Exhibit 10.9

 

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

Execution Version

 

 

 

 

 

 

 

AGREEMENT FOR THE MANUFACTURE, DEVELOPMENT AND

COMMERCIALIZATION OF BENZNIDAZOLE FOR HUMAN USE


by and between


SAVANT NEGLECTED DISEASES, LLC


and


KALOBIOS PHARMACEUTICALS, INC.

 

Dated as of June 30, 2016

 

 

 

CONFIDENTIAL

 

 

Table of Contents

 

 

CONFIDENTIAL 

 

 

 

CONFIDENTIAL 

 

 

 

CONFIDENTIAL 

 

 

 

CONFIDENTIAL 

 

 

EXHIBITS

 

SCHEDULES

 

CONFIDENTIAL 

 

 

AGREEMENT

 

This AGREEMENT FOR THE MANUFACTURE, DEVELOPMENT AND COMMERCIALIZATION OF BENZNIDAZOLE FOR HUMAN USE (this “Agreement”) is entered into as of June 30, 2016 (the “Effective Date”), by and between Savant Neglected Diseases, LLC, a Delaware limited liability company, having a place of business at 655 Skyway Road, Suite 218, San Carlos, CA 94070 (U.S. Mail: P.O. Box 620732, Woodside, CA 94062-0732) (the “Company”), and KaloBios Pharmaceuticals, Inc., a Delaware corporation, having offices at 1000 Marina Blvd, Suite 250, Brisbane, CA 94005 (“KaloBios”).  The Company and KaloBios are sometimes referred to in this Agreement individually as a “Party” and collectively as the “Parties.”

 

RECITALS

 

WHEREAS, the Company is a biopharmaceutical company with expertise in the manufacture and development of medications that prevent or treat disease and maintain wellness;

 

WHEREAS, KaloBios is a biopharmaceutical company with expertise in the development of pharmaceutical products and is working to create and develop novel pharmaceutical products;

 

WHEREAS, the Company owns or controls certain rights to benznidazole, an antiparasitic medication currently used in the treatment of Chagas disease outside the United States;

 

WHEREAS, the Company and KaloBios entered into a Confidential Disclosure Agreement dated December 1, 2015;

 

WHEREAS, the Company and KaloBios entered into the Prior Letter of Intent (as defined below);

 

WHEREAS, the then chief executive officer of KaloBios, Martin Shkreli, was arrested on securities fraud charges by United States federal agents on December 17, 2015, and subsequently dismissed as chief executive officer;

 

WHEREAS, KaloBios filed for protection under Chapter 11 of the Bankruptcy Code on December 29, 2015;

 

WHEREAS, the United States Bankruptcy Court on February 26, 2016, approved the Letter of Intent (as defined below);

 

WHEREAS, the Company and KaloBios entered into the Letter of Intent as approved by the United States Bankruptcy Court effective February 29, 2016, thereby superseding the Prior Letter of Intent;

 

WHEREAS, the Company and KaloBios desire to supersede the Letter of Intent effective February 29, 2016, by entering into one or more definitive agreements as contemplated by the Letter of Intent;

 

CONFIDENTIAL 

 

 

WHEREAS, the Company further desires to sell to KaloBios, and KaloBios further desires to purchase from the Company, all right, title and interest in and to certain assets relating to the Compound and the Product (as such terms are defined below), for the consideration and on the terms set forth in this Agreement;

 

WHEREAS, the Company further desires to grant to KaloBios an exclusive license to certain intellectual property rights relating to the Compound and the Product;

 

WHEREAS, the Company and KaloBios have agreed to jointly perform certain development activities for the Product; and

 

WHEREAS, KaloBios has agreed that it will commercialize the Product, subject to the terms and conditions of this Agreement; and

 

WHEREAS, the Company and KaloBios intend to perform their respective obligations under this Agreement in a manner that maximizes the value of the Product to patients.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, covenants, and conditions contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

 

ARTICLE 1
DEFINITIONS

 

In addition to the terms defined above and other terms defined in other sections of this Agreement, the following capitalized terms have the meanings set forth in this Article 1 for purposes of this Agreement:

 

“Acquired Assets” has the meaning set forth in Section 2.1.

 

“Action” means any action, claim, lawsuit, legal proceeding, litigation, arbitration or mediation, or any hearing, investigation, probe or inquiry by any Governmental Authority or other Person.

 

“Active Ingredient” means any clinically active material that provides pharmacological activity in a pharmaceutical product.

 

CONFIDENTIAL 

 

 

“Affiliate” means, with respect to either Party, any Person that directly or indirectly controls, is controlled by, or is under common control with such Party.  For the purpose of this definition, “control” (including, with correlative meaning, the terms “controlled by” and “under the common control”) means (i) direct or indirect ownership of fifty percent (50%) or more, including ownership by trusts with substantially the same beneficial interests, of the voting securities of such Person, or (ii) the power to direct or cause the direction of the management of such Person.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Allocation Schedule” has the meaning set forth in Section 3.6.

 

“Annual Net Sales” means, with respect to a Product, aggregate Net Sales in the Territory in a particular Calendar Year for such Product.

 

“Assigned Books and Records” has the meaning set forth in Section 2.1(e).

 

“Assignment and Assumption Agreement” means the assignment and assumption agreement, dated as of the Closing Date, substantially in the form attached hereto as Exhibit D.

 

“Assumed Contracts” has the meaning set forth in Section 2.1(b).

 

“Assumed Liabilities” has the meaning set forth in Section 2.3.

 

“Bankruptcy Code” has the meaning set forth in Section 13.4.

 

“Bankruptcy Exit” has the meaning set forth in Section 2.7(c)(iv).

 

“Beneficial Owner” has the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended from time to time.

 

“Bill of Sale” means the bill of sale, dated as of the Closing Date, substantially in the form attached hereto as Exhibit C.

 

“Breaching Party” has the meaning set forth in Section 13.3(a).

 

“Business” means the Company’s and its Affiliates’ business to the extent related to the Compound, the Product and the Acquired Assets.

 

“Business Day” means any day other than (a) Saturday or Sunday, or (b) any other day on which banks in San Francisco, California are closed for business.

 

“Calendar Quarter” means a period of three (3) consecutive months ending on the last day of March, June, September or December, respectively.

CONFIDENTIAL 

 

 

“Calendar Year” means a period of twelve (12) consecutive months beginning on January 1 and ending on December 31.

 

“Cap” has the meaning set forth in Section 12.6(a).

 

“C.F.R.” means the Code of Federal Regulation.

 

“cGMP” or “GMP” means, with respect to any pharmaceutical product, current Good Manufacturing Practices as defined by the FDA (21 C.F.R. Parts 210 and 211), as may be amended from time to time, and other similar provisions under applicable Law outside the United States.

 

“Change of Control” means with respect to any Party (a) any sale, exchange, transfer or issuance to or acquisition in one transaction or a series of related transactions by one or more Third Parties of shares representing more than fifty percent (50%) of the aggregate ordinary voting power entitled to vote for the election of directors represented by the issued and outstanding stock of such Party or any Affiliate that directly or indirectly controls such Party, whether such sale, transfer, exchange, issuance or acquisition is made directly or indirectly, by merger or otherwise, or beneficially or of record, but excluding the issuance of shares in a bona fide financing transaction; (b) a merger or consolidation under Law of the Party with a Third Party in which the stockholders of the Party immediately prior to such consolidation or merger do not continue to hold immediately following the closing of such merger or consolidation at least fifty percent (50%) of the aggregate ordinary voting power entitled to vote for the election of directors represented by the issued and outstanding stock of the entity surviving or resulting from such consolidation; or (c) a sale, transfer, exclusive license or other disposition of all or substantially all of the assets of the Party to one or more Third Parties in one transaction or a series of related transactions.  Notwithstanding the foregoing, neither (i) the transactions related to the emergence of KaloBios from protection under Chapter 11 of the Bankruptcy Code, including the issuance of New Common Stock to the Primary Plan Sponsor (as such terms are defined in KaloBios’ Second Amended Plan of Reorganization, dated May 9, 2016 [D.I. 434] (the “Plan”)), nor (ii) any sale or other disposition of KaloBios securities by or on behalf of Martin Shkreli, shall constitute a Change of Control.

 

“Claim” has the meaning set forth in Section 12.3.

 

“Closing” has the meaning set forth in Section 2.5.

 

“Closing Date” has the meaning set forth in Section 2.5.

 

“Commercialization Plan” has the meaning set forth in Section 5.2(a).

 

“Commercialization Program” has the meaning set forth in Section 5.1.

 

CONFIDENTIAL 

 

 

“Common Stock” means the common stock, $0.001 par value, of KaloBios.

 

“Company” has the meaning set forth in the Preamble.

 

“Company Covered Person” has the meaning set forth in Section 8.6.

 

“[***]” has the meaning set forth in Section [***].

 

“Company Development Program IP” has the meaning set forth in Section 7.1(a).

 

“Company Field” means any and all veterinary uses.

 

“Company IP” means the Company Patents and Company Know-How.

 

“Company Know-How” means any Know-How Controlled by the Company or its Affiliates as of the Effective Date to the extent relating to the Compound or the Product except as solely related to the Company Field.

 

“[***]” has the meaning set forth in Section [***].

 

“Company Patents” means those Patents that are Controlled by the Company or its Affiliates as of the Effective Date that claim or cover the Exploitation of the Compound or the Product.  The issued patents constituting Company Patents as of the Effective Date are set forth on Exhibit B-1 of this Agreement and the pending patent applications constituting Company Patents as of the Effective Date are set forth on Exhibit B-2 of this Agreement.

 

“Compound” means the compound known as benznidazole, having the chemical name and structure set forth in Exhibit A.

 

“Confidential Disclosure Agreement” means that Confidential Disclosure Agreement, dated as of December 1, 2015, by and between KaloBios and the Company.

 

“Confidential Information” has the meaning set forth in Section 11.1.

 

“Confirmation Order” means that certain Order Confirming the Plan issued by the United States Bankruptcy Court for the District of Delaware on June 16, 2016 with respect to the matter entitled In re KaloBios Pharmaceuticals, Inc. (Case No. 15-12628).

 

“Contemplated Transactions” means all of the transactions contemplated by the Transaction Documents.

 

“Contingent Payments” means the collective amount of all Milestone Payments, Royalties and the Voucher Payment, if any.

 

CONFIDENTIAL 

 

 

“Contract” means any written or oral contract, agreement, instrument, commitment, obligation, understanding, or undertaking of any nature (including, without limitation, leases, licenses, mortgages, notes, guarantees, sublicenses, subcontracts, covenants not to compete, covenants not to sue, confidentiality agreements, options and warranties), whether or not legally binding, and any amendments thereto.

 

“Control,” “Controls,” “Controlled” or “Controlling” means, with respect to any material, Know-How or other intellectual property rights, that a Party has the legal authority or right (whether by ownership, license or otherwise) to grant a license, sublicense, access or other right (as applicable) under such material, Know-How or other intellectual property rights to the other Party on the terms and conditions set forth herein, in each case without breaching the terms of any agreement or other arrangement with a Third Party.

 

“Deposit” means (a) Five Hundred Thousand Dollars ($500,000), which amount was paid by KaloBios to the Company under the terms of the Letter of Intent on February 26, 2016.

 

“Development Program IP” has the meaning set forth in Section 7.1(a).

 

“Diligent Efforts” means, with respect to a Party, the performance of obligations or tasks in a manner consistent with the efforts a Party devotes (and which in no event shall be less than the level of effort and resources reasonably standard in the biopharmaceutical industry for a company having similar financial resources) for the Exploitation of a product resulting from its own research efforts and having similar technical and regulatory factors, clinical development plan complexity and requirements, and similar market potential, sales and profit potential and strategic value, and that is at a similar stage in its development or product life cycle as the Product, in each case based on conditions then prevailing.

 

“Disclosing Party” has the meaning set forth in Section 11.1.

 

“Disclosure Schedule” means any schedule delivered by the Company pursuant to Article 8 or KaloBios pursuant to Article 9.

 

“Dispute” has the meaning set forth in Section 14.2.

 

“Disqualification Event” has the meaning set forth in Section 8.6(a).

 

“Dollars” means U.S. dollars, and “$” shall be interpreted accordingly.

 

“Effective Date” has the meaning set forth in the Preamble.

 

“EMA” means the European Medicines Agency or any successor agency thereto.

 

CONFIDENTIAL 

 

 

“Encumbrance” means any charge, claim, condition, equitable interest, lien, mortgage, security interest, pledge, defect or irregularity in title, easement, rights-of-way, encroachment, servitude, right of first option, right of first refusal or similar restriction, covenant, restriction and any other matters typically raised as exceptions in a commitment to issue a title insurance policy, or any other restriction on use, voting, transfer or exercise of any other attribute of ownership other than a Permitted Encumbrance.

 

“Escrow Agent” means Wilmington Savings Fund Society, FSB.

 

“Excluded Assets” has the meaning set forth in Section 2.2.

 

“Excluded Liabilities” means all Liabilities of the Company and its Affiliates other than the Assumed Liabilities.

 

“Executive Officers” means, (a) with respect to the Company, Stephen L. Hurst, and (b) with respect to KaloBios, Cameron Durrant.

 

“Exploit” means to make, have made, import, use, sell or offer for sale, including to research, develop, commercialize, manufacture, register, hold or keep (whether for disposal or otherwise), have used, export, transport, distribute, have distributed, promote, market or have sold or otherwise dispose of a product or a process, and “Exploitation” means the act of Exploiting a product or process.

 

“FD&C Act” means the U.S. Federal Food, Drug, and Cosmetic Act, as amended.

 

“FDA” means the U.S. Food and Drug Administration or any successor entity.

 

“First Commercial Sale” means, with respect to a particular Product, the first sale for which revenue has been recognized by KaloBios for use or consumption by the general public of such Product in any country in the Territory after all required Regulatory Approvals have been granted in such country.

 

“FTE” means [***] labor hours for one (1) year directly related to the Joint Development Program.  Overtime and work on weekends, holidays and the like shall not be counted with any multiplier (i.e., time-and-a-half or double time) toward the number of hours that are used to calculate the number of FTEs under this Agreement.

 

“FTE Rate” means a rate per FTE equal to [***] per hour (which may be prorated on a daily or hourly basis as necessary) with respect to Joint Development Program activities conducted pursuant to this Agreement.  “FTE Rate” includes direct and indirect costs of internal scientific, medical, technical or commercial personnel (including personnel and travel expenses, and includes the costs of any allocated managerial, financial, legal or business development personnel).

 

CONFIDENTIAL 

 

 

“Fundamental Representations” means, (a) with respect to the Company, the representations and warranties of the Company set forth in Sections 8.1, 8.2 and 8.3, and (b) with respect to KaloBios, the representations and warranties of KaloBios set forth in Sections 9.1, 9.2, 9.3and 9.9.

 

“Future Assets” has the meaning set forth in Section 13.6(a).

 

“GAAP” means United States generally accepted accounting principles and practices, consistently applied.

 

“[***]” shall mean [***].

 

“GCP” means current Good Clinical Practices as defined in Article 1.24 of the April 1996 International Conference on Harmonization (“ICH”) E6 Good Clinical Practice Guideline, as may be amended from time to time, and other similar provisions outside the United States.

