discoveries, improvements and patentable or copyrightable works (“Inventions”) initiated, conceived or made by him within the scope of the Company’s business (during the Term) or using Company’s resources, either alone or in conjunction with others shall be the sole property of Company to the maximum extent permitted by applicable law and, to the extent permitted by law, shall be “works made for hire” as that term is defined in the United States Copyright Act (17 U.S.C.A., Section 101). Company shall be the sole owner of all patents, copyrights, trade secret rights, and other intellectual property or other rights in connection therewith; provided, however that this Section 6(c) shall not apply to Inventions which are not related to the business of Company and which are made and conceived by Executive not during normal working hours, not on Company’s premises and not using Company’s tools, devices, equipment or Confidential and Proprietary Information. Subject to the foregoing, Executive hereby assigns to Company all right, title and interest he may have or acquire in all Inventions; provided, however, that the Board may in its sole discretion agree to waive Company’s rights pursuant to this Section 6(c).

 

 

(d) Further Actions and Assistance. Executive agrees to cooperate reasonably with Company and at Company’s expense, both during and after his employment with Company, with respect to the procurement, maintenance and enforcement of copyrights, patents, trademarks, and other intellectual property rights (both in the United States and foreign countries) relating to such Inventions. Executive shall sign all papers, including, without limitation, copyright applications, patent applications, declarations, oaths, formal assignments, assignments of priority rights and powers of attorney, that Company reasonably may deem necessary or desirable in order to protect its rights and interests in any Inventions. Executive further agrees that if Company is unable, after reasonable effort, to secure Executive’s signature on any such papers, any officer of Company shall be entitled to execute such papers as his agent and attorney-in-fact and Executive hereby irrevocably designates and appoints each officer of Company as his agent and attorney-in-fact to execute any such papers on his behalf and to take any and all actions as Company reasonably may deem necessary or desirable in order to protect its rights and interests in any Inventions, under the conditions described in this paragraph.

 

(e) Prior Inventions. Executive will not assert any rights to any invention, discovery, idea, or improvement relating to the business of the Company or his duties hereunder as having been made or acquired by Executive prior to his work for Company.

 

(f) Disclosure. Executive agrees that he will promptly disclose to Company all Inventions initiated, made, or conceived or reduced to practice by him, either alone or jointly with other, during the Term.

 

(g) Survival. The provisions of this Section 6 shall survive any termination of this Agreement.

 

(h) Return of Company Property. Within ten (10) days following the date of any termination of Executive’s employment, Executive or Executive’s personal representative shall return all property of the Company and its affiliates in Executive’s possession, including but not limited to all Company owned computer equipment (hardware and software), smart phones, facsimile machines, tablet computers and other communication devices, credit cards, office keys, security access cards, badges, identification cards and all copies (including drafts) of any documentation or information (however stored) relating to the business of the Company and its affiliates, its customers and clients or its prospective customers and clients.

 

(i) Cooperation. During the Employment Period and for six years thereafter, Executive shall give Executive’s assistance and cooperation, upon reasonable advance notice, in any matter relating to Executive’s position with the Company and its affiliates, or Executive’s knowledge as a result thereof as the Company may reasonably request, including Executive’s attendance and truthful testimony where deemed appropriate by the Company, with respect any investigation or the Company’s (or an affiliate’s) defense or prosecution of any existing or future claims or litigations or other proceeding relating to matters in which Executive was involved or had knowledge by virtue of Executive’s employment with the Company Group, in all cases on schedules that are reasonably consistent with Executive’s other permitted activities and commitments. The Company agrees to reimburse Executive for any costs Executive incurs in connection with complying with this Section, including Executive’s reasonable attorney’s fees.

 

 

7. NON-COMPETITION, NON-SOLICITATION AND NON-DISPARAGEMENT.

 

(a) Restrictive Covenant. Executive understands and recognizes that his services to Company are special and unique and that in the course of performing such services Executive will have access to and knowledge of Confidential and Proprietary Information and Executive agrees that, during the Term and twelve month period immediately following Executive’s separation from employment (the “Termination Restriction Period”), whether such separation is voluntary or involuntary, he shall not in any manner, directly or indirectly, on behalf of himself or any other person, firm, partnership, joint venture, corporation or other business entity (“Person”), enter into or engage in any business involving the development or commercialization of competing products developed or commercialized by the Company at the time of Executive’s separation or at any time during Executive’s employment with the Company (the “Business of the Company”) within the geographic area in which Company does business, which is deemed by the Parties hereto to be the United States and the European Union. Executive acknowledges that, due to the unique nature of Company’s business, Company has a strong legitimate business interest in protecting the continuity of its business interests and its Confidential and Proprietary Information and the restriction herein agreed to by Executive narrowly and fairly serves such an important and critical business interest of Company. Notwithstanding the foregoing, nothing contained in this Section 7(a) shall be deemed to prohibit Executive from acquiring or passively holding, solely for investment, publicly traded securities of any corporation, some or all of the activities of which are engaged in the Business of the Company so long as such securities do not, in the aggregate, constitute more than four percent (4%) of any class or series of outstanding securities of such corporation; and further notwithstanding the foregoing, nothing contained in this Section 7(a) shall preclude Executive from performing the functions of chief executive or other senior executive, per se, provided such functions do not involve the development of a product within the Business of the Company, or the use of the Confidential and Proprietary Information; becoming an employee of, or from otherwise providing services to, a separate division or operating unit of a multi-divisional business or enterprise (a “Division”) if: (i)) the Division by which Executive is employed, or to which Executive provides services, is not engaged in the Business of Company, (ii) Executive does not provide services, directly or indirectly, to any other division or operating unit of such multi-divisional business or enterprise engaged in or proposing to engage in the Business of Company (individually, a “Competitive Division” and collectively, the “Competitive Divisions”) and (iii) the Competitive Divisions, in the aggregate, accounted for less than 10% of the multi-divisional business or enterprise’s consolidated revenues for the fiscal year, and each subsequent quarterly period, prior to Executive’s commencement of employment with or provision of services to the Division.

 

(b) Reasonableness of Restriction. Executive hereby acknowledges and agrees that the covenant against competition provided for pursuant to Section 7(a) is reasonable with respect to its duration, geographic area and scope. If, at the time of enforcement of this Section 7, a court holds that the restrictions stated herein are unreasonable under the circumstances then existing, the Parties hereto agree that the maximum duration, scope or geographic area legally permissible under such circumstances will be substituted for the duration, scope or area stated herein.

 

(c) Non-Solicitation. During the Term and the applicable Termination Restriction Period (as defined hereinafter), Executive shall not, directly or indirectly, without written consent of Company: (i) solicit or induce any employee or independent contractor of Company or any of its affiliates to leave the employ of Company or any affiliate; or hire for any purpose any employee or independent contractor of Company; or hire any former employee or independent contractor who has left the employment of Company or any affiliate of Company within twelve (12) months of the termination of such employee’s employment with Company or any such affiliate for any purpose; or hire any former employee or independent contractor of Company in knowing violation of such employee’s non-competition agreement with Company or any such affiliate; or (ii) solicit, divert or take away, or attempt to divert or take away, the business or patronage of any agent, client or customer (or any potential agent, client or customer) of Company which was served by Company (or which the Company solicited for service) during the twelve-month period prior to the termination of Executive’s employment with Company; or (iii) without the consent of the Board solicit or accept employment or be retained by any person, who at any time during the twelve month period prior to the termination of Executive’s employment with Company, was an agent, client or customer of Company or any of its subsidiaries where his position will be related to the Business of Company.

 

 

(d) Non-Disparagement. Executive agrees that he shall not directly or indirectly disparage, whether or not truthfully, the name or reputation of Company or any of its affiliates, including but not limited to, any officer, director, employee or shareholder of Company or any of its affiliates provided that, nothing in this Section shall be construed to interfere with Executive’s right to engage in protected concerted activity under the National Labor Relations Act. Notwithstanding this Section 7(d), nothing contained herein shall apply to statements made by Executive (x) in the course of his responsibility to evaluate the performance and/or participate in any investigation of the conduct or behavior of officers, employees and/or others or (y) as part of any judicial, administrative or other legal action or proceeding, and nothing shall be construed to limit or impair the ability of Executive to provide truthful testimony in response to any validly issued subpoena or to file pleadings or respond to inquiries or legal proceedings by any government agency to the extent required by applicable law. In addition, Executive agrees not to, without Company’s prior written consent, communicate, directly or indirectly, with the press or other media, concerning the past or present employees or businesses of the Company Group.

 

(e) Enforcement. In the event that Executive breaches or threatens to breach any provisions of Section 6 or this Section 7, then, in addition to any other rights Company may have, Company shall be entitled to seek injunctive relief to enforce such provisions. Company and Executive agree that any such action for injunctive or equitable relief shall be heard in a state or federal court situated in Morris County in the State of New Jersey and each of the Parties hereto agrees to accept service of process by registered or certified mail and to otherwise consent to the jurisdiction of such courts.

 

(f) Remedies Cumulative; Judicial Modification. (i) Each of the rights and remedies enumerated in Section 7(e) shall be independent of the others and shall be in addition to and not in lieu of any other rights and remedies available to Company at law or in equity. If any of the covenants contained in this Section 7, or any part of any of them, is hereafter construed or adjudicated to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants or rights or remedies, which shall be given full effect without regard to the invalid portions. If any of the covenants contained in this Section 7 is held to be invalid or unenforceable because of the duration of such provision or the area covered thereby, the Parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and in its reduced form such provision shall then be enforceable. (ii) In the event that an actual proceeding is brought in equity to enforce the provisions of Section 6 or this Section 7, Executive shall not urge as a defense that there is an adequate remedy at law, nor shall Company be prevented from seeking any other remedies that may be available.

 

(g) Survival. The provisions of this Section 7 shall survive any termination of this Agreement.

 

 

8. REPRESENTATIONS AND WARRANTIES.

 

(a) By Executive. Executive hereby represents and warrants to Company as follows:

 

(i) Neither the execution nor delivery of this Agreement nor the performance by Executive of his duties and other obligations hereunder conflict with or constitute a default or breach of any covenant or obligation under (whether immediately, upon the giving of notice or lapse of time or both) any prior employment agreement, contract, or other instrument to which Executive is a party or by which he is bound.

 

(ii) Executive has the full right, power and legal capacity to enter and deliver this Agreement and to perform his duties and other obligations hereunder. This Agreement constitutes the legal, valid and binding obligation of Executive enforceable against him in accordance with its terms. No approvals or consents of any persons or entities are required for Executive to execute and deliver this Agreement or perform his duties and other obligations hereunder.

 

(iii) Executive will not use any confidential information or trade secrets of any third party in his employment by Company in violation of the terms of the agreements under which he had access to or knowledge of such confidential information or trade secrets.

 

(b) By Company. Company hereby represents and warrants to Executive as follows:

 

(i) Neither the execution nor delivery of this Agreement nor the performance by Company of its obligations hereunder conflict with or constitute a default or breach of any covenant or obligation under (whether immediately, upon the giving of notice or lapse of time or both) any prior agreement, contract, or other instrument to which Company is a party or by which it is bound.

 

(ii) Company has the full right and power to enter and deliver this Agreement and to preform obligations hereunder. This Agreement constitutes the legal, valid and binding obligation of Company enforceable against it in accordance with its terms. All approvals or consents required for Company to validly execute and deliver this Agreement and perform its obligations hereunder, including, without limitation, approval of the Board, have been obtained.

 

9. TERMINATION.

 

(a) Cause. Executive’s employment hereunder may be terminated by the Board immediately for “Cause” (defined below). Any of the following actions by Executive shall constitute “Cause”:

 

(i) The willful failure, disregard or refusal by Executive to perform his material duties or obligations under this Agreement;

 

(ii) Any willful, intentional or grossly negligent act by Executive having the effect of materially injuring (whether financial or otherwise and as determined reasonably and in good faith by a majority of the members of the Board) the business or reputation of Company or any of its affiliates;

 

 

(iii) Executive’s indictment for or being charged with any felony or a crime involving serious moral turpitude (including entry of a guilty or nolo contendere plea);

 

(iv) A good faith determination by the Board and/or any government representative or agency that the Executive is a “bad actor” as defined by 17 CFR 230.506(a);

 

(v) The good faith determination by the Board, after a reasonable and good-faith investigation by the Company following any allegation by another employee of Company, that Executive engaged in some form of harassment prohibited by law (including, without limitation, harassment on the basis of age, sex or race) unless Executive’s actions were specifically directed by the Board;

 

(vi) Any willful misconduct by the Executive or misappropriation, theft or embezzlement by Executive of the property of Company or its affiliates (whether or not a misdemeanor or felony);

 

(vii) Breach by Executive of any material provision of this Agreement or any other agreement between Executive and the Company or of any policy of the Company that is not cured by Executive to the reasonable satisfaction of Company’s Board within thirty (30) days after written notice thereof is given to Executive by Company.

 

For purposes of Section 9(a), no act or omission by Executive shall be considered willful if reasonably and in good faith believed by Executive to be in, or not contrary to, the best interests of Company.

 

(b) Death. Executive’s employment hereunder shall be terminated upon Executive’s death.

 

(c) Disability. The Board may terminate Executive’s employment hereunder due to Executive’s “Disability” (defined below). For purposes of this Agreement, a termination due to Executive’s “Disability” shall be deemed to have occurred:

 

(i) when the Board has provided a written termination notice to Executive supported by a written statement from a Reputable Independent Physician (defined below), whose determination as to disability shall be binding on all Parties, to the effect that Executive shall have become so physically or mentally incapacitated by reason of physical or mental illness or injury as to be unable to resume (with or without reasonable accommodation as that term is defined under applicable law) within the ensuing three (3) months his employment under this Agreement; or

 

 

(ii) upon rendering of a written termination notice by the Board after Executive has been unable to substantially perform his duties hereunder by reason of any physical or mental illness or injury (with or without reasonable accommodation as that term is defined under applicable law) for ninety (90) or more consecutive days or more than one hundred twenty (120) days in any consecutive twelve-month period.

 

The term “Reputable Independent Physician” means a physician satisfactory to both Executive and Company, provided that if Executive and Company do not agree on a physician, then a third physician selected by the physicians selected by Executive and Company. Executive agrees to make himself available and to cooperate in a reasonable examination by the Reputable Independent Physician.

 

(d) Good Reason. Executive may terminate his employment hereunder for “Good Reason” (defined below). The term “Good Reason” shall mean the occurrence any of the following events (provided, Executive has provided Company with written notice of the occurrence of such events within ninety (90) days of the occurrence of such events and Company has not cured such breach within thirty (30) days from such notice and Executive terminates employment within 30 days of the expiration of such cure period):

 

(i) any material breach of this Agreement by Company if Executive has provided Company with written notice of the breach within ninety (90) days of the breach and Company has not cured such breach within thirty (30) days from such notice;

 

(ii) without Executive’s express written consent, any material reduction by Company of Executive’s duties, responsibilities, or authority, including, without limitation, a change in the line of reporting between him and the Board;

 

(iii) a relocation of Company’s principal place of business outside of the New York metropolitan area or to a location more than 50 miles from the immediately preceding location without Executive’s written consent; or

 

(iv) material reduction in Executive’s annual base salary unless all officers and/or members of the Company’s executive management team experience an equal or greater percentage reduction in annual base salary and/or total compensation.

 

(e) Convenience. Company and Executive each may terminate Executive’s employment hereunder for any reason or no reason at any time by written notice of termination to the other Party, which notice shall specify the termination date, or by providing a Notice of Nonrenewal to the other Party.

 

 

10. COMPENSATION UPON TERMINATION.

 

In the event Executive’s employment is terminated, Company shall pay to Executive the Base Salary and benefits otherwise payable to him under Section 5 through the last day of his actual employment by Company, any reimbursable business expenses, and any earned but unpaid bonuses (together, the “Accrued Compensation”). In addition to the Accrued Compensation:

 

(a) Death or Disability. If Executive’s employment is terminated as a result of his death or Disability, Company shall pay to Executive or to Executive’s estate, as applicable, (i) his Base Salary through the date which is ninety (90) days after his death or Disability and (ii) such other or additional benefits, if any, as may be provided under applicable employee benefit plans, programs and/or arrangements of Company. All shares of capital stock of Company held by Executive that are subject to vesting (“Restricted Shares”) and all options to purchase shares of capital stock of Company (“Stock Options”) that are scheduled to vest on or before the next succeeding anniversary of the Effective Date shall be accelerated and deemed to have vested as of the termination date. All Restricted Shares and Stock Options that have not vested (or been deemed pursuant to the immediately preceding sentence to have vested) as of the date of termination shall be forfeited to Company as of such date. Stock Options that have vested as of Executive’s termination shall remain exercisable until the earlier to occur of (i) the expiry of sixty (60) months following such termination and (ii) the last expiration/termination date applicable under the grant under which such Stock Options were granted. For Disability, all payments, benefits and/or grants under this Section 10(a) shall be subject to Executive’s execution and delivery within 21 days of separation from service of a general release of Company, its parents, subsidiaries, and affiliates and each of its officers, directors, employees, agents, successors and assigns in a form that is acceptable to Company, with such payments, benefits and or grants commencing thirty (30) days after Executives separation from service.

 

(b) Cause. If Executive’s employment is terminated by the Board for Cause, then Company shall provide such other or additional benefits, if any, as may be required under applicable employee benefit plans, programs and or arrangements of Company. Executive shall have no further entitlement hereunder to any other compensation or benefits from Company except to extent otherwise provided by law. All Restricted Shares that have not vested as of the date of termination shall be forfeited to Company as of such date. All unexercised Stock Options vested as of Executive’s termination shall remain exercisable for ninety (90) days following such termination.

 

(c) Other than for Cause, Death, or Disability. If Company terminates Executive’s employment other than as a result of Executive’s death or Disability and other than for Cause or if Executive terminates Executive’s employment for Good Reason, then Company shall (i) continue to pay the Executive his Base Salary and provide health benefits for a period of twelve (12) months following the effective date of the Executive’s separation from service (such period of payment referred to herein as the “Section 10(c) Termination Benefits Period” or, in the case of benefits, such time as Executive receives equivalent coverage and benefits under plans and programs of a subsequent employer; and (ii) provide such other or additional benefits, if any, as may be provided under applicable employee benefit plans, programs and/or arrangements of the Company (other than any severance plans or programs). All Restricted Shares and Stock Options that have not vested as of the date of termination shall be forfeited to Company as of such date. Acceleration of the vesting of all outstanding unvested time-based equity awards that are held by Executive as of the date of Executive’s Separation from Service as to the number of shares that would have vested in accordance with the applicable vesting schedule as if Executive had been in service for an additional six (6) months as of Executive’s termination date (based upon months of service and not the occurrence of corporate events or milestones). Stock Options that have vested as of Executive’s termination shall remain exercisable until the earlier to occur of (i) the expiry of sixty (60) months following such termination and (ii) the last expiration/termination date applicable under the grant under which such Stock Options were granted. All payments, benefits and/or grants under this Section 10(c) shall be subject to Executive’s execution and delivery within sixty (60) days of separation from service of a separation agreement with Company, including without limitation non-disparagement and confidentially provisions, an agreement to cooperate past-separation of employment and a general release of the Company, its parents, subsidiaries and affiliates and each of its officers, directors, employees, agents, successors and assign in a form acceptable to the Company, with such payments, benefits, and or grants commencing sixty (60) days from Executive’s separation from service, except that any such payments, benefits, and/or grants that would otherwise be payable during the sixty (60) day period shall be paid on the first payroll date following the expiration of such 60-day period.