 

“GLP” has the meaning set forth in Section 8.11.

 

“Governmental Approval” means any consent, license, registration or permit issued, granted, given or otherwise made available by or under the authority of any Governmental Authority or pursuant to any Law.

 

“Governmental Authority” means any federal, national, state, provincial or local government, or political subdivision thereof (including any agency, branch, office, commission, or council), 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).

 

“[***]” means [***].

 

“[***]” means [***].

 

“IND” means any investigational new drug application as defined in Part 312 of Title 21 of the U.S. Code of Federal Regulations or any comparable application filed with any Regulatory Authority outside of the United States.

 

“Indemnification Basket” has the meaning set forth in Section 12.6(a).

 

“Indemnified Party” has the meaning set forth in Section 12.3.

 

“Indemnifying Party” has the meaning set forth in Section 12.3.

 

“Infringement of Development Program IP” has the meaning set forth in Section 7.5(a).

 

CONFIDENTIAL

 

 

“Infringement of Company IP” has the meaning set forth in Section 7.12(a).

 

“Initial Payment” has the meaning set forth in Section 3.1.

 

“Intellectual Property” means Patents, Know-How and copyrights.

 

“Inventory” means all inventories of the Company or its Affiliates, wherever located, including all work in process, raw materials, starting materials, intermediates from the synthesis of the Compound, the Compound (including Compound bulk stock), the Product, spare parts, assay materials (including cell lines and other reagents) and all other materials and supplies to be used or consumed by the Company in the Exploitation of the Compound or the Product.

 

“Joint Development Committee” or “JDC” has the meaning set forth in Section 6.2.

 

“Joint Development Plan” has the meaning set forth in Section 4.2(a).

 

“Joint Development Program” means the conduct of the activities conducted by the Parties during the Joint Development Program Term, according to Section 4.1 hereto and the other terms and conditions set forth in this Agreement, and as set forth in the Joint Development Plan.

 

“Joint Development Program Costs” has the meaning set forth in Section 4.3(a).

 

“Joint Development Program IP” has the meaning set forth in Section 7.1(a).

 

“Joint Development Program Term” has the meaning set forth in Section 4.1.

 

“Joint Steering Committee” or “JSC” has the meaning set forth in Section 6.1.

 

“KaloBios Development Program IP” has the meaning set forth in Section 7.1(a).

 

“KaloBios” has the meaning set forth in the Preamble.

 

“KaloBios Covered Person” has the meaning set forth in Section 9.6.

 

“[***]” has the meaning set forth in Section [***].

 

“Know-How” means any proprietary data, results, material(s), technology, and nonpublic information of any type whatsoever, in any tangible or intangible form, including: (a) information, techniques, technology, practices, trade secrets, discoveries, developments, methods, knowledge, know-how, skill, experience, data, inventions (whether patentable or not) results (including assay development, compound screening, chemical, pharmacological, toxicological and clinical test data and results), analytical and quality control data, results or descriptions, software and algorithms, reports and study reports; and (b) compositions of matter, cells, cell lines, assays, animal models and physical, biological or chemical material.

 

CONFIDENTIAL

 

 

“Knowledge” means (a) with respect to the Company, the actual knowledge of Stephen L. Hurst, Scott Freeman and Chad Boulanger, after due investigation or inquiry, and (b) with respect to KaloBios, the actual knowledge of Cameron Durrant, David Moradi, Morgan Lam and Ronald Barliant, after due investigation or inquiry.

 

“Law” means any federal, state, local, foreign or multinational law, statute, standard, ordinance, code, rule, regulation, resolution or promulgation, or any order by any Governmental Authority, or any license, franchise, permit or similar right granted by  any Governmental Authority, or any similar provision having the force or effect of law, including the rules or regulations of the SEC or of any stock exchange or trading market on which a Party’s (or its Affiliate’s) securities are traded.

 

“Letter of Intent” means that certain letter agreement between KaloBios and the Company, dated February 29, 2016, setting forth the intent of the Parties to consummate the Contemplated Transactions.

 

“Liabilities” means any and all debts, costs and expenses, liabilities and obligations (including with respect to Taxes), whether accrued or fixed, absolute or contingent, matured or unmatured, determined or determinable, asserted or unasserted, known or unknown, including those arising under any Law, action or governmental order and those arising under any Contract.

 

“Licensed Field” means any and all uses in humans.

 

“Losses” has the meaning set forth in Section 12.1.

 

“MAA” means an application to the appropriate Regulatory Authority for approval to market a Product (but excluding Pricing Approval) in any particular jurisdiction (including an NDA in the United States) and all amendments and supplements thereto.

 

“Material Adverse Effect” means any change, circumstance or effect that, individually or in the aggregate, would or would reasonably be expected to (a) have a materially adverse effect on the Acquired Assets taken as a whole, including the value thereof or KaloBios’ ability to receive, operate and develop the Acquired Assets taken as a whole free of Encumbrances pursuant hereto; provided, that none of the following changes, effects, events, circumstances or occurrences shall be deemed, either alone or in combination, to constitute a Material Adverse Effect, or be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur: (i) changes or effects in general economic or financial conditions; (ii) changes in applicable Laws or accounting rules (including GAAP) or the enforcement, implementation or interpretation thereof; (iii) changes or effects that generally affect the pharmaceutical or medical device industry; (iv) changes or effects that arise out of or are attributable to the commencement, occurrence, continuation or intensification of any war, sabotage, armed hostilities or acts of terrorism; (v) changes or effects arising out of or attributable to the public announcement of the transactions contemplated by this Agreement or the compliance with the provisions of this Agreement including losses or threatened losses of employees, customers, suppliers, distributors or others having relationships with the Company and the Business; or (vi) any matter which KaloBios is aware of on the date hereof; or (b) prevent or materially delay consummation of the Contemplated Transactions.

 

CONFIDENTIAL

 

 

“Milestone Payments” has the meaning set forth in Section 3.3(a).

 

“NDA” means a New Drug Application filed with the FDA, under Sections 505(b)(1) or 505(b)(2) of the FD&C Act, to obtain approval to market a Product (but excluding Pricing Approval) in the United States and all amendments and supplements thereto.

 

“Net Sales” means, with respect to any Product, the total amount invoiced by KaloBios or its respective Affiliates or Sublicensees (the “Selling Party”) to each Third Party purchasing the Product in arm’s length transactions, less the following deductions from such total amounts which are actually incurred, allowed, accrued or specifically allocated:

 

(a)          transportation and insurance charges related to the delivery of the Products to customers;

 

(b)          normal trade, volume and cash discounts, including retroactive price reductions, pertaining to the sale of the Products;

 

(c)          any service fees actually paid to customers as a requirement for the stocking and subsequent re-distribution of the Product;

 

(d)          credits, allowances or refunds given or made to customers for rejection, damage, defect, recall or return of the Product to the Selling Party by customers;

 

(e)          sales and excise taxes, value added taxes, other taxes (excluding income taxes) or other governmental charges otherwise imposed upon the amounts billed for the Product, as adjusted for rebates and refunds or duties that fall due or are absorbed or otherwise imposed on or paid by the Selling Party on sales of Products and other governmental charges imposed upon the importation or sale of the Products;

 

(f)          chargebacks and rebates to third parties, including, without limitation, to managed care health organizations, federal and state government agencies and/or other purchasers of the Product, and group purchasing organization administration fees;

 

CONFIDENTIAL

 

 

(g)          the amount of the rebate that is provided or credited with respect to couponing, a patient assistance program, a patient insurance co-pay program or any program designed to provide a discount to the patient for the cost of a prescription for the Product;

 

(h)          delayed shipping credits, discounts or payments related to the impact of Product price increases between purchase dates and shipping dates, and fees for service payments to customers for non-separable services (including compensation for maintaining agreed Product inventory levels and providing Product-related information);

 

(i)          that portion of the annual fee on prescription drug manufacturers imposed by the Patient Protection and Affordable Care Act, Pub. L. No. 111-148 (as amended), that the Selling Party allocates to sales of the Product in accordance with their respective standard policies and procedures consistently applied across its products; and

 

(j)          all such deductions set forth in (a) through (i) above being supported by reasonable written documentation.

 

Net Sales shall be calculated and accounted for in accordance with GAAP.

 

Notwithstanding anything to the contrary contained herein, for the purposes of this definition, (i) the transfer of the Product by KaloBios or one of its Affiliates or Sublicensees to another Affiliate, other than for value, shall not be considered a sale, and (ii) any disposal of the Product for, or use of the Product in or for research, test marketing, clinical trial purposes, free samples, or for warehousing or staging in advance of release of the Product for commercial sale, shall not be considered a sale.

 

“New Common Stock” has the meaning set forth in the definition of Change of Control.

 

“Net Voucher Proceeds” means the consideration received or deemed received by KaloBios or its Affiliate(s) for the sale or transfer of a Voucher in a Voucher Sale or as determined under Section 3.4 (as reduced for all costs and expenses incurred by KaloBios or its Affiliate(s), exclusively related to a Voucher Sale and excluding any and all government filing fees and costs incurred prior to such Voucher Sale, to a maximum of [***] of gross proceeds).  For the avoidance of doubt, in the event that the Voucher Sale occurs in connection with other transactions between KaloBios and the purchaser of the Voucher, the Net Voucher Proceeds shall mean only the consideration received by KaloBios or its Affiliate(s) that is attributable solely to the purchase of the Voucher.

 

“No-Action Letter” has the meaning set forth in Section 10.9(a).

 

“Non-breaching Party” has the meaning set forth in Section 13.3(a).

 

“Non-Voucher Accompanying Approval” has the meaning set forth in Section 3.3(c).

 

CONFIDENTIAL

 

 

“Omitted Asset” has the meaning set forth in Section 10.6.

 

“Orphan Drug Designation” means a grant by the FDA of a request for designation under Section 526 of the FD&C Act as amended (21 U.S.C. 360bb) in the United States or any analogous grant by a Regulatory Authority in any other country in the Territory.

 

“Party” and “Parties” have the meaning set forth in the Preamble.

 

“Patent” means (a) all patents and patent applications in any country or supranational jurisdiction in the Territory, and (b) any substitutions, divisions, continuations, continuations-in-part, provisional applications, reissues, renewals, registrations, confirmations, re-examinations, extensions, supplementary protection certificates and the like of any such patents or patent applications.

 

“Permitted Encumbrance” means (a) liens for Taxes not yet due and payable or being contested in good faith by appropriate procedures; (b) mechanics’, carriers’, workmen’s, repairmen’s or other like liens arising or incurred in the ordinary course of business; (c) liens arising under original purchase price conditional sales contracts and equipment leases with Third Parties entered into in the ordinary course of business; (d) easements, rights of way, zoning ordinances and other similar Encumbrances affecting real property; and (e) other imperfections of title or Encumbrances, and with respect to (a) through (e), which are neither, individually or in the aggregate, material to the business of the Company, nor have not had, and would not reasonably be expected to have, a Material Adverse Effect.

 

“Person” means any individual, corporation, partnership, joint venture, limited liability company, trust, business association, organization, Governmental Authority, a division or operating group of any of the foregoing or other entity or organization, including any successors or assigns (by merger or otherwise) of any such entity, or government or political subdivision or any agency, department or instrumentality thereof.

 

“Plan” has the meaning set forth in the definition of Change of Control.

 

“Pricing Approval” means such Governmental Approval, agreement, determination or decision establishing prices for a Product that can be charged and/or reimbursed in regulatory jurisdictions where the applicable Governmental Authorities approve or determine the price and/or reimbursement of pharmaceutical products and where such Governmental Approval or determination is necessary for the commercial sale of such Product in such jurisdictions.

 

“Prior Letter of Intent” means that Letter of Intent entered into by the Company and KaloBios on December 1, 2015 and effective as of December 2, 2015.

 

CONFIDENTIAL

 

 

“Priority Review” means a priority review of, and action, upon a human drug application by the FDA not later than six (6) months after the filing of such application to the FDA, as defined in the FD&C Act.

 

“Product” means any pharmaceutical product that contains the Compound, either alone or in combination with other Active Ingredients

 

“Program” means the research and development program, including the Joint Development Program, to obtain Regulatory Approval for the Product in the United States for the treatment of Chagas disease.

 

“Receiving Party” has the meaning set forth in Section 11.1.

 

“Registrable Securities” means (i) the Warrant Shares and any shares of Common Stock issued in respect thereof as a result of any stock split, dividend or other distribution,  merger, consolidation, recapitalization or similar event and (ii) any Common Stock issued as (or issuable upon the exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange or in replacement of, the Warrant Shares described in clause (i) of this definition; provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and KaloBios shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) when (a) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the SEC under the Securities Act and such Registrable Securities have been disposed of in accordance with such effective Registration Statement, (b) such Registrable Securities have been previously sold in accordance with Rule 144, (c) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as reasonably determined by KaloBios, upon the advice of counsel to KaloBios, or (d) such time as the SEC issues the No-Action Letter.

 

“Registration Statement” means any registration statement filed under the Securities Act for an offering to be made on a continuous basis pursuant to Rule 415 thereunder, including (in each case) all exhibits thereto, any amendments thereto (including pre- and post-effective amendments), the related prospectus and any prospectus supplement, and all material incorporated by reference or deemed to be incorporated by reference in any such registration statement.

 

“Regulatory Approval” means those approvals (e.g., drug approval, medical device approval, Pricing Approval and reimbursement approval) necessary for the Exploitation of a Compound or a Product in a given country or regulatory jurisdiction.

 

“Regulatory Authority” means in a particular country or jurisdiction, any applicable Governmental Authority or non-Governmental Authority involved in granting Regulatory Approval in such country or jurisdiction.

 

CONFIDENTIAL

 

 

“Regulatory Exclusivity” means, with respect to a Product in a particular country, any exclusive marketing rights or data exclusivity rights conferred by any Regulatory Authority with respect to such Product in such country other than a Patent right (including Patent rights extended by the grant of a Regulatory Authority, such as patent term restoration in the United States under Section 156 of Title 35 of the U.S. Code, as amended from time to time).

 

“Regulatory Materials” means, with respect to any pharmaceutical product in any jurisdiction, any and all regulatory applications, submissions, notifications, communications, correspondence, registrations, Regulatory Approvals, and/or other filings made to, received from or otherwise conducted with, a Regulatory Authority in order to Exploit a Compound or Product in a particular country or jurisdiction, including, without limitation, all INDs, NDAs and MAAs.

 

“Royalties” has the meaning set forth in Section 7.8(a).

 

“Royalty Term” has the meaning set forth in Section 7.8(b).

 

“Rule 144” means Rule 144 promulgated under the Securities Act.

 

“Sale Proceeds Voucher Payment” has the meaning set forth in Section 3.4(c).

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Security Agreement” has the meaning set forth in Section 3.5.

 

“Selling Party” has the meaning set forth in the definition of Net Sales.

 

“[***]” means [***].

 

“Sublicensee” means, with respect to a particular Product, a Third Party to whom KaloBios has granted a sublicense under any Company Patents or Company Know-How, but excluding distributors.