 

 

(d) By Executive for Convenience. If Executive terminates Executive’s employment pursuant to Section 9(e), Executive shall not be entitled to receive any payments or benefits other than the Accrued Compensation.

 

(e) This Section 10 sets forth the only obligations of Company with respect to the termination of Executive’s employment with Company, and Executive acknowledges that, upon the termination of his employment, he shall not be entitled to any payments or benefits which are not explicitly provided in this Section 10, except as required by law or the terms of another employee plan, program or arrangement covering him. Executive acknowledges and agrees that upon the termination of his employment with the Company, regardless of the reason or grounds therefore, he shall resign from his position on the Board and from any other board, organization or foundation wherein Executive sits or belongs as a representative of the Company.

 

(f) The obligations of Company that arise under this Section 10 shall survive the expiration or earlier termination of this Agreement.

 

11. CHANGE OF CONTROL.

 

(a) Change of Control Defined. The term “Change of Control” means, after the Effective Date:

 

(i) the acquisition by an individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) of beneficial ownership of any capital stock of Company, if, after such acquisition, such individual, entity or group beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) fifty percent (50%) or more of the combined voting power of the then-outstanding securities of Company entitled to vote generally in the election of directors (“Outstanding Company Voting Securities”); or

 

(ii) the consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving Company or a sale or other disposition of all or substantially all of the assets of Company (“Business Combination”), unless, immediately following such Business Combination, all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns Company or substantially all of Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership of the Outstanding Company Voting Securities immediately prior to such Business Combination.

 

 

(b) Consequence. In the event of Executive’s termination of employment with the Company either (i) by the Company without Cause at any time within twelve (12) months prior to the consummation of a Change of Control if, prior to, or as of such termination, a Change of Control transaction was Pending (as defined herein) at any time during such twelve (12)-month period, (ii) by Executive for Good Reason at any time within twelve (12) months after the consummation of a Change of Control, or (iii) by the Company without Cause at any time upon or within twelve (12) months after the consummation of a Change of Control, then, Executive shall be entitled to receive the following:(i) the acceleration and vesting in full of any then outstanding and unvested portion of any time- vesting equity award with, options continuing to be exercisability for sixty (60) months following termination (or, if earlier, their expiration date); (ii) the benefits described in Section 4 (a), (b) and (c), provided, however, that the severance amount shall equal two (2) times the sum of Base Salary and Target Bonus and the severance period shall be twenty-four (24) months. A Change of Control transaction shall be deemed to be “Pending” each time any of the following circumstances exist: (A) the Company and a third party have entered into a confidentiality agreement that has been signed by a duly-authorized officer of the Company and that is related to a potential Change of Control transaction; (B) the Company has received a written expression of interest from a third party, including a binding or nonbinding term sheet or letter of intent, related to a potential Change of Control transaction; or (C) a third party has publicly announced, through a filing with the Securities and Exchange Commission, its intent to commence a tender offer or similar transaction to acquire 50% or more of the outstanding voting interests of the Company.

 

(c) Potential Adjustments due to Tax Implications. Notwithstanding anything in this Agreement or any other agreement between Executive and Company to the contrary, but subject to this Section 11(c), Company will make the payments and other acceleration of benefits under this Agreement or any other agreement or plan between the Company and Executive and other compensatory arrangements without regard to whether Section 280G of the Internal Revenue Code of 1986 (the “Code”) would limit or preclude the deductibility of such payments or benefits. However, if reducing or eliminating any such payment and/or other benefit would increase the “Total After-Tax Payments” (defined below), then the amounts payable to Executive will be reduced or eliminated as follows (or in such other manner as Company may specify at the applicable time) to the extent necessary to maximize such Total After-Tax Payments:

 

(i) first, by reducing or eliminating any cash payments or other benefits (other than the vesting of any options or stock); and

 

(ii) second, by reducing or eliminating the vesting of options and stock that occurs as a result of a Change of Control or other event covered by Section 280G of the Code.

 

 

Company’s independent, certified public accounting firm will determine whether and to what extent payments or vesting are required to be reduced or eliminated in accordance with the foregoing. If there is ultimately determined to be an underpayment of or overpayment to Executive under this provision, the amount of such underpayment or overpayment will be immediately paid to Executive or refunded by him, as the case may be with interest at the applicable federal rate under the Code. The term “Total After-Tax Payments” means the total value of all “parachute payments” (as that term is defined in Section 280G(b)(2) of the Code) made to Executive or for his benefit (whether made under the Agreement or otherwise), after reduction for all applicable federal taxes (including, without limitation, the tax described in Section 4999 of the Code).

 

12. INDEMNIFICATION. Company shall defend and indemnify Executive in his capacity as Chief Operating Officer of Company to the fullest extent permitted under to the Delaware General Corporate Law (the “DGCL”). Executive’s rights to, and Company’s obligation to provide, indemnification shall survive termination of this Agreement.

 

13. COMPLIANCE WITH CODE SECTION 409A.

 

(a) The intent of the Parties to the Agreement is that the payments, compensation, and benefits under this Agreement will be exempt from or comply with Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, in this connection, the Agreement shall be interpreted to be exempt or in compliance with Section 409A.

 

(b) Potential Delay of Payment(s) and Adjustments. Notwithstanding any other provisions of the Agreement, if any payment, compensation or other benefit provided to Executive in connection with his separation from service is determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409A and Executive is a “specified employee” within the meaning of Section 409A, no part of such payments shall be paid before the day that is six (6) months plus one (1) day after the termination date (the “New Payment Date”). The aggregate of any payments that otherwise would have been paid to Executive during the period between the termination date and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, any payments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the time period originally scheduled, in accordance with the terms of this Agreement.

 

(c) Separation from Service. For purposes of this Agreement, the terms “termination of employment” or “separation from service” will be determined consistent with the rules relating to “separation from service” under Section 409A.

 

(d) Installments. If any payment, compensation, or other benefit required by the Agreement is to be paid in a series of installment payments, each individual payment in the series shall be considered a separate payment for purposes of Section 409A.

 

14. MISCELLANEOUS.

 

(a) Governing Law. Subject to the next sentence, this Agreement and all questions relating to its validity, interpretation, performance, remediation, and enforcement (including, without limitation, provisions concerning limitations of actions) shall be governed by and construed in accordance with the substantive laws of the State of New Jersey, notwithstanding any choice-of-law doctrines of that jurisdiction or any other jurisdiction that ordinarily would or might cause the substantive law of another jurisdiction to apply.

 

 

Notwithstanding the foregoing, all questions relating to the validity, interpretation, performance, remediation, and enforcement of Company’s obligations, and Executive’s rights, under Section 12 shall be governed by and construed in accordance with the substantive laws of the State of Delaware.

 

(b) Personal Jurisdiction. To the fullest extent permitted by applicable law, any action or proceeding relating in any way to this Agreement may only be brought and enforced in the State or Federal Courts located in Morris County, New Jersey, to the extent subject matter jurisdiction exists therefore. The Parties irrevocably submit to the jurisdiction of such courts in respect of any such action or proceeding. The parties irrevocable waive, to the fullest extent permitted by law, any objection that they may now or hereafter have to the laying of venue of any such action or proceeding in such courts, as well as any claim that any such action or proceeding brought in any such court has been brought in any inconvenient forum.

 

(c) Service of Process. The Parties further irrevocably consent to the service of Process out of any of the aforementioned courts in the manner and to the address specified in Section 14(h) of this Agreement.

 

(d) Waiver of Jury Trail. Each of the parties hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based in contract, tort, or otherwise) arising out of or relating to this Agreement or the actions of any party in the negotiation, administration, performance, and enforcement thereof. Each of the parties hereto further warrants and represents that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. This waiver is irrevocable, meaning that it may not be modified either orally or in writing, and this waiver shall apply to any subsequent amendments, renewals, supplements, or modifications to this Agreement. In the event of litigation, this Agreement may be filed as a written consent to a trial by court.

 

(e) Assignment. This Agreement, and Executive’s rights and obligations hereunder, may not be assigned by Executive. Company may assign its rights, together with its obligations, hereunder in connection with any sale, transfer or other disposition of all or substantially all of its business or assets. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties hereto, and their respective heirs, legal representatives, successors and assigns.

 

(f) Amendment. This Agreement cannot be amended orally, or by any course of conduct or dealing, but only by a written agreement duly executed by the Parties.

 

(g) Waiver. The failure of either Party to insist upon the strict performance of any of the terms, conditions and provisions of this Agreement shall not be construed as a waiver or relinquishment of future compliance therewith, and such terms, conditions and provisions shall remain in full force and effect. No waiver of any term or condition of this Agreement on the part of either Party shall be effective for any purpose whatsoever unless such waiver is in writing and signed by such Party. Unless the written waiver instrument expressly provides otherwise, no waiver by a Party of any right or remedy or breach by the other Party in any particular instance shall be construed to apply to any right, remedy or breach arising out of or related to a subsequent instance.

 

 

(h) Notices. All notices, demands or other communications desired or required to be given by a Party to the other Party shall be in writing and shall be deemed effectively given upon (i) personal delivery to the Party to be notified, (ii) upon confirmation of receipt of fax or other electronic transmission, (iii) one business day after deposit with a reputable overnight courier, prepaid for priority overnight delivery, or (iv) five days after deposit with the United States Post Office, postage prepaid, certified mail, return receipt requested, in each case to the Party to be notified at its/his address set forth at the top of this Agreement; or to such other addresses and to the attention of such other individuals as either Party shall have designated to the other by notice given in the foregoing manner.

 

(i) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the Parties relating to the subject matter hereof, and supersedes all prior agreements, arrangements, and understandings, written or oral between the Parties, relating to the subject matter hereof. No representation, promise or inducement has been made by either Party that is not embodied in this Agreement, and neither Party shall be bound by or liable for any alleged representation, promise or inducement not so set forth.

 

(j) Affiliate and Control Defined. As used in this Agreement, the term “affiliate” of a specified Person shall mean and include any Person controlling, controlled by or under common control with the specified Person. A Person shall be deemed to “control” another Person if such first Person possesses directly or indirectly the power to direct, or cause the direction of, the management and policies of the second Person, whether through the ownership of voting securities, by contract or otherwise.

 

(k) Captions, Headings and Cross-References. The section headings contained herein are for reference purposes and convenience only and shall not in any way affect the meaning or interpretation of this Agreement. Except as expressly set forth otherwise, all cross-references to sections refer to sections of this Agreement.

 

(l) Severability. In addition to, and not in conflict with, the provisions of Section 7(b) and 7(f), the Parties agree that each and every provision of this Agreement shall be deemed valid, legal and enforceable in all jurisdictions to the fullest extent possible. Any provision of this Agreement that is determined to be invalid, illegal or unenforceable in any jurisdiction or country in the Territory shall, as to that jurisdiction or country, be adjusted and reformed rather than voided, if possible, in order to achieve the intent of the Parties. Any provision of this Agreement that is determined to be invalid, illegal or unenforceable in any jurisdiction or country which cannot be adjusted and reformed shall for the purposes of that jurisdiction or country, be voided. Any adjustment, reformation or voidance of any provisions of this Agreement shall only be effective in the jurisdiction or country requiring such adjustment or voidance, without affecting in any way the remaining provisions of this Agreement in such jurisdiction or country or adjusting, reforming, voiding or rendering that provision or any other provision of this Agreement invalid, illegal or unenforceable in any other jurisdiction or country.

 

(m) Counterpart Execution. This Agreement may be executed in one or more counterparts each of which shall be an original document and all of which together shall constitute one and the same instrument. The Parties acknowledge that this Agreement may be executed and delivered by means of electronic signatures and that use and acceptance of electronic signatures to bind the Parties represents the voluntary agreement and intention of the Parties to conduct this transaction by electronic means. The Parties agree that execution and delivery by electronic means will have the same legal effect as if signatures had been manually written on this Agreement. This Agreement will be deemed lawfully executed by the Parties by such action for purposes of any statute or rule of law that requires this Agreement to be executed by the Parties to make the mutual promises, agreements and obligations of the Parties set forth herein legally enforceable. Facsimile and .pdf exchanges of signatures will have the same legal force and effect as the exchange of original signatures. The parties hereby waive any right to raise any defense or waiver based upon the execution of this Agreement by means of electronic signatures in any proceeding arising under or relating to this Agreement. The Parties agree that the legal effect, validity and enforceability of this Agreement will not be impaired solely because of its execution in electronic form or that an electronic record was used in its formation. The Parties acknowledge that they are capable of retaining electronic records of this transaction.

 

 

IN WITNESS WHEREOF, the Parties hereto have executed this Employment Agreement as of the date forth above.

 

HILLSTREAM BIOPHARMA INC.			EXECUTIVE:
/s/ Randy Milby			/s/ Sireesh Appajosyula
Name:	Randy Milby		Sireesh Appajosyula
Title:	Chief Executive Officer		Chief Operating Officer
Date:	July 11, 2023		Date:	July 11, 2023

 

 

Exhibit 10.3

 

AMENDED and RESTATED MILBY EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made as of July 6, 2023 (the “Effective Date”) by and between Hillstream BioPharma Inc., a Delaware corporation with principal executive offices at 245 Main Street, Suite 204, Chester, New Jersey 07930 (“Company”), and Randy D. Milby, residing at [        ] (“Executive”). Each of Company and Executive is referred to herein as a “Party” and together they are referred to as the “Parties.”

 

Whereas, the Company desires to continue to employ Executive, and Executive desires to continue to be employed by the Company, in each case effective as of the date of an initial public offering of the Company (the “Effective Date”);

 

Whereas, in connection with the foregoing, Executive shall be required to perform Executive’s duties and obligations hereunder on behalf of the Company, as appropriate, and such duties and obligations shall be enforceable by the Company;

 

Whereas, this Agreement supersedes any and all prior employment agreements by and between Executive and the Company;

 

TERMS

 

Now therefore, in consideration of such employment and mutual covenants and promises herein contained, and for other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive agree that the above recitals are hereby incorporated by reference into this Agreement and are binding upon the parties hereto and agree as follows:

 

1. EMPLOYMENT. The Company hereby agrees to employ Executive, and Executive hereby agrees to be employed with the Company, upon the terms and conditions contained in this Agreement. Unless earlier terminated by either party in accordance with Section 5, Executive’s employment with the Company shall continue for an initial term commencing on the Effective Date and continuing until the fifth (5th) anniversary of the Effective Date (the “Initial Term”) and thereafter shall automatically renew for successive one year terms (each a “Renewal Term”) unless either party provides written notice of non-renewal to the other party at least sixty (60) days prior to the last day of the then-current term (such Initial Term and subsequent Renewal Term(s) or portions thereof occurring prior to termination, collectively the “Employment Period”).

 

2. DUTIES.

 

(a) During the Employment Period, Executive shall serve the Company on a full-time basis and perform services in a capacity and in a manner consistent with Executive’s position for the Company. Executive shall have the title of Founder, President and Chief Executive Officer of the Company and shall have such duties, authorities and responsibilities as are consistent with such position, as the Board of Directors of the Company (the “Company Board”) may designate from time to time. Executive will report directly to the Company Board. During the Employment Period, the Company Board shall recommend to its shareholders that Executive be elected as a member of the Company Board and, if so elected, Executive shall serve for no additional consideration as a member of the Company Board. Notwithstanding the foregoing, Executive may (i) serve as a director officer and/or advisor of one (1) for-profit company without the prior approval of the Company Board; (ii) perform and participate in charitable, civic, educational, professional, community and industry affairs and other related activities; and (iii) manage Executive’s personal investments, provided, however, that such activities do not materially interfere, individually or in the aggregate with the performance of Executive’s duties hereunder or conflict or compete with the interests of the Company.

 

 

3. LOCATION OF EMPLOYMENT.

 

(a) Place of Performance. The duties to be performed by Executive hereunder shall (subject to reasonable travel requirements on behalf of Company) be performed remotely or at the executive offices of the Company in New Jersey, or wherever the principal executive offices of the Company shall hereafter be located, or such other place as the Board may reasonably designate.

 

4. COMPENSATION.

 

As full compensation for the performance by Executive of the Services, Company shall pay Executive as follows:

 

(a) Base Salary. In consideration of all services rendered by Executive under this Agreement, the Company shall pay Executive a base salary (the “Base Salary”) at an annual rate of $500,000 (as it may be increased from time to time, the “Base Salary”) during the Employment Period. The Base Salary shall be paid in such installments and such times as the Company pays its regularly salaried employees, but no less than once per month, less applicable withholding and deductions. The Board shall annually review the Base Salary to determine whether an increase in the amount thereof is warranted.

 

(b) Annual Discretionary Bonus. During each fiscal year of the Executive’s employment with the Company (commencing with the 2021 fiscal year), Executive will be eligible to receive an annual discretionary bonus (“Cash Bonus”). Executive’s target Cash Bonus shall be equal to 60% of Base Salary (the “Target Bonus”). The Cash Bonus amount will be based upon achievement of Company and individual performance targets established by the Company Board, in its sole and absolute discretion, for the fiscal year to which the bonus relates. The payment of any Cash Bonus described herein will be made at the same time annual bonuses are generally paid to other senior executives of the Company (generally the first regular payroll date following the Company Board’s certification of achievement of applicable performance targets). If Executive is eligible to receive a Cash Bonus, such bonus will not be deemed to be fully “earned” unless Executive is (i) employed by the Company and in good standing on the date the Cash Bonus is paid, and (ii) has not given notice of Executive’s intention to resign Executive’s employment as of, or prior to, the date the Company pays the applicable Cash Bonus. The Cash Bonus shall be paid to Executive no later than March 15th of the year following the year for which the bonus is payable.

 

 

(c) Equity. Equity Award. Executive will on or as soon as reasonably practicable after the date of an initial public offering of the Company (the “IPO Date”), be granted an equity-based compensation award (“Award”) in such amounts and subject to such terms and conditions that are consistent with the terms and conditions outlined on Exhibit A attached hereto. Upon termination of Executive’s employment, the treatment of any portion of outstanding Award shall be determined in accordance with the terms of any agreements (and/or Company incentive plan) governing such Awards (“Award Agreement”). Executive shall remain eligible to receive additional equity-based compensation awards as the Company may grant from time to time.