 

“Tax” means all taxes, charges, fees, duties, levies or other assessments, including, income, gross receipts, net proceeds, turnover, real and personal property (tangible and intangible), sales, use, franchise, excise, value added, license, payroll, unemployment, escheat, environmental, customs duties, capital stock, disability, stamp, leasing, lease, user, transfer, fuel, excess profits, occupational and interest equalization, windfall profits, severance and employees’ income withholding and social security or similar taxes imposed by the United States or by any state, municipality, subdivision or Governmental Authority or by any foreign country or by any other tax authority, whether disputed or not, in each case to the extent relevant in the given context, and such term includes any interest, penalties or additions to tax attributable to such taxes, and shall include any liability for such amount as a result either of being a member of a combined, consolidated, unitary or affiliated group, or of a continuing obligation to indemnify any Person or as a result of being a transferee or a successor of another Person.

 

CONFIDENTIAL

 

 

“Tax Returns” means all returns, declarations, reports, statements and other documents of, relating to, or required to be filed in respect of, any and all Taxes (including any schedule or attachment thereto, and including any amendment thereof).

 

“Term” has the meaning set forth in Section 13.1.

 

“Territory” means all countries of the world.

 

“Third Party” means any Person other than a Party or an Affiliate of a Party.

 

“Third Party License” means any license or other agreement between a Third Party and KaloBios or its Affiliate pursuant to which KaloBios or its Affiliate is granted a license or other rights to Patents, assets or Know-How owned or controlled by a Third Party, where such license or other rights are related to the Exploitation of the Compound or Products.

 

“Transaction Documents” means, collectively, this Agreement, the Bill of Sale, the Assignment and Assumption Agreement, the Security Agreement and the Warrant.

 

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

 

“Voucher” means a priority review voucher issued by the FDA or otherwise under the authority of the United States Department of Health and Human Services to KaloBios or its Affiliate(s) as the sponsor of a rare pediatric disease or neglected tropical disease product application related to the Compound or the Product, that entitles the holder of such voucher to Priority Review of a single human drug application submitted under Section 505(b)(1) or 505(b)(2) of the FD&C Act or Section 351(a) of the United States Public Health Service Act, as further defined in the FD&C Act.

 

“Voucher Issuance Expiration Date” has the meaning set forth in Section 3.3(c).

 

“Voucher Payment” has the meaning set forth in Section 3.4(a).

 

“[***]” has the meaning set forth in Section [***].

 

“Voucher Sale” means the good faith sale, transfer or other direct or indirect disposition of a Voucher for value by KaloBios or its Affiliate that results, in a single transaction or a series of related transactions, in its ownership by, or the benefits of ownership flowing to, a Third Party.

 

CONFIDENTIAL

 

 

“Warrant” has the meaning set forth in Section 3.2.

 

“Warrant Shares” has the meaning set forth in Section 9.3(b).

 

ARTICLE 2
PURCHASE AND SALE OF ASSETS

 

Section 2.1          Acquired Assets.  On the terms and subject to the conditions contained herein and in consideration for the payment of the Initial Payment, the Milestone Payments and the Voucher Payment (to the extent that such amounts become payable) and the issuance of the Warrant by KaloBios, the Company hereby  sells, transfers, conveys, assigns and delivers to KaloBios, at the Closing, free and clear of all Encumbrances, and KaloBios accepts, at the Closing, all of the Company’s  right, title and interest in and to the following assets (collectively, the “Acquired Assets”):

 

(a)          all Regulatory Materials in the Territory relating to the Compound or the Product, including the Regulatory Materials set forth on Schedule 2.1;

 

(b)          all contracts relating to the Compound or the Product, including the contracts set forth on Schedule 2.1 (the “Assumed Contracts”);

 

(c)          all Inventory, including the Inventory set forth on Schedule 2.1;

 

(d)          all Governmental Approvals and all pending applications therefor or renewals thereof, in each case to the extent relating to the Compound or the Product and transferable to KaloBios, including the Government Approvals, pending applications and renewals set forth on Schedule 2.1, and for the avoidance of doubt, the right to be the sponsor of, and to own all rights to, all applications or other submissions to FDA in the future relating to the Compound or the Product, including all INDs, NDAs and NDA supplements, orphan drug designations, drug master files, and requests for issuance of vouchers, including pursuant to the change of ownership regulations set forth in 21 C.F.R. § 314.72 and 21 C.F.R. § 316.27;

 

(e)          any and all material books, records, files, manuals, data and other documentation (including clinical study reports and data, investigator brochures and laboratory notebooks) that relate primarily to the Compound or the Product, including (i) all data in all databases for all clinical and pre-clinical studies, (ii) research and development reports, creative materials, studies, reports, correspondence and other similar documents and records, and (iii) all other material business information, whether tangible or intangible, including, in each case, the books and records set forth on Schedule 2.1 (the “Assigned Books and Records”) and contact information for all Third Parties in contact with the Company in connection with any of the Acquired Assets, or who may have access to assets necessary to support the Program;

 

CONFIDENTIAL

 

 

(f)          all claims, causes of action, judgments and demands of whatever kind or description (regardless of whether or not such claims and causes of action have been asserted by the Company) of the Company against Third Parties that arise out of or relate to the Acquired Assets, whether choate or inchoate, known or unknown, contingent or non-contingent, to the extent such claims, causes of action, judgments or demands are not Excluded Assets;

 

(g)          all rights of indemnification, warranty, contribution, credits, refunds, reimbursement and other rights of recovery (regardless of whether such rights are currently exercisable) against Third Parties (excluding insurance carriers) that arise out of or relate to any of the Acquired Assets to the extent such rights first arise after the Closing and are not Excluded Assets or do not relate to (or represent a counterclaim of the Company in connection with) any Excluded Liability;

 

(h)          all other claims, rights and causes of action relating to the items described in clauses (a) through (g) above or the Assumed Liabilities against Third Parties that arise after the Closing, whether liquidated or unliquidated; and

 

(i)          any and all intangibles and goodwill of the Company  arising from the items described in clauses (a) through (h) above.

 

Section 2.2          Excluded Assets.  All assets, properties, rights and interests of the Company and its Affiliates not expressly included in the Acquired Assets under Section 2.1, including the Excluded Assets, are expressly excluded from the transfer, conveyance, assignment and delivery contemplated hereby and as such are not included in the Acquired Assets and shall remain the assets, properties, rights and interests of the Company and its Affiliates.  Excluded Assets shall include all of the Company’s right, title and interest in and to the following assets (collectively, the “Excluded Assets”):

 

(a)          all Company IP;

 

(b)          all cash and cash equivalents, bank accounts and securities of the Company;

 

(c)          all contracts that are not Assumed Contracts;

 

(d)          the corporate seals, organizational documents, minute books, stock books, Tax Returns, books of account or other records having to do with the corporate organization of the Company, all employee-related or employee benefit-related files or records, other than personnel files of any employees transferred to KaloBios, and any other books and records which the Company is prohibited from disclosing or transferring to KaloBios under applicable Law and is required by applicable Law to retain;

 

CONFIDENTIAL

 

 

(e)          all Company employee benefit plans and trusts or other assets attributable thereto;

 

(f)          all Tax assets (including duty and Tax refunds and prepayments) of the Company or any of its Affiliates;

 

(g)          all rights to any action, suit or claim of any nature available to pursue or being pursued by the Company, whether arising by way of counterclaim or otherwise;

 

(h)          any attorney work product, attorney-client communications and other items protected by attorney-client privilege generated in connection with the Transaction Documents or related to the Excluded Assets;

 

(i)          all other assets of the Company and its Affiliates other than the Acquired Assets;

 

(j)          all rights of indemnification, warranty, contribution, credits, refunds, reimbursement and other rights of recovery (regardless of whether such rights are currently exercisable) against Third Parties (excluding insurance carriers) that arise out of or relate to any of the Excluded Assets; and

 

(k)          all rights which accrue or will accrue to the Company under this Agreement and the Transaction Documents.

 

Section 2.3           Assumed Liabilities.  Upon the terms and subject to the conditions of this Agreement, at the Closing, KaloBios shall assume, and shall pay, perform, satisfy and discharge (or cause to be paid, performed, satisfied and discharged on behalf of KaloBios) when due, the following Liabilities of the Company related to the Acquired Assets (collectively, the “Assumed Liabilities”):

 

(a)          Liabilities for all Taxes relating to the Compound, the Product or the Acquired Assets for any taxable period (or portion thereof) beginning on or after the Closing Date, including those payable by KaloBios pursuant to Section 3.9; and

 

(b)          any Liability exclusively related to the Acquired Assets, to the extent arising after the Closing.

 

Section 2.4           Excluded Liabilities.  Notwithstanding anything to the contrary contained in this Agreement, the Assumed Liabilities will exclude any other Liabilities whatsoever not expressly assumed by KaloBios under Section 2.3, including the Excluded Liabilities.  For the avoidance of doubt, it is understood and agreed that KaloBios is not assuming any Liabilities or claims arising out of the use or operation of the Acquired Assets prior to the Closing.

 

CONFIDENTIAL

 

 

Section 2.5          Closing.  The Closing (the “Closing”) will take place on the date of the Bankruptcy Exit; provided, that if all conditions to the Closing set forth in Section 2.6 have not been satisfied or waived on or prior to such date, the Closing shall take place on the first Business Day following the satisfaction or waiver (by the Party entitled to waive the condition) of all conditions to the Closing set forth in Section 2.6, or at such other time and place as the Parties to this Agreement may agree (the “Closing Date”).  Each Party shall deliver its closing deliverables pursuant to Section 2.8 to the other Party, and KaloBios shall deliver, or cause to be delivered, the funds payable pursuant to Section 3.1, to the Escrow Agent, and the Escrow Agent shall release such funds in accordance with the Escrow Agreement in substantially the form attached hereto as Exhibit H.  The Closing will be deemed effective for tax, accounting and other computational purposes as of 11:59 p.m. Eastern time on the Closing Date.

 

Section 2.6          Delivery of Acquired Assets; Assigned Books and Records.

 

(a)          The Company shall use commercially reasonable efforts to deliver all Acquired Assets in the Company’s possession necessary to support the Program promptly after the Closing Date (and in any case within thirty (30) days after the Closing Date) to KaloBios at its principal place of business or at such other location mutually agreed by the Parties, at the [***] cost and expense of [***].  To the extent any Acquired Assets are not in the Company’s possession or have not been delivered by the Company to KaloBios within thirty (30) days after the Closing Date, the Company shall, within ninety (90) days after the Effective Date, obtain possession and control of and deliver to KaloBios such remaining Acquired Assets, including those Acquired Assets set forth in Schedule 2.6(a).  For the avoidance of doubt, [***] shall be [***] responsible for such delivery and any reasonable costs and expenses incurred by the Company in the delivery of the Acquired Assets, and KaloBios shall be [***] responsible for any damages that may occur to the Acquired Assets once delivered.

 

(b)          The Company may retain copies of any Assigned Books and Records (i) to the extent necessary for tax, accounting, regulatory, compliance or litigation purposes, (ii) in order to perform and discharge the Excluded Liabilities and the Company’s obligations under the Transaction Documents, or (iii) to the extent that such Assigned Books and Records contain information with respect to any Excluded Asset or Excluded Liability. For the avoidance of doubt, such retained Assigned Books and Records shall be treated as Confidential Information of KaloBios pursuant to Article 11.

 

Section 2.7          Conditions to Closing.

 

(a)          Conditions to Obligations of Each Party.  The obligations of the Company and KaloBios to consummate the Closing are subject to the satisfaction (or the waiver by each of the Company and KaloBios in their respective sole and absolute discretion) of the following condition: there shall not be in effect a final, non-appealable order or decree entered by a Governmental Authority that permanently enjoins, restrains or otherwise prohibits the consummation of the Contemplated Transactions.

 

CONFIDENTIAL

 

 

(b)          Conditions to Obligations of KaloBios.  The obligation of KaloBios to consummate the Closing is subject to the satisfaction (or the waiver by KaloBios in its sole and absolute discretion) of the following further conditions:

 

(i)          The Company shall have performed in all material respects all of its covenants and obligations under this Agreement that are required to be performed by it at or prior to the Closing;

 

(ii)          The representations and warranties of the Company set forth in Article 8 that are qualified by materiality or Material Adverse Effect shall be true and correct and so qualified in all respects as of the Effective Date and as of the Closing Date, except to the extent expressly made as of a specified date, in which case such representations and warranties shall be true and correct as of such date, and the representations and warranties of the Company set forth in Article 8 that are not qualified by materiality or Material Adverse Effect shall be true and correct in all material respects as of the Effective Date and as of the Closing Date, except to the extent expressly made as of a specified date, in which case such representations and warranties shall be true and correct as of such date;

 

(iii)          KaloBios shall have received the documents listed in Section 2.8(a) to be delivered at Closing.

 

(c)          Conditions to Obligations of the Company.  The obligation of the Company to consummate the Closing is subject to the satisfaction (or the waiver by the Company in its sole and absolute discretion) of the following further conditions:

 

(i)          KaloBios shall have performed in all material respects all of its covenants and obligations under this Agreement that are required to be performed by it at or prior to the Closing;

 

(ii)           the representations and warranties of KaloBios set forth in Article 9 that are qualified by materiality shall be true and correct and so qualified in all respects as of the Effective Date and as of the Closing Date, except the extent expressly made as of a specified date, in which case such representations and warranties shall be true and correct as of such date, and the representations and warranties of KaloBios set forth in Article 9 that are not qualified by materiality or Material Adverse Effect shall be true and correct in all material respects as of the Effective Date and as of the Closing Date, except to the extent expressly made as of a specified date, in which case such representations and warranties shall be true and correct as of such date;

 

(iii)          as of the Closing Date, KaloBios shall have a minimum balance of Ten Million Dollars ($10,000,000) in cash, inclusive of the Initial Payment, which shall not be subject to any Encumbrance or Permitted Encumbrance;

 

CONFIDENTIAL

 

 

(iv)          a court of competent jurisdiction shall have issued a judicial order approving the Contemplated Transactions, and the effective date of KaloBios’ plan of reorganization (the “Bankruptcy Exit”) shall have occurred or shall occur contemporaneously with the Closing of the Contemplated Transactions;

 

(v)          the Company shall have received the documents listed in Section 2.8(b); and

 

(vi)          the Company shall have received an opinion from special counsel to KaloBios, in the form attached as Exhibit E concerning the validity and enforceability of the Transaction Documents and the Contemplated Transactions.

 

Section 2.8          Deliveries at Closing.   Upon the terms and subject to the conditions set forth in this Agreement, the Parties agree that at the Closing, among other things:

 

(a)          the Company shall deliver the following items, duly executed by the Company, all of which shall be in a form and substance reasonably acceptable to KaloBios and KaloBios’ counsel:

 

(i)

the Transaction Documents that are required to be executed by the Company;

 

(ii)

a certificate executed by the Managing Member of the Company certifying that the conditions to KaloBios’ obligations hereunder set forth in Section 2.7(b)(i) and Section 2.7(b)(ii) have been fulfilled;

 

(iii)

a certificate in the form prescribed by Treasury Regulation Section 1.4445-2, certifying either that the Company is not a foreign person for purposes of Section 1445 of the Code or that the Acquired Assets do not constitute a “United States Real Property Interest” within the meaning of Section 897 of the Code; and

 

(iv)

such other certificates, instruments or documents required pursuant to the provisions of this Agreement or otherwise necessary or appropriate in accordance with the terms hereof and consummate the Contemplated Transactions.