 

(d) Withholding. Company shall withhold all applicable federal, state, local taxes and social security and such other amounts as may be required by law, including withholding and/or deductions properly elected by Executive, from all amounts payable to Executive under this Section 5.

 

(e) Expenses. Company shall reimburse Executive for all reasonable business expenses incurred by Executive in furtherance of the business and affairs of Company, including without limitation reasonable travel, lodging, meals, and entertainment, in each case, upon timely receipt by Company of appropriate vouchers or other proof of Executive’s expenditures and otherwise in accordance with any expense reimbursement policy as may from time to time be adopted by Company. In any case, any claim by Executive for reimbursement of expenses for a calendar year must be submitted by the Executive by March 15^th of the following year, and payment of the reimbursement shall be made by the Company within ninety (90) days after Executive’s submission of request for reimbursement.

 

(f) Other Benefits. Executive shall be entitled to benefits for which he shall be eligible under any benefit or other plans of the Company (including, without limitation, dental, medical, medical reimbursement and hospital plans, pension plans, employee stock purchase plans, profit sharing plans, bonus plans, prescription drug reimbursement plans, short and long term disability plans, life insurance and other so-call “fringe” benefits) as Company shall make available to its senior executives from time to time. Executive shall be designated as a named insured on directors’ and officers’ liability insurance for Company.

 

5. VACATION. During the Employment Period, Executive shall be entitled to vacation benefits consistent with Company policy, as may be in effect from time to time, except to the extent such policy is inconsistent with this Agreement.

 

6. CONFIDENTIAL INFORMATION AND INVENTIONS.

 

(a) Confidential Information; Non-Use. Executive recognizes and acknowledges that in the course of his duties he is likely to receive confidential or proprietary information of Company, its affiliates or third parties with whom Company or any such affiliates has an obligation of confidentiality. Accordingly, during and after the Term, Executive agrees to keep confidential and not disclose or make accessible to any other person or use for any other purpose other than in connection with the fulfillment of his duties under this Agreement, any “Confidential and Proprietary Information” (defined below) owned by or received by or on behalf of Company or any of its affiliates. The term “Confidential and Proprietary Information” shall include, but shall not be limited to, confidential or proprietary scientific or technical information, data, formulas and related concepts, business plans (both current and under development), client lists, promotion and marketing programs, trade secrets, or any other confidential or proprietary business information relating to development programs, costs, revenues, marketing, investments, sales activities, promotions, credit and financial data, manufacturing processes, financing methods, plans or the business and affairs of Company or of any affiliate or client of Company. Executive expressly acknowledges that the Confidential and Proprietary Information constitutes a protectable business interest of Company. Executive agrees: (i) not to use any such Confidential and Proprietary Information for himself or others; and (ii) not to take any Company material or reproductions (including but not limited to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) thereof from Company’s offices at any time during his employment by Company, except as required in the execution of Executive’s duties to Company, unless and until such Confidential and Proprietary Information has become public knowledge without fault by Executive. Executive agrees to return immediately all Company material and reproductions (including but not limited, to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) thereof in his possession to Company upon request and in any event immediately upon termination of employment.

 

 

Notwithstanding any other provisions of this Agreement, Executive may be entitled to immunity and protection from retaliation under the Defend Trade Secrets Act of 2016 for disclosing a trade secret under certain limited circumstances. Specifically, pursuant to 18 U.S.C. 1833(b), Executive shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, Executive who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the Executive and use the trade secret information in the court proceeding, if Executive (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

 

(b) Non-Disclosure. Except with prior written authorization by Company, Executive agrees that during the Term and thereafter, he will not disclose or publish: (i) any of the Confidential and Proprietary Information; or (ii) any confidential, scientific, technical, or business information of any party to whom the Executive knows, or should reasonably know, that Company or any of its affiliates owes an obligation of confidence.

 

(c) Inventions. Executive agrees that all inventions, discoveries, improvements and patentable or copyrightable works (“Inventions”) initiated, conceived or made by him within the scope of the Company’s business (during the Term) or using Company’s resources, either alone or in conjunction with others shall be the sole property of Company to the maximum extent permitted by applicable law and, to the extent permitted by law, shall be “works made for hire” as that term is defined in the United States Copyright Act (17 U.S.C.A., Section 101). Company shall be the sole owner of all patents, copyrights, trade secret rights, and other intellectual property or other rights in connection therewith; provided, however that this Section 6(c) shall not apply to Inventions which are not related to the business of Company and which are made and conceived by Executive not during normal working hours, not on Company’s premises and not using Company’s tools, devices, equipment or Confidential and Proprietary Information. Subject to the foregoing, Executive hereby assigns to Company all right, title and interest he may have or acquire in all Inventions; provided, however, that the Board may in its sole discretion agree to waive Company’s rights pursuant to this Section 6(c).

 

 

(d) Further Actions and Assistance. Executive agrees to cooperate reasonably with Company and at Company’s expense, both during and after his employment with Company, with respect to the procurement, maintenance and enforcement of copyrights, patents, trademarks, and other intellectual property rights (both in the United States and foreign countries) relating to such Inventions. Executive shall sign all papers, including, without limitation, copyright applications, patent applications, declarations, oaths, formal assignments, assignments of priority rights and powers of attorney, that Company reasonably may deem necessary or desirable in order to protect its rights and interests in any Inventions. Executive further agrees that if Company is unable, after reasonable effort, to secure Executive’s signature on any such papers, any officer of Company shall be entitled to execute such papers as his agent and attorney-in-fact and Executive hereby irrevocably designates and appoints each officer of Company as his agent and attorney-in-fact to execute any such papers on his behalf and to take any and all actions as Company reasonably may deem necessary or desirable in order to protect its rights and interests in any Inventions, under the conditions described in this paragraph.

 

(e) Prior Inventions. Executive will not assert any rights to any invention, discovery, idea, or improvement relating to the business of the Company or his duties hereunder as having been made or acquired by Executive prior to his work for Company, except for the matters, if any, described in Appendix A to this agreement.

 

(f) Disclosure. Executive agrees that he will promptly disclose to Company all Inventions initiated, made, or conceived or reduced to practice by him, either alone or jointly with other, during the Term.

 

(g) Survival. The provisions of this Section 6 shall survive any termination of this Agreement.

 

(h) Return of Company Property. Within ten (10) days following the date of any termination of Executive’s employment, Executive or Executive’s personal representative shall return all property of the Company and its Affiliates in Executive’s possession, including but not limited to all Company Group-owned computer equipment (hardware and software), smart phones, facsimile machines, tablet computers and other communication devices, credit cards, office keys, security access cards, badges, identification cards and all copies (including drafts) of any documentation or information (however stored) relating to the business of the Company and its Affiliates, its customers and clients or its prospective customers and clients.

 

(i) Cooperation. During the Employment Period and for six years thereafter, Executive shall give Executive’s assistance and cooperation, upon reasonable advance notice, in any matter relating to Executive’s position with the Company and its Affiliates, or Executive’s knowledge as a result thereof as the Company may reasonably request, including Executive’s attendance and truthful testimony where deemed appropriate by the Company, with respect any investigation or the Company’s (or an Affiliate’s) defense or prosecution of any existing or future claims or litigations or other proceeding relating to matters in which Executive was involved or had knowledge by virtue of Executive’s employment with the Company Group, in all cases on schedules that are reasonably consistent with Executive’s other permitted activities and commitments. The Company agrees to reimburse Executive for any costs Executive incurs in connection with complying with this Section, including Executive’s reasonable attorney’s fees.

 

 

7. NON-COMPETITION, NON-SOLICITATION AND NON-DISPARAGEMENT.

 

(a) Restrictive Covenant. Executive understands and recognizes that his services to Company are special and unique and that in the course of performing such services Executive will have access to and knowledge of Confidential and Proprietary Information and Executive agrees that, during the Term and twelve month period immediately following Executive’s separation from employment (the “Termination Restriction Period”), whether such separation is voluntary or involuntary, he shall not in any manner, directly or indirectly, on behalf of himself or any other person, firm, partnership, joint venture, corporation or other business entity (“Person”), enter into or engage in any business involving the development or commercialization of competing products developed or commercialized by the Company at the time of Executive’s separation or at any time during Executive’s employment with the Company (the “Business of the Company”) within the geographic area in which Company does business, which is deemed by the Parties hereto to be the United States and the European Union. Executive acknowledges that, due to the unique nature of Company’s business, Company has a strong legitimate business interest in protecting the continuity of its business interests and its Confidential and Proprietary Information and the restriction herein agreed to by Executive narrowly and fairly serves such an important and critical business interest of Company. Notwithstanding the foregoing, nothing contained in this Section 7(a) shall be deemed to prohibit Executive from acquiring or passively holding, solely for investment, publicly traded securities of any corporation, some or all of the activities of which are engaged in the Business of Company so long as such securities do not, in the aggregate, constitute more than four percent (4%) of any class or series of outstanding securities of such corporation; and further notwithstanding the foregoing, nothing contained in this Section 7(a) shall preclude Executive from performing the functions of chief executive or other senior executive, per se, provided such functions do not involve the development of a product within the Business of the Company, as defined herein, or the use of the Confidential and Proprietary Information; becoming an employee of, or from otherwise providing services to, a separate division or operating unit of a multi-divisional business or enterprise (a “Division”) if: (i)) the Division by which Executive is employed, or to which Executive provides services, is not engaged in the Business of Company, (ii) Executive does not provide services, directly or indirectly, to any other division or operating unit of such multi-divisional business or enterprise engaged in or proposing to engage in the Business of Company (individually, a “Competitive Division” and collectively, the “Competitive Divisions”) and (iii) the Competitive Divisions, in the aggregate, accounted for less than 10% of the multi-divisional business or enterprise’s consolidated revenues for the fiscal year, and each subsequent quarterly period, prior to Executive’s commencement of employment with or provision of services to the Division.