 

(b)          KaloBios shall deliver, or cause to be delivered, the following items, duly executed by the KaloBios, all of which shall be in a form and substance reasonably acceptable to the Company and the Company’s counsel:

 

CONFIDENTIAL

 

 

(i)

the Transaction Documents that are required to be executed by KaloBios;

 

(ii)

a certificate signed by the Chief Executive Officer of KaloBios certifying that the conditions to the Company’s obligations hereunder set forth in Section 2.7(c)(i), and Section 2.7(c)(ii), Section 2.7(c)(iii) and Section 2.7(c)(iv) have been fulfilled;

 

(iii)

a certificate signed by the President of KaloBios certifying that (A) a judicial order of a court of competent jurisdiction approving the Contemplated Transactions has been issued, and (B) the effective date of the Bankruptcy Exit shall have occurred or shall occur contemporaneously with the Closing of the Contemplated Transactions; and

 

(iv)

such other certificates, instruments or documents required pursuant to the provisions of this Agreement or otherwise necessary or appropriate in accordance with the terms hereof to consummate the Contemplated Transactions.

 

ARTICLE 3
CONSIDERATION

 

Section 3.1          Initial Payment.  As partial consideration for the sale, transfer, conveyance, assignment and delivery of the Acquired Assets to, and assumption of the Assumed Liabilities by, KaloBios, at the Closing, KaloBios shall pay to the Company Three Million Dollars ($3,000,000) less the amount of the Deposit (the “Initial Payment”).  In addition, concurrently with the payment of the Initial Payment, KaloBios shall, pursuant to  Section 4.3(b), pay the first [***] payment and shall pay to the Company up to One Hundred Thousand Dollars ($100,000) in reimbursement of its documented legal and other expenses resulting from KaloBios’ bankruptcy proceedings and incurred by the Company between December 17, 2015, and the date of KaloBios’ exit from bankruptcy, subject to reasonable documentation of such expenses having been provided to KaloBios no less than three (3) Business Days prior to the Closing Date.

 

Section 3.2          Warrant.  As partial consideration for the sale, transfer, conveyance, assignment and delivery of the Acquired Assets to, and assumption of the Assumed Liabilities by, KaloBios, at the Closing, KaloBios shall issue to the Company a warrant to purchase two hundred thousand (200,000) shares of the Common Stock, as may be adjusted from time to time as set forth therein for reclassifications, stock-splits or otherwise, in substantially the form attached hereto as Exhibit F (the “Warrant”).  The Parties hereby agree that the face value of the Warrant is One Hundred Dollars ($100).

 

CONFIDENTIAL

 

 

Section 3.3          Milestones.

 

(a)          As partial consideration for the sale, transfer, conveyance, assignment and delivery of the Acquired Assets to, and assumption of the Assumed Liabilities by, KaloBios, KaloBios shall pay to the Company each of the following one-time milestone payments (the “Milestone Payments”) promptly, but in no event later than [***] after the first achievement of the corresponding milestone event, if such milestone is achieved:

 

(b)          Each Milestone Payment shall be payable only once no matter how many times each corresponding milestone event is achieved and the aggregate amount of Milestone Payments paid by KaloBios under this Section 3.3 shall not exceed Twenty-One Million Dollars ($21,000,000).  Notwithstanding the foregoing, if a Change of Control of KaloBios occurs, KaloBios shall pay to the Company [***] of all unpaid Milestone Payments, if any, concurrently with such Change of Control, irrespective of whether the corresponding milestone events have been achieved, and any remaining unpaid Milestone Payments shall be reduced by [***].

 

(c)          Notwithstanding anything to the contrary or limiting any other rights of the Company under this Section 3.3, if, and only if, the FDA grants Regulatory Approval for the Product in the United States but does not issue a Voucher to KaloBios contemporaneously with such Regulatory Approval (a “Non-Voucher Accompanying Approval”, and the date such Regulatory Approval is granted, the “Voucher Issuance Expiration Date”), then:

 

(i)          KaloBios shall have the option, exercisable at any time upon delivery of written notice to the Company within ten (10) days following the Voucher Issuance Expiration Date, to [***].  Notwithstanding the foregoing if, due to changes in applicable Law with respect to the timing of the issuance of a Voucher, the issuance of the Voucher to KaloBios does not occur contemporaneously with the receipt of Regulatory Approval by the FDA for the Product in the United States, then the foregoing 10-day option period shall instead run from the date of such Regulatory Approval until ten (10) days after determination by FDA that a Voucher shall not be issued in connection with the Regulatory Approval and notice to KaloBios thereof.

 

CONFIDENTIAL

 

 

(ii)          If KaloBios timely [***] pursuant to Section 3.3(c)(i), the Company shall have the option, exercisable at any time upon delivery of written notice to KaloBios within ten (10) days following [***].

 

(d)          If KaloBios [***]and the Company does not [***], then [***]; provided, however, that nothing in this Section 3.3(c) shall be construed to relieve KaloBios of any other obligations to pay any other Milestone Payments pursuant to this Section 3.3 or other royalty payments pursuant to Section 7.8, in each case as they become due, or to otherwise relieve KaloBios of any other obligations under Article 5 (other than Section 5.3).

 

Section 3.4          Voucher Payment.

 

(a)          Voucher.  Following the Closing, KaloBios shall, and it shall cause its Affiliates to, use Diligent Efforts to satisfy all preconditions and requirements for the issuance of a Voucher [***] from the FDA with respect to the Product.  As partial consideration for the sale, transfer, conveyance, assignment and delivery of the Acquired Assets to, and assumption of the Assumed Liabilities by, KaloBios, after the receipt by KaloBios or its Affiliate of a Voucher as provided below, KaloBios shall pay to the Company (or cause to paid to the Company) [***] with respect to such Voucher (the “Voucher Payment”), subject to the terms and conditions set forth in this Section 3.4.

 

(b)          Voucher Sale Process.  [***] 

 

(c)          Voucher Sale.  Subject to Section 3.4(d) below, if KaloBios or any of its Affiliates consummates a Voucher Sale at any time (other than a Voucher Sale to the Company pursuant to Section 3.4(b) above), then the Voucher Payment in connection with such Voucher Sale shall be an amount in the form of cash equal to the product obtained by multiplying (i) the Net Voucher Proceeds by (ii) [***] (the “Sale Proceeds Voucher Payment”).  The Voucher Payment shall be made in the form of cash to the extent that the Net Voucher Proceeds are in the form of cash, and to the extent non-cash, shall be paid over in such non-cash consideration.

 

(d)          Retained Voucher.  If KaloBios has not consummated a process with respect to a Voucher Sale within [***] after a Voucher is issued to KaloBios or its Affiliate, or KaloBios notifies the Company in writing that it has determined not to engage in a Voucher Sale and to instead retain such Voucher for its or its Affiliates’ own use, then the Voucher Payment shall be calculated based on [***] equal to [***] as determined using generally accepted methods by an independent Third Party valuator having significant experience in valuing Vouchers or similar assets.  The Third Party valuator shall be selected by [***] and reasonably acceptable to [***], and [***] shall be responsible for paying the fees of any such Third Party valuator.  The determination of such Third Party valuator shall be binding on both KaloBios and the Company absent fraud.  The Voucher Payment shall be due within [***] days after the determination of the value of the Net Voucher Proceeds by the Third Party valuator.

 

CONFIDENTIAL

 

 

(e)          Payment.  The Voucher Payments shall be paid to the Company as follows:  with respect to a Sale Proceeds Voucher Payment, upon the closing of the Voucher Sale unless there is a disagreement over the value of any non-cash consideration, in which case it shall be made within [***] after the determination of such amounts by the Third Party valuator pursuant to Section 3.4(c) above (provided that the Company’s share of any deferred consideration payable to KaloBios as Net Voucher Proceeds following such closing shall be paid to the Company promptly, and within [***] following payment thereof to KaloBios.)  KaloBios shall pay, or cause any of its Affiliates to which it had transferred the Voucher to pay, such amounts to the Company within [***] after such determination.

 

Section 3.5          Security Agreement.  To secure the performance of KaloBios’ payment obligations under this Agreement, the Company and KaloBios shall enter into a security agreement in substantially the form attached hereto as Exhibit G (the “Security Agreement”).

 

Section 3.6          Purchase Price Allocation.  Within [***] after Closing the Parties will agree in good faith on a schedule setting forth the allocation of the Initial Payment to the Acquired Assets (the “Allocation Schedule”), to be attached hereto as Schedule 3.6.  The Company and KaloBios will sign and submit all necessary forms to report this transaction for U.S. federal, state and local income Tax purposes in accordance with the Allocation Schedule and will not take a position for such Tax purposes inconsistent therewith.  The Parties will treat the Contemplated Transactions in all filings with Governmental Authorities for all Tax purposes consistently with the Allocation Schedule and this Section 3.6.  Following the Closing, the Parties shall cooperate in good faith to amend the Allocation Schedule in order to take into account KaloBios’ payment to the Company of additional consideration for the Acquired Assets in the form of any Contingent Payments actually received by the Company, and the Parties shall amend or file all necessary forms as may be required to report the amended Allocation Schedule.

 

Section 3.7          Payments.  Except as otherwise specified herein, all payments to be made by KaloBios or its Affiliates to the Company under this Agreement shall be made in Dollars by bank wire transfer in immediately available funds to a bank account designated in writing by the Company.  Interest will accrue on all late payments under this Agreement at an annual rate equal to the lesser of (i) [***] or (ii) the maximum rate permitted under applicable Law.  For the avoidance of doubt, all payments to be made by KaloBios under this Agreement shall constitute Secured Obligations (as such term is defined in the Security Agreement).

 

Section 3.8          Audits.

 

(a)          KaloBios shall maintain for three (3) years complete and accurate records in sufficient detail to permit the Company to confirm the accuracy of (i) the calculation of the Voucher Payment hereunder, and (ii) the Royalties paid under Section 7.8 hereunder.

 

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(b)          The Company shall, and shall ensure that its Affiliates and Third Party subcontractors shall, maintain complete and accurate records in sufficient detail to permit KaloBios to confirm the Joint Development Program Costs invoiced by the Company to KaloBios in accordance with Section 4.3(b).

 

(c)          Each Party shall have the right to have an independent and nationally recognized certified public accounting firm in the United States, reasonably acceptable to the other Party, have access during normal business hours, and upon reasonable prior written notice, to examine only those records of the other Party (and its Affiliates and Sublicensees) as may be reasonably necessary to determine, with respect to any calendar year ending not more than three (3) years prior to such request, the correctness or completeness of any report or payment made under Article 3, Article 4 or Section 7.8; provided, that upon request of the audited Party, such accounting firm shall enter into a confidentiality agreement in a form reasonably acceptable to the audited Party. The foregoing right of review may be exercised only (i) [***] by the Company with respect to the records described in Section 3.8(a)(i); (ii) [***] per [***] by the Company with respect to the records described in Section 3.8(a)(ii); provided, however, that the Company shall not be entitled to audit the same period of time more than [***]; and (iii) [***] per [***] by KaloBios with respect to the records described in Section 3.8(b); provided, however, that KaloBios shall not be entitled to audit the same period of time more than [***].  Upon completion of the audit, the accounting firm shall disclose to both Parties, as applicable, (a) whether payments made under Section 3.4 or Section 7.8, as the case may be, are correct or incorrect, and if it believes in good faith that KaloBios is in breach of any of its payment obligations under the applicable section, and (b) whether it believes in good faith that any amounts invoiced by the Company were inaccurate or without a valid basis and the amount of such funds at issue.  Upon request, the accounting firm shall provide to both Parties its full, unredacted audit report. If the audit report concludes that additional amounts were owed but unpaid, such Party shall pay the additional amounts within [***] after the date on which such audit report is delivered to both Parties, together with interest thereon at an annual rate equal to the lesser of (i) [***] or (ii) [***].  [***] shall bear [***] cost of the performance of any such audit, unless such audit discloses a variance of more than [***] of the amount actually owed for the period audited, in which case [***] shall bear [***] cost of the performance of such audit.  The results of such audit shall be final, absent manifest error or fraud. Each Party shall hold all information disclosed to it under this Section 3.8 as Confidential Information of the other Party.

 

Section 3.9          Taxes.

 

(a)          Taxes on Income.  Each Party shall be solely responsible for the payment of all Taxes imposed on its share of income arising directly or indirectly from the activities of, or the receipt of any payment by, the Parties under this Agreement.

 

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(b)          Proration.  Liability for all personal property (tangible or intangible) Taxes (or other similar Taxes), if any, attributable to the Compound, the Product or the Acquired Assets, will be prorated between the Parties as of the Closing Date, with the Company liable to the extent such items relate to any taxable period (or portion thereof) ending on or before the Closing Date, and KaloBios liable to the extent such items relate to a period (or portion thereof) beginning after the Closing Date.  The Company will prepare a proration of such items, which it will present to KaloBios prior to the Closing Date, and the Parties will reasonably agree on such proration.  The Company will furnish KaloBios with such documents and other records as KaloBios reasonably requests in order to confirm the Company’s proration calculations.  The Company will prepare and timely file all Tax Returns and pay all Taxes for all personal property (tangible or intangible) Taxes (or other similar Taxes), if any, attributable to the Compound, the Product or the Acquired Assets for all Tax periods ending on or prior to the Closing Date.  KaloBios will prepare and timely file all other such Tax Returns that are required to be filed in respect of the Product or the Acquired Assets and KaloBios will be responsible for paying all Taxes with respect to periods beginning after the Closing Date.  With respect to Taxes apportioned pursuant to this Section 3.9, the Company will pay such apportioned Taxes that are due and payable on or prior to the Closing Date, and bill KaloBios for any part of that amount apportioned to KaloBios.  KaloBios will pay such apportioned Taxes that are due and payable after the Closing Date and bill the Company for any part of that amount apportioned to the Company.

 

(c)          Taxes Resulting from Sale of Assets.  The Company shall pay in a timely manner all Taxes resulting from or payable in connection with the sale of the Acquired Assets pursuant to this Agreement, regardless of the Person on whom such Taxes are imposed by Laws, and shall file, or cause to be filed, all Tax Returns required to be filed in connection therewith.  The Parties shall cooperate with each other and use their reasonable efforts to reduce the Taxes attributable to the transfer of the Acquired Assets and shall use reasonable efforts to obtain any exemption or other similar certificate from any Governmental Authority as may be necessary to mitigate such Taxes.

 

(d)          Tax Withholding.  KaloBios shall be entitled to deduct and withhold from any amounts payable pursuant to this Agreement such amounts as may be required to be deducted or withheld therefrom under any provision of federal, state, local or foreign Tax law or under any applicable Law. To the extent such amounts are so deducted and withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the Company.

 

(e)          Tax Cooperation.  The Parties agree to cooperate with one another and use reasonable efforts to avoid or reduce Tax withholding or similar obligations in respect of payments made by KaloBios to the Company under this Agreement.  The Company shall provide KaloBios any Tax forms and other documents that may be reasonably necessary in order for KaloBios to not withhold Tax or to withhold Tax at a reduced rate under an applicable bilateral income Tax treaty with respect to any payments made by KaloBios to the Company under this Agreement.  KaloBios shall be entitled to withhold the full amount of Tax applicable to any amount payable to the Company if the Company does not provide the applicable Tax forms and other necessary documents (establishing a Tax exemption or reduction) at least five (5) Business Days prior to the date the relevant payment is due.  Each Party shall provide the other Party with reasonable assistance to enable the recovery, as permitted by Law, of withholding Taxes or similar obligations resulting from payments made under this Agreement.

 

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ARTICLE 4

DEVELOPMENT PROGRAM

 

 

 

 

 

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(b)          [***] Payments.  No later than [***] during the Joint Development Program Term, KaloBios shall pay to the Company the Joint Development Program Costs corresponding to the budget included within the Joint Development Plan with respect to the activities to be performed by the Company thereunder for the [***] to the maximum extent known.  No later than [***] after the last day of each [***] during the Joint Development Program Term, the Company shall deliver to KaloBios an invoice setting forth the Joint Development Program Costs incurred by the Company during that [***] and other related documentation including timesheets reflecting the activities conducted by the Company’s employees, agents and contractors under the Joint Development Plan.  In the event such invoice reflects that Joint Development Program Costs incurred by the Company in the applicable [***] lower than those set forth in the budget included within the Joint Development Plan for such [***], the subsequent payment to the Company will reflect a reduction in the amount payable by KaloBios equal to the amount by which such budget exceeded the actual Joint Development Program Costs incurred by the Company during such [***].  For the avoidance of doubt, KaloBios will not be liable for amounts in excess of the budget included within the Joint Development Plan for any given [***].

 

 

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(b)          Filings. [***] shall also be solely responsible for filing drug approval applications for the Product in seeking Regulatory Approval in those countries of the Territory for the Product in accordance with this Agreement and as [***] otherwise reasonably determines, following consultation with the JDC. At a minimum, [***] shall use Diligent Efforts in filing and seeking Regulatory Approval of the Product in the United States. Such regulatory documents for each filing shall be centralized and held at the offices of [***]. [***] shall provide such reasonable assistance as may be required by [***], at [***] cost and expense, where liaison between the Parties is, or may be, necessary to enable [***] to fulfill its responsibilities hereunder. [***] shall be responsible for maintaining the approvals obtained under this Section 4.7(b) and shall [***] own all such approvals in the Territory.  [***] shall be fully responsible for bearing [***] costs and expenses associated with undertaking and completing said registration activities in the Territory, including but not limited to, the costs of preparing and prosecuting applications for such approvals and fees payable to regulatory agencies in obtaining and maintaining same.

 

 

Section 4.8 Compensation for Development Delays.  Notwithstanding anything herein to the contrary, if, due to the insufficiency or inadequacy of the Acquired Assets delivered to KaloBios, (a) the acceptance of the NDA for the Product is delayed beyond [***] from the target date set forth in the Joint Development Plan, (b) the preparation and filing of such NDA would result in costs and expenses that exceed by more than [***] in combined internal and external costs the Joint Development Program Costs set forth in the Joint Development Plan as of the Closing Date, and/or (c) the FDA determines that the Product is not eligible for submission of an NDA under Section 505(b)(2) of the FD&C Act, then the Company shall either (with such election between (i) and (ii) made in its sole discretion except as provided below), compensate KaloBios, as KaloBios’ sole and exclusive monetary remedy for any and all liability arising out of, under or in connection with this Section 4.8, by either (i) allowing KaloBios to credit the payment of any such costs and expenses above [***] incurred by KaloBios as a result of such insufficiency, inadequacy and/or delay against any future payments to be made by KaloBios to the Company under this Agreement on a [***] basis, provided that such credit shall not cause the payment of any Milestone Payments to be reduced to less than [***] of the total amount of all potential Milestone Payments, or (ii) pay KaloBios in cash any such costs and expenses above [***] incurred by KaloBios as a result of such insufficiency, inadequacy and/or delay within [***] after receipt by the Company of an invoice and reasonable supporting detail for such costs and expenses (with the failure to make such payment within [***] being deemed as an election by the Company to allow the credit described in subsection (i) above, and provided, however, that if no Milestone Payment comes due and payable within the calendar year in which such invoice is delivered that is sufficient to credit in full the amount of such invoice after giving effect to the [***] aggregate limitation described above, the Company shall pay the remainder of such invoice in full in cash within [***] after the end of such calendar year.) Notwithstanding anything to the contrary set forth in this Agreement including, without limitation, Section 12.1, this Section 4.8 sets forth the sole and exclusive remedy of KaloBios and liability of the Company to KaloBios for any and all Losses suffered by KaloBios with respect to the matters set forth in clauses (a) through (c) above, and all such Losses shall be deemed excluded from any Claim under Article 12.

 

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ARTICLE 5
COMMERCIALIZATION

 

 

 

 

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ARTICLE 6
GOVERNANCE

 

 

(a)          Responsibilities.  The JSC shall perform the following functions, some or all of which may be addressed directly at each meeting of the JSC:

 

(i)          monitor progress of activities under the Joint Development Program in coordination with the JDC and the Commercialization Program;

 

(ii)          review and approve amendments and updates to the Joint Development Plan and the Commercialization Plan;

 

(iii)          serve as an information transfer vehicle to facilitate collaboration and the discussion of activities under the Joint Development Plan and the Commercialization Plan;

 

(iv)          resolve disputes escalated to it by the JDC or any other subcommittee; and

 

(v)          such other responsibilities as may be assigned to the JSC pursuant to this Agreement or as may be mutually agreed by the Parties from time to time.

 

 

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ARTICLE 7
INTELLECTUAL PROPERTY RIGHTS

 

 

 

 

 

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(c)          Reservation of Rights; No Implied Rights.  Notwithstanding Section 7.2(a) above, the Company retains rights under the Company Development Program IP and its interest in the Joint Development Program IP to perform its obligations under this Agreement.  KaloBios shall have no other right to use, or interest in, the Company Development Program IP or any other Intellectual Property rights Controlled by the Company, other than as expressly provided in this Agreement or other valid written agreements.  The Company makes no grant of Intellectual Property rights by implication.

 

 

 

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(c)          Reservation of Rights; No Implied Rights.  The Company shall have no other right to use, or interest in, the KaloBios Development Program IP or any other Intellectual Property rights Controlled by KaloBios, other than as expressly provided in the Transaction Documents.  KaloBios makes no grant of Intellectual Property rights by implication.

 

 

 

 

 

 

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Section 7.7          Grant of Rights to Company IP

 

 

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Section 7.8          Royalty on Company IP.

 

 

 

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(c)          Reduction for Third Party Licenses.  KaloBios shall pay all amounts due under Third Party Licenses; provided, that KaloBios shall be entitled to a credit against the Royalties due to the Company upon sales of a Product in a particular country of an amount equal to total royalties paid by KaloBios to a Third Party with respect to such Product in such country under any Third Party Licenses, and provided, further, without duplication of the foregoing, that KaloBios shall be entitled to a credit against all non-Royalty amounts due to the Company hereunder in an amount equal to [***] of all non-royalty amounts paid by KaloBios to a Third Party under a Third Party License.  Notwithstanding the foregoing, such credit shall not cause the royalty rate payable to the Company to be reduced to less than (i) [***], if the royalty rate pursuant to Section 7.8(a) above is then [***], or (ii) [***], if the royalty rate pursuant to Section 7.8(a) above is then [***], of Annual Net Sales of such Product in such country.

 

 

 

 

 

 

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Section 7.11          Prosecution and Maintenance of Company IP.

 

 

 

Section 7.12          Third Party Infringement of Company IP.

 

 

 

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ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the Company’s Disclosure Schedules delivered to KaloBios as of the date hereof, the Company represents and warrants to KaloBios as follows:

 

Section 8.1          Corporate Existence.  The Company is a limited liability company duly organized, validly existing, and in good standing under the Laws of the State of Delaware and has all necessary corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as currently conducted.

 

Section 8.2          Authorization and Enforceability.  The Company (a) has the full limited liability company power and authority and the legal right to enter into this Agreement and the other Transaction Documents and to perform its obligations hereunder and thereunder; (b) has taken all necessary governance action on its part required to authorize the execution and delivery of this Agreement and the other Transaction Documents and the performance of its obligations hereunder and thereunder; and (c) this Agreement and the other Transaction Documents have been duly executed and delivered on behalf of the Company, and constitute legal, valid, and binding obligations of the Company that are enforceable against it in accordance with their terms, in each case, subject to enforcement of remedies under applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting generally the enforcement of creditors’ rights and subject to a court’s discretionary authority with respect to the granting of a decree ordering specific performance or other equitable remedies.

 

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Section 8.3          No Conflict.  The execution and delivery of this Agreement and the other Transaction Documents, the performance of the Company’s obligations hereunder and thereunder and the assignments, licenses and sublicenses to be granted pursuant to this Agreement and the other Transaction Documents do not and will not (a) conflict with or violate any requirement of applicable Law; (b) conflict with or violate the certificate of formation or other organizational documents of the Company; (c) conflict with, violate, breach or constitute a default under any Assumed Contract or other contractual obligations of the Company or any of its Affiliates; and (d) result in the creation of any Encumbrances on the Acquired Assets other than pursuant to the Transaction Documents; except in the case of (a) or (c) where the conflict, violation, breach, default, failure to give notice or Encumbrance would not, individually or in the aggregate, have a Material Adverse Effect.

 

Section 8.4          Legal Proceedings.  There are no pending, or to the Company’s Knowledge, threatened in writing, adverse Actions against or by the Company or any of its Affiliates, at Law or in equity, or before or by any Governmental Authority that challenge or seek to prevent, enjoin or otherwise delay the Contemplated Transactions or that relate to or affect the Acquired Assets.

 

Section 8.5          Contracts and Commitments.

 

(a)          The Company has provided to KaloBios complete and accurate copies of each of the Assumed Contracts.  Other than the Assumed Contracts set forth on Schedule 2.1, there are no other Contracts of the Company or its Affiliates currently in effect that are directly related to the Acquired Assets or which are necessary for the Exploitation of the Compound or the Product.

 

(b)          Each Assumed Contract is a legal, valid and binding obligation of either the Company or one of its Affiliates and, to the Company’s Knowledge, each other party thereto, enforceable against the Company and any applicable Affiliates and each other party thereto in accordance with its terms (except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar Law as now or hereafter in effect relating to or affecting creditors’ rights generally, and subject to the limitations imposed by general principles of equity, regardless of whether such enforceability is considered in a proceeding at Law or in equity (including concepts of materiality, reasonableness, good faith or fair dealing)). Except with regards to [***], neither the Company nor any of its Affiliates has received written notice from any party to any Assumed Contract claiming or alleging that the Company or any of its Affiliates has materially breached or is in default thereunder.  There is not under any Assumed Contract: (i) any existing material default by the Company or, to the Company’s Knowledge, by any other party thereto, or (ii) any event which, after notice or lapse of time or both, would constitute a material default by the Company or, to the Company’s Knowledge, by any other party, or result in a right to accelerate or terminate or result in a loss of any material rights of the Company, except as would not reasonably be expected to have a Material Adverse Effect.

 

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(c)          Neither the Company nor any of its Affiliates (i) is a party to or otherwise bound by any oral or written Contract or agreement that will result in any other Person obtaining any interest in, or that would give to any other Person any right to assert any claim in or with respect to, any of the Company’s rights under the Transaction Documents; (ii) has granted any rights with respect to the Acquired Assets to any Person other than KaloBios that would impede the fulfillment of the Company’s obligations hereunder or thereunder; or (iii) is under any obligation to any Person, contractual or otherwise, that is in material violation of the terms of this Agreement or the other Transaction Documents or that would impede the fulfillment of the Company’s obligations hereunder or thereunder.

 

(d)          The Company is and at all times has been in compliance with all applicable terms and requirements of each Assumed Contract that is being assumed by KaloBios.

 

(e)          Neither the Company nor any of its Affiliates are bound by any non-competition agreements related to the Compound or the Product.

 

Section 8.6          No “Bad Actor”; No Debarment.  None of the Company or any of its predecessors, Affiliates, directors, executive officers, other officers of the Company or any Beneficial Owners of twenty percent (20%) or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, in any capacity (each, a “Company Covered Person”):

 

(a)          is, to the Company’s Knowledge, subject to any of the “bad actor” disqualification events described in Rule 506(d)(1)(i)-(viii) of the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) of the Securities Act,

 

(b)          is, or has been, to the Company’s Knowledge, debarred under Section 306(a) or 306(b) of the FD&C Act or by the analogous Laws of any Regulatory Authority, or disqualified as a clinical investigator under 21 C.F.R. § 312.70 or any analogous Laws of any Regulatory Authority, or has engaged in any conduct that could reasonably be expected to result in any of the foregoing;

 

(c)          has, to the Company’s Knowledge, been charged with, or convicted of, any felony or misdemeanor within the ambit of 42 U.S.C. §§ 1320a-7(a), 1320a-7(b)(1)-(3), or pursuant to the analogous Laws of any Regulatory Authority, or is proposed for exclusion, or the subject of exclusion or debarment proceedings by a Regulatory Authority, during the employee’s or consultant’s employment or contract term with the Company; or

 

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(d)          is, to the Company’s Knowledge, or has been, excluded, suspended or debarred from participation, or otherwise ineligible to participate, in any U.S. or non-U.S. health care programs (or has been convicted of a criminal offense that falls within the scope of 42 U.S.C. § 1320a-7 but not yet excluded, debarred, suspended, or otherwise declared ineligible), or excluded, suspended or debarred by a Regulatory Authority from participation, or otherwise ineligible to participate, in any procurement or non-procurement programs.

 

(e)          The Company has exercised reasonable care to determine (i) the identity of each Person that is a Company Covered Person; and (ii) whether any Company Covered Person is subject to a Disqualification Event or has been excluded, debarred, suspended, or otherwise declared ineligible by any Regulatory Authority.

 

Section 8.7          Title; Encumbrances; Sufficiency.

 

(a)          The Company has (i) sufficient legal and beneficial title to or ownership of, and the Company will convey to KaloBios, all of the Acquired Assets, free and clear from any Encumbrances; and (ii) any assignments to the Company of the Acquired Assets have been validly made, duly executed and sufficiently perfected so as to grant KaloBios full legal title, free and clear and any Encumbrances.

 

(b)          Other than the Company IP, the Acquired Assets constitute all of the assets, tangible and intangible, owned or licensed by the Company relating to the Compound or the Product and necessary to the Exploitation of the Compound and the Product.  There are no assets, tangible or intangible, owned or licensed by Affiliates of the Company relating to the Compound or the Product and necessary to the Exploitation of the Compound and the Product.

 

(c)          Other than payments to [***] as set forth on Section 8.7(c) of the Disclosure Schedules, there are no outstanding obligations to pay any amounts or provide other material consideration to any other Person in connection with any Acquired Assets.