 

(b) Reasonableness of Restriction. Executive hereby acknowledges and agrees that the covenant against competition provided for pursuant to Section 7 (a) is reasonable with respect to its duration, geographic area and scope. If, at the time of enforcement of this Section 7, a court holds that the restrictions stated herein are unreasonable under the circumstances then existing, the Parties hereto agree that the maximum duration, scope or geographic area legally permissible under such circumstances will be substituted for the duration, scope or area stated herein.

 

 

(c) Non-Solicitation. During the Term and the applicable Termination Restriction Period (as defined hereinafter), Executive shall not, directly or indirectly, without written consent of Company: (i) solicit or induce any employee or independent contractor of Company or any of its affiliates to leave the employ of Company or any affiliate; or hire for any purpose any employee or independent contractor of Company; or hire any former employee or independent contractor who has left the employment of Company or any affiliate of Company within twelve (12) months of the termination of such employee’s employment with Company or any such affiliate for any purpose; or hire any former employee or independent contractor of Company in knowing violation of such employee’s non-competition agreement with Company or any such affiliate; or (ii) solicit, divert or take away, or attempt to divert or take away, the business or patronage of any agent, client or customer (or any potential agent, client or customer) of Company which was served by Company (or which the Company solicited for service) during the twelve-month period prior to the termination of Executive’s employment with Company; or (iii) without the consent of the Board solicit or accept employment or be retained by any person, who at any time during the twelve month period prior to the termination of Executive’s employment with Company, was an agent, client or customer of Company or any of its subsidiaries where his position will be related to the Business of Company.

 

(d) Non-Disparagement. Executive agrees that he shall not directly or indirectly disparage, whether or not truthfully, the name or reputation of Company or any of its affiliates, including but not limited to, any officer, director, employee or shareholder of Company or any of its affiliates provided that, nothing in this Section shall be construed to interfere with Executive’s right to engage in protected concerted activity under the National Labor Relations Act. Notwithstanding this Section 7(d), nothing contained herein shall apply to statements made by Executive (x) in the course of his responsibility to evaluate the performance and/or participate in any investigation of the conduct or behavior of officers, employees and/or others or (y) as part of any judicial, administrative or other legal action or proceeding, and nothing shall be construed to limit or impair the ability of Executive to provide truthful testimony in response to any validly issued subpoena or to file pleadings or respond to inquiries or legal proceedings by any government agency to the extent required by applicable law. In addition, Executive agrees not to, without Company’s prior written consent, communicate, directly or indirectly, with the press or other media, concerning the past or present employees or businesses of the Company Group.

 

(e) Enforcement. In the event that Executive breaches or threatens to breach any provisions of Section 6 or this Section 7, then, in addition to any other rights Company may have, Company shall be entitled to seek injunctive relief to enforce such provisions. Company and Executive agree that any such action for injunctive or equitable relief shall be heard in a state or federal court situated in Morris County in the State of New Jersey and each of the Parties hereto agrees to accept service of process by registered or certified mail and to otherwise consent to the jurisdiction of such courts.

 

 

(f) Remedies Cumulative; Judicial Modification. (i) Each of the rights and remedies enumerated in Section 7(e) shall be independent of the others and shall be in addition to and not in lieu of any other rights and remedies available to Company at law or in equity. If any of the covenants contained in this Section 7, or any part of any of them, is hereafter construed or adjudicated to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants or rights or remedies, which shall be given full effect without regard to the invalid portions. If any of the covenants contained in this Section 7 is held to be invalid or unenforceable because of the duration of such provision or the area covered thereby, the Parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and in its reduced form such provision shall then be enforceable. (ii) In the event that an actual proceeding is brought in equity to enforce the provisions of Section 6 or this Section 7, Executive shall not urge as a defense that there is an adequate remedy at law, nor shall Company be prevented from seeking any other remedies that may be available.

 

(g) Survival. The provisions of this Section 7 shall survive any termination of this Agreement.

 

8. REPRESENTATIONS AND WARRANTIES.

 

(a) By Executive. Executive hereby represents and warrants to Company as follows:

 

(i) Neither the execution nor delivery of this Agreement nor the performance by Executive of his duties and other obligations hereunder conflict with or constitute a default or breach of any covenant or obligation under (whether immediately, upon the giving of notice or lapse of time or both) any prior employment agreement, contract, or other instrument to which Executive is a party or by which he is bound.

 

(ii) Executive has the full right, power and legal capacity to enter and deliver this Agreement and to perform his duties and other obligations hereunder. This Agreement constitutes the legal, valid and binding obligation of Executive enforceable against him in accordance with its terms. No approvals or consents of any persons or entities are required for Executive to execute and deliver this Agreement or perform his duties and other obligations hereunder.

 

(iii) Executive will not use any confidential information or trade secrets of any third Party in his employment by Company in violation of the terms of the agreements under which he had access to or knowledge of such confidential information or trade secrets.

 

(b) By Company. Company hereby represents and warrants to Executive as follows:

 

(i) Neither the execution nor delivery of this Agreement nor the performance by Company of its obligations hereunder conflict with or constitute a default or breach of any covenant or obligation under (whether immediately, upon the giving of notice or lapse of time or both) any prior agreement, contract, or other instrument to which Company is a party or by which it is bound.

 

(ii) Company has the full right and power to enter and deliver this Agreement and to preform obligations hereunder. This Agreement constitutes the legal, valid and binding obligation of Company enforceable against it in accordance with its terms. All approvals or consents required for Company to validly execute and deliver this Agreement and perform its obligations hereunder, including, without limitation, approval of the Board, have been obtained.

 

 

9. TERMINATION.

 

(a) Cause. Executive’s employment hereunder may be terminated by the Board immediately for “Cause” (defined below). Any of the following actions by Executive shall constitute “Cause”:

 

(i) The willful failure, disregard or refusal by Executive to perform his material duties or obligations under this Agreement;

 

(ii) Any willful, intentional or grossly negligent act by Executive having the effect of materially injuring (whether financial or otherwise and as determined reasonably and in good faith by a majority of the members of the Board) the business or reputation of Company or any of its affiliates;

 

(iii) Executive’s indictment for or being charged with any felony or a crime involving serious moral turpitude (including entry of a guilty or nolo contendere plea);

 

(iv) A good faith determination by the Board and/or any government representative or agency that the Executive is a “bad actor” as defined by 17 CFR 230.506(a);

 

(v) The good faith determination by the Board, after a reasonable and good-faith investigation by the Company following any allegation by another employee of Company, that Executive engaged in some form of harassment prohibited by law (including, without limitation, harassment on the basis of age, sex or race) unless Executive’s actions were specifically directed by the Board;

 

(vi) Any willful misconduct by the Executive or misappropriation, theft or embezzlement by Executive of the property of Company or its affiliates (whether or not a misdemeanor or felony);

 

(vii) Breach by Executive of any material provision of this Agreement or any other agreement between Executive and the Company or of any policy of the Company that is not cured by Executive to the reasonable satisfaction of Company’s Board within thirty (30) days after written notice thereof is given to Executive by Company.

 

For purposes of Section 9 (a), no act or omission by Executive shall be considered willful if reasonably and in good faith believed by Executive to be in, or not contrary to, the best interests of Company.

 

(b) Death. Executive’s employment hereunder shall be terminated upon Executive’s death.

 

 

(c) Disability. The Board may terminate Executive’s employment hereunder due to Executive’s “Disability” (defined below). For purposes of this Agreement, a termination due to Executive’s “Disability” shall be deemed to have occurred:

 

(i) when the Board has provided a written termination notice to Executive supported by a written statement from a “Reputable Independent Physician” (defined below), whose determination as to disability shall be binding on all Parties, to the effect that Executive shall have become so physically or mentally incapacitated by reason of physical or mental illness or injury as to be unable to resume (with or without reasonable accommodation as that term is defined under applicable law) within the ensuing three (3) months his employment under this Agreement; or

 

(ii) upon rendering of a written termination notice by the Board after Executive has been unable to substantially perform his duties hereunder by reason of any physical or mental illness or injury (with or without reasonable accommodation as that term is defined under applicable law) for ninety (90) or more consecutive days or more than one hundred twenty (120) days in any consecutive twelve-month period.

 

The term “Reputable Independent Physician” means a physician satisfactory to both Executive and Company, provided that if Executive and Company do not agree on a physician, then a third physician selected by the physicians selected by Executive and Company. Executive agrees to make himself available and to cooperate in a reasonable examination by the Reputable Independent Physician.