 

Section 8.8          No Consents.  To the Company’s Knowledge, no material consent, waiver, approval, order or authorization of, or registration, declaration or filing with, or notice to any Governmental Authority is required by, or with respect to, the Company or the Acquired Assets in connection with the execution and delivery of this Agreement or the other Transaction Documents, or the consummation of the Contemplated Transactions, except for (a) any notice filings or registrations of transfer with any Governmental Authority that may be required in connection with the assignment and transfer of the Acquired Assets that are set forth on Section 8.8 of the Disclosure Schedules, except for those to be performed or made to evidence the transfer of Acquired Assets after the Closing in connection with the Transaction Documents, and (b) such other material consents, waivers, approvals, authorizations or notices, if any, set forth on Section 8.8 of the Disclosure Schedules.

 

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Section 8.9          Compliance with Laws.

 

(a)          The Company is conducting, and since inception, has conducted, its business as applied to or in connection with the Acquired Assets in compliance in all material respects with all Laws within all Territories applicable to the Acquired Assets, except where the failure to be in compliance would not have a Material Adverse Effect.

 

(b)          The Company has not received any written notices or other written communications related to the Compound, the Product or the Acquired Assets from any Governmental Authority regarding any actual, alleged, threatened, possible or potential material violation of, or failure to comply in all material respects with, any Law.

 

(c)          The Company is not a party to or bound by any order, judgment, decree, injunction, rule or award of any Governmental Authority concerning the Compound, the Product or any Acquired Asset, and the Company has filed all reports required to be filed with any Governmental Authority in respect of the Compound, the Product or any Acquired Asset on or before the date hereof.

 

(d)          The Company and, to Company’s Knowledge, its officers, employees, contractors, and agents, as well as all parties that conducted or were responsible for conducting pre-clinical and clinical studies on which the Company intends to rely, hold all applicable Governmental Approvals required to develop, test, manufacture, store, label, package, distribute, import, export, market and promote the Product and otherwise conduct business as presently conducted.  Each such Governmental Approval is valid and in full force and effect, and no suspension, revocation, or cancellation of such Governmental Approval is pending or threatened, and there is no reasonable basis for believing that such Governmental Approval will not be renewable upon expiration.

 

Section 8.10          Safety and Efficacy; Exclusive Rights to Certain Existing Foreign Data.  To the Company’s Knowledge there are no problems concerning the safety or efficacy of the Compound or the Product (including any of its ingredients) or any questions raised by any Regulatory Authority with respect thereto, and the Company has informed KaloBios of all adverse drug reactions of which it has Knowledge relating to the Compound, the Product or their use that occurred anywhere in the Territory, supplied or administered by any party, whether or not affiliated with the Company.  [***]. The Company has not provided access to any third party to [***] clinical data owned by the Company or to which the Company has rights.

 

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Section 8.11          Good Practices.  All pre-clinical and clinical studies and other development activities in the United States involving the Compound or the Product carried out by or on behalf of the Company that, at such time were required to be conducted in accordance with the FDA’s Good Laboratory Practice (“GLP”), Good Clinical Practice (“GCP”), and current Good Manufacturing Practice (“cGMP”) requirements and standards, as applicable, including regulations under title 21 of the C.F.R., Parts 50, 54, 56, 58, 210, 211, 312, the GCP requirements under the April 1996 ICH E6 Good Clinical Practice Guideline, and applicable guidance documents, as amended from time to time, the Animal Welfare Act, and all applicable similar Laws in other jurisdictions, and all Laws relating to protection of human subjects were and/or are being conducted in accordance with such requirements.  The Company has not received any notice that FDA, any other Governmental Authority, or any institutional review board, ethics committee, or similar body has recommended, initiated, or threatened to initiate any action to suspend or terminate any clinical trial sponsored by the Company or on which the Company intends to rely for marketing approval purposes, or otherwise to restrict the preclinical research on or clinical study of the Compound or the Product.

 

FOR THE AVOIDANCE OF DOUBT, STUDIES MAY HAVE BEEN CONDUCTED BY OR ON BEHALF OF THE COMPANY THAT ARE NOT DESIGNATED AS GLP, CGMP OR GCP BUT MAY STILL BE OF VALUE AND INCLUDED IN THE ACQUIRED ASSETS OR THE DEVELOPMENT PROGRAM. FURTHER, THIRD PARTY STUDIES MAY BE REPORTED IN THE LITERATURE OR DATABASES AS GLP, CGMP OR GCP AND/OR OTHERWISE IN COMPLIANCE WITH RELEVANT REGULATORY AND LEGAL AUTHORITIES BY SUCH THIRD PARTY AND THE COMPANY MAKES NO REPRESENTATIONS OR WARRANTIES AS TO SUCH THIRD PARTY DESIGNATIONS OR COMPLIANCE CLAIMS.

 

Section 8.12          Regulatory Matters.

 

(a)          The Company has provided or made available any and all documents and communications in its possession from and to any Governmental Authority or Regulatory Authority, or prepared by any Governmental Authority or Regulatory Authority, related to the Compound, the Product and the Acquired Assets, including but not limited to any notice of inspection, inspection report, warning letter, deficiency letter, or similar communication.

 

(b)          To the Company’s Knowledge, none of the Company, any of its Affiliates or any of their respective officers, employees or agents has made, with respect to the Compound or the Product, an untrue statement of a material fact or fraudulent statement to any Governmental Authority or Regulatory Authority or failed to disclose a material fact required to be disclosed to such Governmental Authority or Regulatory Authority.

 

(c)          The Company has maintained records relating to the research, development, testing, manufacture, handling, labeling, packaging, storage, and supply of the Compound and the Product in compliance with the FD&C Act, all implementing regulations and interpretative FDA guidance, and all other applicable Laws, and the Company has submitted to Governmental Authorities and Regulatory Authorities, in a timely manner, all required notices and annual or other reports, including but not limited to adverse experience reports and annual reports, related to the research, development, testing, manufacture, handling, labeling, packaging, storage, supply, promotion, distribution, marketing, commercialization, import, export, and sale of the Compound and the Product in the Territory.

 

CONFIDENTIAL

 

 

(d)          To the Company’s Knowledge, no other person or party currently holds any form of regulatory exclusivity in the United States that would materially and adversely affect  the  marketing of the Product, the Compound, or the Acquired Assets by KaloBios or a subsequent owner of the Acquired Assets, nor, to the Company’s Knowledge, has any other person or party submitted a marketing application that, if approved, would create regulatory exclusivity with such effect.  Regulatory exclusivity includes, but is not limited to, orphan drug exclusivity under Section 527 of the FD&C Act, new chemical entity exclusivity under Sections 505(c)(3)(E)(ii) and 505(j)(5)(F)(ii) of the FD&C Act, new use exclusivity under Sections 505(c)(3)(E)(iii) and 505(j)(5)(F)(iii) of the FD&C Act, and pediatric exclusivity under Section 505A of the FD&C Act.

 

Section 8.13          Taxes.  Except as set forth on Section 8.13 of the Disclosure Schedules:

 

(a)          The Company has duly and timely filed all Tax Returns (taking into account appropriate extensions) required to be filed with respect to the Acquired Assets, each such return is true, correct and complete in all respects, and the Company has timely paid all material Taxes required to be paid with respect to the Acquired Assets (whether or not such Taxes are shown as due on any Tax Return).

 

(b)          There are no currently proposed or pending or threatened adjustments, audits or examinations by any Governmental Authority in connection with any Taxes relating to the Acquired Assets, and there are no matters under discussion with any Governmental Authority with respect to Taxes that may result in an additional liability for Taxes with respect to which the Acquired Assets may be subject, levied, or assessed.

 

(c)          There is no waiver or extension of any statute of limitations with respect to any Tax matter relating to the Acquired Assets.

 

(d)          No claim has ever been made in writing by a Governmental Authority in a jurisdiction where the Company does not file Tax Returns that the Acquired Assets are or may be subject to taxation by that jurisdiction.

 

(e)          All Taxes required by legal requirements to be withheld or collected with respect to the Acquired Assets have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Authority or Person.

 

(f)          The Company is not a party to, nor is it bound by or required to make any payment under, any Tax sharing agreement, Tax allocation agreement, Tax indemnity obligation or similar agreement, arrangement, understanding or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any Governmental Authority).

 

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(g)          There are no Tax Encumbrances with respect to any Acquired Assets other than for Taxes not yet due and payable.

 

Section 8.14          No Undisclosed Liabilities.  The Company does not have any Liabilities of any nature (whether known or unknown and whether absolute, accrued, contingent, or otherwise) in respect of the Compound, the Product or the Acquired Assets other than Liabilities (a) incurred in the ordinary course of business, or (b) incurred in connection with the Contemplated Transactions; except where such Liabilities would not, individually or in the aggregate, have a Material Adverse Effect.

 

Section 8.15          Inventory.  All manufacturing operations relating to the Inventory are being conducted in compliance with all applicable provisions of cGMP requirements as set forth in 21 U.S.C. § 351(a)(2)(B), 21 C.F.R. Parts 210 and 211, and applicable guidance documents, as amended from time to time.  To the Company’s Knowledge, the Inventory has not been voluntarily recalled, suspended, or discontinued by the Company or any other party that had authority to do so, either on its own initiative or at the request of the FDA or any other Governmental Authority. The Company has not received any written notice of observed cGMP violations (Form 483) or Warning Letters of cGMP violations from FDA or similar notices from other Governmental Authorities.

 

Section 8.16          Brokers.  No broker, investment banker, agent, finder or other intermediary acting on behalf of any member of the Company or its Affiliates or under the authority of the Company or any Affiliate is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee directly or indirectly in connection with the Contemplated Transactions.

 

Section 8.17          Compliance with the Foreign Corrupt Practices Act and Export Control and Anti-boycott Laws.

 

(a)          Neither the Company nor, to the Company’s Knowledge, any of the Company’s directors, officers, employees or agents have, directly or indirectly, made, offered, promised or authorized any payment or gift of any money or anything of value to or for the benefit of any “foreign official” (as such term is defined in the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”)), foreign political party or official thereof or candidate for foreign political office for the purpose of (i) influencing any official act or decision of such official, party or candidate, (ii) inducing such official, party or candidate to use his, her or its influence to affect any act or decision of a foreign governmental authority, or (iii) securing any improper advantage, in the case of (i), (ii) and (iii) above in order to assist the Company or any of its affiliates in obtaining or retaining business for or with, or directing business to, any person.  Neither the Company nor, to the Company’s Knowledge, any of its directors, officers, employees or agents have made or authorized any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of funds or received or retained any funds in violation of any law, rule or regulation.  The Company further represents that it has maintained, and has caused each of its Affiliates to maintain, systems of internal controls (including, but not limited to, accounting systems, purchasing systems and billing systems) to ensure compliance with the FCPA or any other applicable anti-bribery or anti-corruption law. Neither the Company, or, to the Company’s Knowledge, any of its officers, directors or employees are the subject of any allegation, voluntary disclosure, investigation, prosecution or other enforcement action related to the FCPA or any other anti-corruption law.

 

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(b)          Each transaction related to the Compound, the Product and the Acquired Assets is properly and accurately recorded on the books and records of the Company, and each document upon which entries in the Company’s books and records are based is complete and accurate in all respects.  The Company maintains a system of internal accounting controls adequate to insure that the Company maintains no off-the-books accounts and that the Company’s assets are used only in accordance with the Company’s management directives.

 

Section 8.18          Intellectual Property.  In all cases subject in its entirety to Section 9.8, below:

 

(a)          The Company Patents are subsisting.

 

(b)          The Company Controls the Company Patents and the Company Know-How and has the right to assign and grant all rights and licenses it purports to grant to KaloBios with respect to the Company Patents and the Company Know-How under this Agreement.

 

(c)          The Company has no present Knowledge of any settled, pending or threatened claim or lawsuit or legal proceeding of a Third Party against the Company alleging that the Company Patents or the Company Know-How infringes or misappropriates, in part or in whole, the intellectual property or intellectual property rights of such Third Party.

 

(d)          The Company has not granted any right or license to any Third Party relating to any of the Company Patents or the Company Know-How that would conflict or interfere with any of the rights or licenses granted to KaloBios hereunder.

 

(e)          Exhibit B-1 sets forth a complete and accurate list of the issued patents constituting Company Patents as of the Effective Date and Exhibit B-2 sets forth a complete and accurate list of the pending patent applications constituting Company Patents as of the Effective Date.

 

(f)          The Company has disclosed to KaloBios all material information received by the Company concerning the institution of any interference, opposition, reexamination, reissue, revocation, nullification or any official proceeding involving any Company Patent anywhere in the Territory.

 

CONFIDENTIAL

 

 

ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF KALOBIOS

 

Except as set forth in KaloBios’ Disclosure Schedules delivered to the Company as of the date hereof, KaloBios represents and warrants to the Company as follows:

 

Section 9.1          Corporate Existence.  KaloBios is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Delaware and has all necessary corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as currently conducted.

 

Section 9.2          Authorization and Enforceability.  KaloBios (a) has the full corporate power and authority and the legal right to enter into this Agreement and the other Transaction Documents and perform its obligations hereunder and thereunder; (b) has taken all necessary governance action on its part required to authorize the execution and delivery of this Agreement and the other Transaction Documents and the performance of its obligations hereunder and thereunder; and (c) this Agreement and the other Transaction Documents have been duly executed and delivered on behalf of KaloBios, and constitute legal, valid, and binding obligations of KaloBios that are enforceable against it in accordance with their terms, in each case, subject to enforcement of remedies under applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting generally the enforcement of creditors’ rights and subject to a court’s discretionary authority with respect to the granting of a decree ordering specific performance or other equitable remedies.

 

Section 9.3          Capitalization.

 

(a)          The authorized capital stock and the issued and outstanding stock of KaloBios and stock reserved for issuance are as described in KaloBios’ Form 8-K filed with the SEC on June 22, 2016.

 

(b)          Except for the Warrant (including the shares of Common Stock issuable upon exercise of the Warrant) (the “Warrant Shares”) to be issued under this Agreement and the issuance of New Common Stock under the Plan, there are no outstanding or authorized options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the capital stock of KaloBios or obligating KaloBios to issue or sell any shares of capital stock of, or any other interest in, KaloBios. KaloBios does not have outstanding or authorized any stock appreciation, phantom stock, profit participation or similar rights. KaloBios has reserved the Warrant Shares for issuance upon exercise of the Warrant.

 

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(c)          The Warrant, when issued, delivered and paid for in compliance with the provisions of this Agreement, will be validly issued.  The Warrant Shares, when issued, delivered and paid for in compliance with the provisions of this Agreement and the Warrant, will be validly issued, fully paid and nonassessable.  The Warrant and the Warrant Shares, when issued, delivered and paid for, as the case may be, in accordance with the provisions of this Agreement and the Warrant, as applicable, will be free of any liens or Encumbrances (including free of any Permitted Encumbrances), other than any liens or encumbrances created by or imposed upon the Company; provided, however, that the Warrants and the Warrant Shares are subject to restrictions on transfer under U.S. state and/or federal securities Laws.  The Warrant and the Warrant Shares are not subject to any preemptive rights or rights of first refusal, except for such rights as have been, or will be, duly complied with or waived.

 

Section 9.4          No Conflict.  The execution and delivery of this Agreement and the other Transaction Documents, the performance of KaloBios’ obligations hereunder and thereunder and the assignments and licenses to be granted pursuant to the Transaction Documents do not and will not (a) conflict with or violate any requirement of applicable Law; (b) conflict with or violate the certificate of incorporation, bylaws or other organizational documents of KaloBios; (c) conflict with, violate, breach or constitute a default under any material contractual obligations of KaloBios or any of its Affiliates; or (d) conflict with or violate any Government authorization, permit or consent.  No Person has any right to cause KaloBios to effect the registration under the Securities Act of any securities of KaloBios or any of its Affiliates, and neither KaloBios nor any of its Affiliates is a party to or otherwise bound by any oral or written contract or agreement that would prevent or restrict the ability of KaloBios to register for resale the Warrant Shares under the Securities Act or otherwise limit the amount of Warrant Shares that KaloBios could register for resale under the Securities Act.

 

Section 9.5          Legal Proceedings.  There are no pending or, to KaloBios’ Knowledge, overtly threatened in writing, adverse Actions against or by KaloBios or any of its Affiliates, at Law or in equity, or before or by any Governmental Authority that challenge or seek to prevent, enjoin or otherwise delay the Contemplated Transactions. No event has occurred or circumstances exist that may give rise to, or serve as a basis for, any such Action.

 

Section 9.6          No “Bad Actor”; No Debarment.  None of KaloBios or any of its predecessors, Affiliates, directors, executive officers, other officers of KaloBios or any Beneficial Owners of twenty percent (20%) or more of KaloBios’ outstanding voting equity securities (with the sole exception of Martin Shkreli who is known by the Parties to be under federal indictment for securities fraud charges and is not an employee, director, consultant or agent of KaloBios and does not have any influence upon the management or direction of KaloBios in any form), calculated on the basis of voting power, in any capacity at the date hereof (each, a “KaloBios Covered Person”):

 

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(a)          is, to the KaloBios’ Knowledge, subject to any of the Disqualification Events, except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) of the Securities Act;

 

(b)          is, or has been, to the KaloBios’ Knowledge, debarred under Section 306(a) or 306(b) of the FD&C Act or by the analogous Laws of any Regulatory Authority, or disqualified as a clinical investigator under 21 C.F.R. § 312.70 or under any analogous Laws of any Regulatory Authority;

 

(c)          has, to the KaloBios’ Knowledge, been charged with, or convicted of, any felony or misdemeanor within the ambit of 42 U.S.C. §§ 1320a-7(a), 1320a-7(b)(1)-(3), or pursuant to the analogous Laws of any Regulatory Authority, or is proposed for exclusion, or the subject of exclusion or debarment proceedings by a Regulatory Authority, during the employee’s or consultant’s employment or contract term with KaloBios; and

 

(d)          is, or has been excluded, suspended or debarred from participation, or otherwise ineligible to participate, in any U.S. or non-U.S. health care programs (or has been convicted of a criminal offense that falls within the scope of 42 U.S.C. § 1320a-7 but not yet excluded, debarred, suspended, or otherwise declared ineligible), or excluded, suspended or debarred by a Regulatory Authority from participation, or otherwise ineligible to participate, in any procurement or non-procurement programs.

 

(e)          KaloBios has exercised reasonable care to determine (i) the identity of each person that is a KaloBios Covered Person; and (ii) whether any KaloBios Covered Person is subject to a Disqualification Event or has been excluded, debarred, suspended, or otherwise declared ineligible by any Regulatory Authority.

 

Section 9.7          Solvency. Immediately after giving effect to the Contemplated Transactions, KaloBios shall be solvent and shall have the financial capacity to perform all of its obligations under this Agreement and the other Transaction Documents.

 

Section 9.8          Unencumbered Cash Balance.  Upon the Closing, KaloBios will have a minimum balance of at least Ten Million Dollars ($10,000,000) in cash, inclusive of the Initial Payment, which shall not be subject to any Encumbrance or Permitted Encumbrance.

 

Section 9.9          Data.  KaloBios acknowledges that access and use of data not commissioned by the Company are provided “as is, where is,” that the Company makes no representations and warranties concerning the same and that the Company fully disclaims any and all implied warranties concerning the same.

 

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Section 9.10          Private Offering.  Neither KaloBios nor anyone acting on its behalf has offered the Warrant (or the Warrant Shares) or any similar securities for sale to, or solicited any offer to buy the Warrant (or the Warrant Shares) or any similar securities from, or otherwise approached or negotiated in respect thereof with, any Person other than the Company, which has been offered the Warrant (and the Warrant Shares) pursuant to Section 1145 of the U.S. Bankruptcy Code and/or as a private sale for investment.  The offer, sale and issuance of the Warrant and the Warrant Shares to be issued in conformity with the terms of this Agreement and the Confirmation Order, constitute transactions exempt from the registration requirements of Section 5 of the Securities Act and from the registration or qualification requirements of applicable state securities laws, and neither KaloBios nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption.

 

Section 9.11          Brokers.  Except for Batuta Capital Advisors LLC, which was retained by KaloBios and the fees of which will be paid by KaloBios, no broker, investment banker, agent, finder or other intermediary acting on behalf of KaloBios or its Affiliates or under the authority of KaloBios or any Affiliate is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee directly or indirectly in connection with the Contemplated Transactions.

 

 

Section 10.1          Availability of Records.

 

(a)          For so long as a Party is required to maintain books, records, files and other information that is subject to this Section 10.1, during normal business hours following reasonable prior notice, each Party will permit the other Party and its Affiliates, employees, agents and representatives, subject to execution of a confidentiality agreement in a form reasonably acceptable to both Parties, to review all Assigned Books and Records and all other information, records and documents in their possession, which are reasonably requested by the other Party and are necessary or useful in connection with any Tax inquiry, audit, investigation or dispute with a Third Party or any litigation, mediation or arbitration or similar legal Action by any Governmental Authority reasonably requiring access to any such books and records, in each case relating to or arising out of transactions or events occurring prior to the Closing and that relate to the Compound, the Product or the Acquired Assets.  Each Party will cause its employees, agents and representatives to abide by the terms of the confidentiality agreement entered into with respect to any access or information provided pursuant to this Section 10.1(a). Each Party will direct its employees (without substantial disruption of employment) to render any assistance that the other Party may reasonably request in accessing or utilizing the Assigned Books and Records or other information, records or documents. The Party requesting access to any such books and records or other information shall bear all of the out-of-pocket costs and expenses (including attorneys’ fees) reasonably incurred by the other Party in order to comply with this Section 10.1.

 

(b)          Each Party will preserve all information, records and documents relating to or arising out of transactions or events occurring prior to the Closing and that relate to the Compound, the Product or the Acquired Assets until the later of: (i) [***] after the Closing; or (ii) the expiration of the required retention period under any applicable Laws for all such information, records or documents.

 

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Section 10.2          Regulatory.

 

(a)          The Parties shall cooperate and use commercially reasonable efforts to obtain promptly all consents from all Governmental Authorities or Regulatory Authorities that may be or become necessary for the performance of each of their respective obligations pursuant to the Transaction Documents.

 

(b)          Each Party shall promptly notify the other Party of any communication it or any of its Affiliates sends to or receives from any Governmental Authority or Regulatory Authority relating to the matters that are the subject of this Agreement.

 

Section 10.3          Disqualification Events or Debarment.  [***] KaloBios agrees to immediately terminate the employment, consultancy, agency or other service relationship of any KaloBios Covered Person if such KaloBios Covered Person:

 

(a)          is subject to any Disqualification Event;

 

(b)          is charged with any felony or misdemeanor within the ambit of 42 U.S.C. §§ 1320a-7(a), 13a-7(b)(1)-(3), or pursuant to the analogous Laws of any Regulatory Authority, or is proposed for exclusion, or the subject of exclusion or debarment proceedings by any Regulatory Authority, during such individual’s service relationship with KaloBios; or

 

(c)          becomes excluded, suspended or debarred from participation or otherwise is ineligible to participate, in any U.S. or non-U.S. health care programs (or has been convicted of a criminal offense that falls within the scope of 42 U.S.C. § 1320a-7 but not yet excluded, debarred, suspended, or otherwise declared ineligible), or excluded, suspended or debarred by a Regulatory Authority from participation, or otherwise ineligible to participate, in any procurement or non-procurement programs.

 

Section 10.4          Further Assurances. Each Party shall execute, acknowledge and deliver such further instruments, and do all such other acts, as is reasonably necessary or appropriate in order to consummate the Contemplated Transactions on the terms and subject to the conditions set forth herein, or to carry out the expressly stated purposes and the clear intent of this Agreement and the Contemplated Transactions.

 

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Section 10.5          Consents.  In the event that (a) the sale, novation, conveyance, assignment or transfer of any Acquired Asset (including any Assumed Contract) or any claim, right or benefit arising thereunder or resulting therefrom, without the consent of any Third Party, would constitute a breach or other contravention thereof, be ineffective with respect to any party thereto, or in any way adversely affect the claims, rights or benefits of KaloBios thereunder, and (b) the Company shall not have received the consent or approval of such Person prior to the Effective Date, at the request of and for the benefit of KaloBios as to a particular Acquired Asset, the Company and KaloBios shall use reasonable commercial efforts to obtain the consent or approval of any such Person to the assignment, transfer or novation of any such Acquired Asset or any claims, rights or benefits arising thereunder (to the extent such claims, rights or benefits constitute Acquired Assets) for the assignment or transfer thereof to KaloBios.  Until such consent or approval is obtained, at the request of and for the benefit of KaloBios as to a particular Acquired Asset, the Company will cooperate with KaloBios to enter into a mutually agreeable arrangement under which (i) KaloBios would obtain, to the maximum extent possible, the claims, rights and benefits under each such Acquired Asset (to the extent such claims, rights or benefits constitute Acquired Assets), including subcontracting, sublicensing, or subleasing to KaloBios with KaloBios obtaining any and all rights of the Company against any party related thereto, (ii) KaloBios would assume, to the extent possible, all obligations of the Company under such Assumed Contracts (to the extent such obligations constitute Assumed Liabilities) and agree to perform and discharge all such obligations under such Assumed Contracts and indemnify the Company in connection therewith, and (iii) the Company would enforce at [***] cost and at the reasonable request of and for the benefit of KaloBios, any and all claims, rights and benefits of the Company against any Third Party thereto arising from any such Assumed Contract (to the extent such claims, rights or benefits constitute Acquired Assets).  At the request of and for the benefit of KaloBios as to a particular Acquired Asset, the Company and KaloBios shall continue to use reasonable commercial efforts to obtain all such required consents and approvals, it being understood that upon receipt of all required consents and approvals for the assignment, novation or transfer of an Acquired Asset (or any claim, right or benefit arising thereunder or resulting therefrom to the extent such claims, rights or benefits constitute Acquired Assets) to KaloBios, the assignment, novation or transfer of such Acquired Asset shall be deemed to be effective as of the Closing Date.  The Company will promptly pay to KaloBios, when received, all monies received under any Acquired Asset, or any claim, right or benefit arising thereunder (to the extent such claims, rights or benefits constitute Acquired Assets), not assigned or transferred to KaloBios on the Closing Date.  KaloBios will promptly pay to the Company any amounts constituting Assumed Liabilities that are required to be paid by the Company, and actually paid to a Third Party, with respect to any Assumed Liability.

 

Section 10.6          Omitted Assets.  If KaloBios reasonably determines that an asset owned or licensed by the Company relating to the Compound or the Product or material to the Exploitation of the Compound or the Product in accordance with the terms and conditions of the Joint Development Plan (an “Omitted Asset”) was not transferred to KaloBios as part of the Acquired Assets and notifies the Company in writing of the existence of such Omitted Asset and KaloBios’ belief that such Omitted Asset constitutes an Acquired Asset, the Company shall cooperate in good faith with KaloBios to determine whether such Omitted Asset should have been transferred to KaloBios as an Acquired Asset, and if the Company agrees that such Omitted Asset should have been transferred to KaloBios, the Company shall either (a) transfer and assign the Omitted Asset to KaloBios, or (b) otherwise make the benefits of such Omitted Asset available to KaloBios.  Any consideration payable by KaloBios for any such Omitted Assets shall be deemed to have already been included in the Initial Payment for the Acquired Assets. Notwithstanding the foregoing, [***] shall be responsible for payment of any fees or costs associated with the transfer of any Omitted Assets.

 

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Section 10.7          Reserved.

 

Section 10.8          Listing of Common Stock on National Securities Exchange.  If determined by the Board of Directors of KaloBios to be in the best interests of KaloBios and its stockholders in accordance with applicable Law, KaloBios shall use commercially reasonable efforts to relist its Common Stock on a national securities exchange.

 

Section 10.9          Securities Registration Matters.

 

(a)          SEC No-Action Submission.  As contemplated by the Confirmation Order, KaloBios shall prepare (with the reasonable assistance, cooperation and support of the Company) and submit to the SEC a request that the staff of the SEC issue a “no-action letter” confirming to KaloBios that the staff of the SEC will recommend to the SEC that the SEC not take enforcement action against KaloBios for reliance on the exemption provided by Section 1145 of the Bankruptcy Code with respect to the Warrant and the Warrant Shares (such confirmatory letter from the SEC, the “No-Action Letter”).

 

(b)          Registration.  If KaloBios shall determine to file a Registration Statement for the account of a security holder or holders, other than a Registration Statement relating solely to employee benefit plans, a Registration Statement relating to the offer and sale of debt securities, a Registration Statement relating to a corporate reorganization or other transaction pursuant to Rule 145 under the Securities Act, or a Registration Statement on any registration form that does not permit secondary sales, KaloBios will:

 

(i)          promptly give written notice of the proposed registration to the Company;

 

(ii)         use its commercially reasonable efforts to include in such Registration Statement (and any related qualification under other securities or “blue sky” laws, provided, that KaloBios shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any state or jurisdiction) all of the Registrable Securities; and

 

(iii)        use commercially reasonable efforts to keep such Registration Statement continuously effective under the Securities Act until all Registrable Securities covered by such Registration Statement (A) have been sold thereunder or pursuant to Rule 144, or (B) otherwise cease to be Registrable Securities.

 

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(c)          Obligations of the Company.  The Company shall take all commercially reasonable efforts to cooperate with all reasonable requests from KaloBios as are necessary for KaloBios to perform its obligations under Section 10.9(a) and Section 10.9(b).  Furthermore, the Company agrees to furnish to KaloBios in a timely manner a completed questionnaire in customary form reasonably acceptable to the Company containing all information regarding the Company as necessary for KaloBios to comply with the requirements of the Securities Act in connection with the filing of any Registration Statement covering any of the Registrable Securities.

 

Section 10.10          Insurance.  For so long as KaloBios is obligated to make any payments to the Company and for a period of [***] thereafter, KaloBios shall, at its sole cost and expense, obtain, pay for and maintain in full force and effect commercial general liability and professional liability (Errors and Omissions) insurance in commercially reasonable and appropriate amounts that (a) provides product liability coverage concerning the Products, and (b) with policy limits that reflect the customs of the industry, accounting for the then current and planned operations of KaloBios.  KaloBios shall have the Company named in each policy as an additional insured.  Upon request by the Company, KaloBios shall provide the Company with certificates of insurance or other reasonable written evidence of all coverages described herein.