 

(d) Good Reason. Executive may terminate his employment hereunder for “Good Reason” (defined below). The term “Good Reason” shall mean the occurrence any of the following events (provided, Executive has provided Company with written notice of the occurrence of such events within ninety (90) days of the occurrence of such events and Company has not cured such breach within thirty (30) days from such notice and Executive terminates employment within 30 days of the expiration of such cure period):

 

(i) any material breach of this Agreement by Company if Executive has provided Company with written notice of the breach within ninety (90) days of the breach and Company has not cured such breach within thirty (30) days from such notice;

 

(ii) without Executive’s express written consent, any material reduction by Company of Executive’s duties, responsibilities, or authority, including, without limitation, a change in the line of reporting between him and the Board;

 

(iii) a relocation of Company’s principal place of business outside of the New York metropolitan area or to a location more than 50 miles from the immediately preceding location without Executive’s written consent; or

 

(iv) material reduction in Executive’s annual base salary unless all officers and/or members of the Company’s executive management team experience an equal or greater percentage reduction in annual base salary and/or total compensation.

 

(e) Convenience. Company and Executive each may terminate Executive’s employment hereunder for any reason or no reason at any time by written notice of termination to the other Party, which notice shall specify the termination date, or by providing a Notice of Nonrenewal to the other Party.

 

 

10. COMPENSATION UPON TERMINATION.

 

In the event Executive’s employment is terminated, Company shall pay to Executive the Base Salary and benefits otherwise payable to him under Section 5 through the last day of his actual employment by Company, any reimbursable business expenses, and any earned but unpaid bonuses (together, the “Accrued Compensation”). In addition to the Accrued Compensation:

 

(a) Death or Disability. If Executive’s employment is terminated as a result of his death or Disability, Company shall pay to Executive or to Executive’s estate, as applicable, (i) his Base Salary through the date which is ninety (90) days after his death or Disability and (ii) such other or additional benefits, if any, as may be provided under applicable employee benefit plans, programs and/or arrangements of Company. All shares of capital stock of Company held by Executive that are subject to vesting (“Restricted Shares”) and all options to purchase shares of capital stock of Company (“Stock Options”) that are scheduled to vest on or before the next succeeding anniversary of the Effective Date shall be accelerated and deemed to have vested as of the termination date. All Restricted Shares and Stock Options that have not vested (or been deemed pursuant to the immediately preceding sentence to have vested) as of the date of termination shall be forfeited to Company as of such date. Stock Options that have vested as of Executive’s termination shall remain exercisable until the earlier to occur of (i) the expiry of sixty (60) months following such termination and (ii) the last expiration/termination date applicable under the grant under which such Stock Options were granted. For Disability, all payments, benefits and/or grants under this Section 10(a) shall be subject to Executive’s execution and delivery within 21 days of separation from service of a general release of Company, its parents, subsidiaries, and affiliates and each of its officers, directors, employees, agents, successors and assigns in a form that is acceptable to Company, with such payments, benefits and or grants commencing thirty (30) days after Executives separation from service.

 

(b) Cause. If Executive’s employment is terminated by the Board for Cause, then Company shall provide such other or additional benefits, if any, as may be required under applicable employee benefit plans, programs and or arrangements of Company. Executive shall have no further entitlement hereunder to any other compensation or benefits from Company except to extent otherwise provided by law. All Restricted Shares that have not vested as of the date of termination shall be forfeited to Company as of such date. All unexercised Stock Options vested as of Executive’s termination shall remain exercisable for ninety (90) days following such termination.

 

 

(c) Other than for Cause, Death, or Disability. . If Company terminates Executive’s employment other than as a result of Executive’s death or Disability and other than for Cause or if Executive terminates Executive’s employment for Good Reason, then Company shall (i) continue to pay the Executive his Base Salary and provide health benefits for a period of eighteen (18) months following the effective date of the Executive’s separation from service (such period of payment referred to herein as the “Section 10(c) Termination Benefits Period” or, in the case of benefits, such time as Executive receives equivalent coverage and benefits under plans and programs of a subsequent employer; and (ii) provide such other or additional benefits, if any, as may be provided under applicable employee benefit plans, programs and/or arrangements of the Company (other than any severance plans or programs). All Restricted Shares and Stock Options that have not vested as of the date of termination shall be forfeited to Company as of such date. Acceleration of the vesting of all outstanding unvested time-based equity awards that are held by Executive as of the date of Executive’s Separation from Service as to the number of shares that would have vested in accordance with the applicable vesting schedule as if Executive had been in service for an additional twelve (12) months as of Executive’s termination date (based upon months of service and not the occurrence of corporate events or milestones). Stock Options that have vested as of Executive’s termination shall remain exercisable until the earlier to occur of (i) the expiry of sixty (60) months following such termination and (ii) the last expiration/termination date applicable under the grant under which such Stock Options were granted. All payments, benefits and/or grants under this Section 10(c) shall be subject to Executive’s execution and delivery within sixty (60) days of separation from service of a separation agreement with Company, including without limitation non-disparagement and confidentially provisions, an agreement to cooperate past-separation of employment and a general release of the Company, its parents, subsidiaries and affiliates and each of its officers, directors, employees, agents, successors and assign in a form acceptable to the Company, with such payments, benefits, and or grants commencing sixty (60) days from Executive’s separation from service, except that any such payments, benefits, and/or grants that would otherwise be payable during the sixty (60) day period shall be paid on the first payroll date following the expiration of such 60-day period.

 

(d) By Executive for Convenience. If Executive terminates Executive’s employment pursuant to Section 9(e), Executive shall not be entitled to receive any payments or benefits other than the Accrued Compensation.

 

(e) This Section 10 sets forth the only obligations of Company with respect to the termination of Executive’s employment with Company, and Executive acknowledges that, upon the termination of his employment, he shall not be entitled to any payments or benefits which are not explicitly provided in this Section 10, except as required by law or the terms of another employee plan, program or arrangement covering him. Executive acknowledges and agrees that upon the termination of his employment with the Company, regardless of the reason or grounds therefore, he shall resign from his position on the Board and from any other board, organization or foundation wherein Executive sits or belongs as a representative of the Company.

 

(f) The obligations of Company that arise under this Section 10 shall survive the expiration or earlier termination of this Agreement.

 

11. CHANGE OF CONTROL.

 

(a) Change of Control Defined. The term “Change of Control” means, after the Effective Date:

 

(i) the acquisition by an individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) of beneficial ownership of any capital stock of Company, if, after such acquisition, such individual, entity or group beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) fifty percent (50%) or more of the combined voting power of the then-outstanding securities of Company entitled to vote generally in the election of directors (“Outstanding Company Voting Securities”); or

 

 

(ii) the consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving Company or a sale or other disposition of all or substantially all of the assets of Company (“Business Combination”), unless, immediately following such Business Combination, all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns Company or substantially all of Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership of the Outstanding Company Voting Securities immediately prior to such Business Combination.

 

(b) Consequence. In the event of Executive’s termination of employment with the Company either (i) by the Company without Cause at any time within twelve (12) months prior to the consummation of a Change of Control if, prior to, or as of such termination, a Change of Control transaction was Pending (as defined herein) at any time during such twelve (12)-month period, (ii) by Executive for Good Reason at any time within twelve (12) months after the consummation of a Change of Control, or (iii) by the Company without Cause at any time upon or within twelve (12) months after the consummation of a Change of Control, then, Executive shall be entitled to receive the following:(i) the acceleration and vesting in full of any then outstanding and unvested portion of any time- vesting equity award with, options continuing to be exercisability for sixty (60) months following termination (or, if earlier, their expiration date); (ii) the benefits described in Section 4 (a), (b) and (c), provided, however, that the Severance Amount shall equal two (2) times the sum of Base Salary and Target Bonus and the Severance Period shall be twenty-four (24) months. A Change of Control transaction shall be deemed to be “Pending” each time any of the following circumstances exist: (A) the Company and a third party have entered into a confidentiality agreement that has been signed by a duly-authorized officer of the Company and that is related to a potential Change of Control transaction; (B) the Company has received a written expression of interest from a third party, including a binding or nonbinding term sheet or letter of intent, related to a potential Change of Control transaction; or (C) a third party has publicly announced, through a filing with the Securities and Exchange Commission, its intent to commence a tender offer or similar transaction to acquire 50% or more of the outstanding voting interests of the Company.

 

(c) Potential Adjustments due to Tax Implications. Notwithstanding anything in this Agreement or any other agreement between Executive and Company to the contrary, but subject to this Section 11(c), Company will make the payments and other acceleration of benefits under this Agreement or any other agreement or plan between the Company and Executive and other compensatory arrangements without regard to whether Section 280G of the Internal Revenue Code of 1986 (the “Code”) would limit or preclude the deductibility of such payments or benefits. However, if reducing or eliminating any such payment and/or other benefit would increase the “Total After-Tax Payments” (defined below), then the amounts payable to Executive will be reduced or eliminated as follows (or in such other manner as Company may specify at the applicable time) to the extent necessary to maximize such Total After-Tax Payments:

 

(i) first, by reducing or eliminating any cash payments or other benefits (other than the vesting of any options or stock) and

 

 

(ii) second, by reducing or eliminating the vesting of options and stock that occurs as a result of a Change of Control or other event covered by Section 280G of the Code.

 

Company’s independent, certified public accounting firm will determine whether and to what extent payments or vesting are required to be reduced or eliminated in accordance with the foregoing. If there is ultimately determined to be an underpayment of or overpayment to Executive under this provision, the amount of such underpayment or overpayment will be immediately paid to Executive or refunded by him, as the case may be with interest at the applicable federal rate under the Code. The term “Total After-Tax Payments” means the total value of all “parachute payments” (as that term is defined in Section 280G(b)(2) of the Code) made to Executive or for his benefit (whether made under the Agreement or otherwise), after reduction for all applicable federal taxes (including, without limitation, the tax described in Section 4999 of the Code).

 

12. INDEMNIFICATION. Company shall defend and indemnify Executive in his capacity as Chief Executive Officer of Company to the fullest extent permitted under to the Delaware General Corporate Law (the “DGCL”). Executive’s rights to, and Company’s obligation to provide, indemnification shall survive termination of this Agreement.

 

13. COMPLIANCE WITH CODE SECTION 409A.

 

(a) The intent of the Parties to the Agreement is that the payments, compensation, and benefits under this Agreement will be exempt from or comply with Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, in this connection, the Agreement shall be interpreted to be exempt or in compliance with Section 409A.

 

(b) Potential Delay of Payment(s) and Adjustments. Notwithstanding any other provisions of the Agreement, if any payment, compensation or other benefit provided to Executive in connection with his separation from service is determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409A and Executive is a “specified employee” within the meaning of Section 409A, no part of such payments shall be paid before the day that is six (6) months plus one (1) day after the termination date (the “New Payment Date”). The aggregate of any payments that otherwise would have been paid to Executive during the period between the termination date and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, any payments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the time period originally scheduled, in accordance with the terms of this Agreement.

 

(c) Separation from Service. For purposes of this Agreement, the terms “termination of employment” or “separation from service” will be determined consistent with the rules relating to “separation from service” under Section 409A.

 

(d) Installments. If any payment, compensation, or other benefit required by the Agreement is to be paid in a series of installment payments, each individual payment in the series shall be considered a separate payment for purposes of Section 409A.

 

 

14. MISCELLANEOUS.

 

(a) Governing Law. Subject to the next sentence, this Agreement and all questions relating to its validity, interpretation, performance, remediation, and enforcement (including, without limitation, provisions concerning limitations of actions) shall be governed by and construed in accordance with the substantive laws of the State of New Jersey, notwithstanding any choice-of-law doctrines of that jurisdiction or any other jurisdiction that ordinarily would or might cause the substantive law of another jurisdiction to apply.

 

Notwithstanding the foregoing, all questions relating to the validity, interpretation, performance, remediation, and enforcement of Company’s obligations, and Executive’s rights, under Section 12 shall be governed by and construed in accordance with the substantive laws of the State of Delaware.

 

(b) Personal Jurisdiction. To the fullest extent permitted by applicable law, any action or proceeding relating in any way to this Agreement may only be brought and enforced in the State or Federal Courts located in Morris County, New Jersey, to the extent subject matter jurisdiction exists therefore. The Parties irrevocably submit to the jurisdiction of such courts in respect of any such action or proceeding. The parties irrevocable waive, to the fullest extent permitted by law, any objection that they may now or hereafter have to the laying of venue of any such action or proceeding in such courts, as well as any claim that any such action or proceeding brought in any such court has been brought in any inconvenient forum.

 

(c) Service of Process. The Parties further irrevocably consent to the service of Process out of any of the aforementioned courts in the manner and to the address specified in Section 14(h) of this Agreement.

 

(d) Waiver of Jury Trail. Each of the parties hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based in contract, tort, or otherwise) arising out of or relating to this Agreement or the actions of any party in the negotiation, administration, performance, and enforcement thereof. Each of the parties hereto further warrants and represents that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. This waiver is irrevocable, meaning that it may not be modified either orally or in writing, and this waiver shall apply to any subsequent amendments, renewals, supplements, or modifications to this Agreement. In the event of litigation, this Agreement may be filed as a written consent to a trial by court.

 

(e) Assignment. This Agreement, and Executive’s rights and obligations hereunder, may not be assigned by Executive. Company may assign its rights, together with its obligations, hereunder in connection with any sale, transfer or other disposition of all or substantially all of its business or assets. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties hereto, and their respective heirs, legal representatives, successors and assigns.

 

(f) Amendment. This Agreement cannot be amended orally, or by any course of conduct or dealing, but only by a written agreement duly executed by the Parties.

 

 

(g) Waiver. The failure of either Party to insist upon the strict performance of any of the terms, conditions and provisions of this Agreement shall not be construed as a waiver or relinquishment of future compliance therewith, and such terms, conditions and provisions shall remain in full force and effect. No waiver of any term or condition of this Agreement on the part of either Party shall be effective for any purpose whatsoever unless such waiver is in writing and signed by such Party. Unless the written waiver instrument expressly provides otherwise, no waiver by a Party of any right or remedy or breach by the other Party in any particular instance shall be construed to apply to any right, remedy or breach arising out of or related to a subsequent instance.

 

(h) Notices. All notices, demands or other communications desired or required to be given by a Party to the other Party shall be in writing and shall be deemed effectively given upon (i) personal delivery to the Party to be notified, (ii) upon confirmation of receipt of fax or other electronic transmission, (iii) one business day after deposit with a reputable overnight courier, prepaid for priority overnight delivery, or (iv) five days after deposit with the United States Post Office, postage prepaid, certified mail, return receipt requested, in each case to the Party to be notified at its/his address set forth at the top of this Agreement; or to such other addresses and to the attention of such other individuals as either Party shall have designated to the other by notice given in the foregoing manner.

 

(i) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the Parties relating to the subject matter hereof, and supersedes all prior agreements, arrangements, and understandings, written or oral between the Parties, relating to the subject matter hereof. No representation, promise or inducement has been made by either Party that is not embodied in this Agreement, and neither Party shall be bound by or liable for any alleged representation, promise or inducement not so set forth.

 

(j) Affiliate and Control Defined. As used in this Agreement, the term “affiliate” of a specified Person shall mean and include any Person controlling, controlled by or under common control with the specified Person. A Person shall be deemed to “control” another Person if such first Person possesses directly or indirectly the power to direct, or cause the direction of, the management and policies of the second Person, whether through the ownership of voting securities, by contract or otherwise.

 

(k) Captions, Headings and Cross-References. The section headings contained herein are for reference purposes and convenience only and shall not in any way affect the meaning or interpretation of this Agreement. Except as expressly set forth otherwise, all cross-references to sections refer to sections of this Agreement.

 

(l) Severability. In addition to, and not in conflict with, the provisions of Section 7(b) and 7(f), the Parties agree that each and every provision of this Agreement shall be deemed valid, legal and enforceable in all jurisdictions to the fullest extent possible. Any provision of this Agreement that is determined to be invalid, illegal or unenforceable in any jurisdiction or country in the Territory shall, as to that jurisdiction or country, be adjusted and reformed rather than voided, if possible, in order to achieve the intent of the Parties. Any provision of this Agreement that is determined to be invalid, illegal or unenforceable in any jurisdiction or country which cannot be adjusted and reformed shall for the purposes of that jurisdiction or country, be voided. Any adjustment, reformation or voidance of any provisions of this Agreement shall only be effective in the jurisdiction or country requiring such adjustment or voidance, without affecting in any way the remaining provisions of this Agreement in such jurisdiction or country or adjusting, reforming, voiding or rendering that provision or any other provision of this Agreement invalid, illegal or unenforceable in any other jurisdiction or country.

 

 

(m) Counterpart Execution. This Agreement may be executed in one or more counterparts each of which shall be an original document and all of which together shall constitute one and the same instrument. The Parties acknowledge that this Agreement may be executed and delivered by means of electronic signatures and that use and acceptance of electronic signatures to bind the Parties represents the voluntary agreement and intention of the Parties to conduct this transaction by electronic means. The Parties agree that execution and delivery by electronic means will have the same legal effect as if signatures had been manually written on this Agreement. This Agreement will be deemed lawfully executed by the Parties by such action for purposes of any statute or rule of law that requires this Agreement to be executed by the Parties to make the mutual promises, agreements and obligations of the Parties set forth herein legally enforceable. Facsimile and .pdf exchanges of signatures will have the same legal force and effect as the exchange of original signatures. The parties hereby waive any right to raise any defense or waiver based upon the execution of this Agreement by means of electronic signatures in any proceeding arising under or relating to this Agreement. The Parties agree that the legal effect, validity and enforceability of this Agreement will not be impaired solely because of its execution in electronic form or that an electronic record was used in its formation. The Parties acknowledge that they are capable of retaining electronic records of this transaction.

 

IN WITNESS WHEREOF, the Parties hereto have executed this Employment Agreement as of the date forth above.

 

HILLSTREAM BIOPHARMA INC.			EXECUTIVE:
/s/ Thomas Hess			/s/ Randy Milby
Name:	Thomas Hess		Randy D. Milby
Title:	Chief Financial Officer
Date:	July 6, 2023		Date:	July 6, 2023

 

 

EXHIBIT A

Equity Terms

 

Type of Award (“Award”)		●	An award of stock options under the Company’s 20XX Stock Option plan
		●	Executive’s Award to equal _________ shares at the initial public offering price of the common stock
		●	Award is evidenced by agreement executed by Executive and the Company
Vesting of Award		●	Vesting shall be monthly over a 48 month period with a 12 month cliff.

 

 

 

v3.23.2

Cover	Jul. 05, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Jul. 05, 2023
Entity File Number	001-41210
Entity Registrant Name	HILLSTREAM BIOPHARMA, INC.
Entity Central Index Key	0001861657
Entity Tax Identification Number	84-2642541
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	1200 Route 22 East
Entity Address, Address Line Two	Suite 2000
Entity Address, City or Town	Bridgewater
Entity Address, State or Province	NJ
Entity Address, Postal Zip Code	08807
City Area Code	(908)
Local Phone Number	955-3140
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common stock, $0.0001 par value
Trading Symbol	HILS
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false

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