 

ARTICLE 11
CONFIDENTIALITY

 

Section 11.1          Confidential Information.  Except to the extent expressly authorized by this Agreement or otherwise agreed in writing, the Parties agree that the receiving Party (the “Receiving Party”) will, and will cause its employees, agents and representatives to, keep confidential and not publish or otherwise disclose or use for any purpose other than as provided for in this Agreement any confidential or proprietary information and materials, patentable or otherwise, in any form (written, oral, photographic, electronic, magnetic, or otherwise), which are disclosed to it by the other Party (the “Disclosing Party”) or otherwise received or accessed by a Receiving Party in the course of performing its obligations or exercising its rights under this Agreement, the Letter of Intent, the Prior Letter of Intent or the Confidential Disclosure Agreement (collectively, “Confidential Information”), except to the extent that it can be established by the Receiving Party that such Confidential Information:

 

(a)          was in the lawful knowledge and possession of the Receiving Party prior to the time it was disclosed to, or learned by, the Receiving Party, or was otherwise developed independently by the Receiving Party, as evidenced by written records kept in the ordinary course of business, or other documentary proof of actual knowledge by the Receiving Party;

 

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(b)          was generally available to the public or otherwise part of the public domain at the time of its disclosure to the Receiving Party;

 

(c)          became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the Receiving Party in breach of this Agreement; or

 

(d)          was disclosed to the Receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the Disclosing Party not to disclose such information to others.

 

Section 11.2          Authorized Disclosure.  Except as otherwise provided in this Agreement, a Receiving Party may use and disclose Confidential Information of the Disclosing Party as follows:

 

(a)          under appropriate confidentiality provisions substantially equivalent to those in this Agreement, in connection with the performance of its obligations or exercise of rights granted or reserved in this Agreement;

 

(b)          to the extent such disclosure is reasonably necessary in filing or prosecuting patent, copyright and trademark applications, prosecuting or defending litigation, complying with applicable governmental regulations, obtaining Governmental Approval, conducting pre-clinical activities or clinical trials, marketing products or services, or otherwise required by applicable Laws; provided, that if a Receiving Party is required by Applicable Laws to make any such disclosure of a Disclosing Party’s Confidential Information it will (i) give reasonable advance notice to the Disclosing Party of such disclosure requirement, (ii) upon the request of the Disclosing Party, use its reasonable efforts to secure confidential treatment of such Confidential Information required to be disclosed and cooperate with the Disclosing Party, and (iii) only disclose that portion of the Confidential Information required to be disclosed by Applicable Laws;

 

(c)          existing or prospective investors, advisors, collaborators, (sub)licensees, partners, lenders, acquirers or joint venturers, in each case solely to the extent related to the Contemplated Transactions and under appropriate confidentiality provisions substantially equivalent to those of this Agreement; and

 

(d)          as reasonably required under the circumstances, to a Third Party in connection with: (i) a Change of Control; or (ii) to the extent mutually agreed in writing by the Parties.

 

In each of the above authorized disclosures, the Receiving Party shall remain responsible for any failure by any Person who receives the Confidential Information from the Receiving Party pursuant to this Section 11.2 to treat such Confidential Information as required under this Article 11.

 

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Section 11.3          Press Release; Disclosure of Agreement.  Except to the extent required by applicable Law, neither Party will issue any press release or other public disclosure concerning this Agreement, the subject matter hereof or the Parties’ activities hereunder, or any results or data arising hereunder, except with the other Party’s prior written consent.  A Party may publicly disclose, without regard to the preceding requirements of this Section 11.3, any information that was previously publicly disclosed pursuant to this Section 11.3; provided, that such disclosure does not materially alter the meaning of the information disclosed previously.

 

Section 11.4          Survival.  Each Party’s obligations with respect to the other Party’s Confidential Information shall survive the expiration or termination of this Agreement until the later of (a) [***] from disclosure of the Confidential Information, and (b) for so long as the Confidential Information is protected under applicable Laws.

 

ARTICLE 12
INDEMNIFICATION

 

Section 12.1          Indemnification by the Company.  In each case subject to Section 4.8, the Company shall, at its sole expense, defend, indemnify, and hold KaloBios and its Affiliates and their respective officers, managers, directors, employees, and agents harmless from and against any and all liabilities, damages, losses, costs and expenses including the reasonable fees of attorneys and other professionals (collectively, “Losses”), arising out of or resulting from:

 

(a)          any breach of any representation or warranty made by the Company under the Transaction Documents;

 

(b)          any breach of any covenant made by the Company under the Transaction Documents;

 

(d)          the extent to which the Company commercializes a Product, and any allegation that personal injury or death, or any damage to any property, was caused or allegedly caused by any Product manufactured, sold or used by or for the Company, including, without limitation, manufacturing or design defects in the Products or the failure to warn any person or entity of any such defects in the Products, except to the extent that the foregoing was directly caused by KaloBios in breach of its obligations pursuant to this Agreement; and

 

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(e)          the Excluded Liabilities or Excluded Assets;

 

except, in each case of Sections 12.1(a) through 12.1(e) (inclusive), to the extent that KaloBios is required to indemnify the Company with respect to such Losses under Section 12.2.

 

Section 12.2          Indemnification by KaloBios.  KaloBios shall, at its sole expense, defend, indemnify, and hold the Company and its Affiliates and their respective officers, managers, directors, employees, and agents harmless from and against any and all Losses arising out of or resulting from:

 

(a)          any breach of any representation or warranty made by KaloBios under the Transaction Documents;

 

(b)          any breach of any covenant made by KaloBios under the Transaction Documents;

 

(d)          to the extent KaloBios or its Affiliates commercialize a Product, any allegation that personal injury or death, or any damage to any property, was caused or allegedly caused by any Product manufactured, sold or used by or for KaloBios, including, without limitation, manufacturing or design defects in the Products or the failure to warn any person or entity of any such defects in the Products, except to the extent that the foregoing was directly caused by the Company in breach of its obligations pursuant to this Agreement;

 

(e)          any actions taken with respect to the enforcement of any term or provision of the Security Agreement, exercise of any rights of the Company as a secured creditor thereunder or with respect to the taking of any actions by the Company pursuant to the terms of the Security Agreement with respect to the protection of the Collateral (as defined in the Security Agreement), in each case upon, after or during any Event of Default (as defined in the Security Agreement); and

 

(f)          the Acquired Assets or the Assumed Liabilities;

 

except, in each case of Sections 12.2(a) through 12.2(f) (inclusive), to the extent that the Company is required to indemnify KaloBios with respect to such Losses under Section 12.1.

 

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Section 12.3          Indemnification Procedures.  In the event that any Person entitled to indemnification under Section 12.1 or Section 12.2 (an “Indemnified Party”) is seeking indemnification, the Indemnified Party shall (a) inform, in writing, the indemnifying Party under Section 12.1 or Section 12.2 (the “Indemnifying Party”) as soon as reasonably practicable after the Indemnified Party receives any written notice of any Action against or involving the Indemnified Party by a Governmental Authority or other Person, or otherwise discovers the liability, obligation or facts giving rise to such claim for indemnification (the “Claim”), (b) permit the Indemnifying Party to assume direction and control of the defense of the Claim (provided, that the Indemnifying Party may not settle the Claim without the prior consent of the Indemnified Party, not to be unreasonably withheld), (c) cooperate as reasonably requested (at the expense of the [***]) in the defense of the Claim, and (d) undertake all reasonable steps to mitigate any loss, damage or expense with respect to the Claim(s).  Without limiting the foregoing, any Indemnified Party will be entitled to participate in the defense of a Claim for which it has sought indemnification hereunder and to employ counsel of its choice for such purpose; provided, that such employment will be at the [***] expense unless (i) the employment thereof has been specifically authorized by the Indemnifying Party in writing, (ii) the Indemnifying Party has failed to assume the defense (or has failed to continue to defend such Claim in good faith) and employ counsel in accordance with this Section 12.3, in which case the Indemnified Party will be allowed to control the defense, or (iii) there exists a conflict of interest between the Indemnifying Party and the Indemnified Party that cannot be waived.

 

 

Section 12.5          Survival.  The representations and warranties of the Parties contained herein shall survive for a period of [***] following the Closing, except that each of the Company’s and KaloBios’ Fundamental Representations shall survive [***] (and for no less than [***]).  Any claim for indemnification on account of breach of a representation, warranty or covenant will survive the applicable termination date if a Party, prior to such termination date, advises the other Party in writing of facts that constitute or may give rise to an alleged claim for indemnification, specifying in reasonable detail the basis under this Agreement for such claim.

 

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Section 12.6          Limitation on Indemnity.

 

(a)          Indemnification by the Company for Breach of Representation or Warranty.  Notwithstanding the provisions of Section 12.1, the Company shall not be liable for Losses under Section 12.1(a) unless the aggregate amount of Losses with respect to all misrepresentations or breaches of warranty exceed [***] (the “Indemnification Basket”), in which event all Losses incurred shall be subject to indemnification. The Company’s aggregate liability for all Losses under Section 12.1(a) shall not exceed the lesser of (i) the consideration actually received by the Company under this Agreement and (ii) [***] (the “Cap”). 

 

(b)          Indemnification by KaloBios for Breach of Representation or Warranty.  Notwithstanding the provisions of Section 12.2(a), (i) KaloBios shall not be liable for Losses under Section 12.2 unless the aggregate amount of Losses with respect to all misrepresentations or breaches of warranty exceed the Indemnification Basket, in which event all Losses incurred shall be subject to indemnification, and (ii) in no event shall KaloBios’ aggregate liability for Losses under Section 12.2(a) exceed the Cap.

 

(c)          Insurance Proceeds. Payments by an Indemnifying Party pursuant to Section 12.1 or Section 12.2 in respect of any Losses shall be limited to the amount of any liability or damage that remains after deducting therefrom any insurance proceeds and any indemnity, contribution or other similar payment actually received by the Indemnified Party in respect of any such claim, less any related costs and expenses, including the aggregate cost of pursuing any related insurance claims and any related increases in insurance premiums or other chargebacks (it being agreed that neither Party shall have any obligation to seek to recover any insurance proceeds in connection with making a claim under this Article 12 and that, promptly after the realization of any insurance proceeds, indemnity, contribution or other similar payment, the Indemnified Party shall reimburse the Indemnifying Party for such reduction in Losses for which the Indemnified Party was indemnified prior to the realization of reduction of such Losses).

 

(d)          Knowledge. Neither Party shall be liable under this Article 12 for any Losses based upon or arising out of any inaccuracy in or breach of any of the representations or warranties of such Party contained in this Agreement that the other Party had knowledge of such inaccuracy or breach prior to the Closing.

 

 

Section 12.8          Exclusive Remedy.  Except in the case of fraud or as otherwise provided in Section 4.8, from and after the Closing, the indemnification provided in this Section 12.8, subject to the limitations herein, shall be the sole and exclusive monetary remedy of the Indemnified Parties for any and all liability arising out of, under or in connection with the Transaction Documents (including any breaches of any representations and warranties and covenants provided in the Transaction Documents) or in connection with the transactions contemplated thereby.

 

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ARTICLE 13
TERM AND TERMINATION

 

Section 13.1          Term. This Agreement shall commence as of the Effective Date and, unless sooner terminated in whole or in part as specifically provided in this Agreement, shall continue in effect until the full satisfaction of all payment obligations under this Agreement (the “Term”).

 

Section 13.2          Termination for Convenience. Either Party shall have the right, at its sole discretion and without any penalty or liability, exercisable at any time during the Term, to terminate this Agreement for any reason or no reason at all upon ninety (90) days’ prior written notice to the other Party.

 

 

(a)          Termination for Material Breach.  Either Party (the “Non-breaching Party”) may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement in the event the other Party (the “Breaching Party”) shall have materially breached or defaulted in the performance of its obligations under the Transaction Documents and such breach or default shall have continued for sixty (60) days after written notice thereof was provided to the Breaching Party by the Non-breaching Party, such notice describing with particularity and in detail the alleged material breach or default.  Any such termination of this Agreement under this Section 13.3(a) shall become effective at the end of such sixty (60) day period, unless the Breaching Party has either (i) cured any such breach or default prior to the expiration of such sixty (60) day period, or (ii) if such breach is not susceptible to cure within such sixty (60) day period, the Breaching Party has, within such sixty (60) day period, provided to the Non-breaching Party a written plan that is reasonably calculated to effect a cure and such plan is reasonably acceptable to the Non-breaching Party.  Where the Non-breaching Party has accepted any such plan in accordance with the preceding sentence, the Non-breaching Party may terminate this Agreement immediately upon written notice to the Breaching Party if the Breaching Party subsequently fails to carry out such plan.

 

(b)          Company Termination Right.  The Company may terminate this Agreement only with respect to the license granted to KaloBios under Section 7.7 immediately upon written notice to KaloBios if Martin Shkreli is appointed as an agent, employee, consultant, officer or director of KaloBios.

 

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Section 13.4          Termination for Bankruptcy.  In the event that following the Closing either Party makes an assignment for the benefit of creditors, appoints or suffers appointment of a receiver or trustee over all or substantially all of its property, files a petition under any bankruptcy or insolvency act in any state or country or has any such petition filed against it which is not discharged within sixty (60) days of the filing thereof, then the other Party may thereafter terminate this Agreement effective immediately upon written notice to such Party.  In connection therewith, all rights and licenses granted under or pursuant to any section of this Agreement are and shall otherwise be deemed to be for purposes of Section 365(n) of Title 11, United States Code (the “Bankruptcy Code”) licenses of rights to “intellectual property” as defined in Section 101(56) of the Bankruptcy Code.  The Parties shall retain and may fully exercise all of their respective rights and elections under the Bankruptcy Code, including without limitation, under Section 365(n)(4) thereto.  Upon the bankruptcy of any Party, the non-bankrupt Party shall further be entitled to a complete duplicate of, or complete access to, any such intellectual property, and such, if not already in its possession, shall be promptly delivered to the non-bankrupt Party, unless the bankrupt Party elects to continue, and continues, to perform all of its obligations under this Agreement.  For the avoidance of doubt, in the event that the ability to terminate this Agreement pursuant to this Section 13.4 is not enforceable for any reason, all other provisions in this Section 13.4 shall remain fully enforceable in accordance with Section 15.3.

 

Section 13.5          Termination of Joint Development Program upon Mutual Consent.  The obligations of the Parties under Article 5 may be terminated by written mutual consent, such consent not to be unreasonably withheld, conditioned or delayed, upon mutual agreement on a transition plan with respect to the Joint Development Program. If such transition plan is not mutually agreed within thirty (30) days after either Party has notified the other of its desire to terminate such obligations, either Party may immediately terminate such obligations upon written notice to the other Party.

 

Section 13.6          Effects of Termination after Closing.

 

(a)          Upon Termination by KaloBios for Convenience.  Except as otherwise provided in this Agreement, in the event of termination of this Agreement by KaloBios pursuant to Section 13.2, (i) all rights and licenses granted to KaloBios under this Agreement shall terminate, (ii) KaloBios shall, upon the written request of the Company and in exchange for the payment described in subsection (iv) below, which request shall be in the sole discretion of the Company, transfer to the Company all right, title and interest in and to the Acquired Assets any and all intellectual property rights, regulatory approvals and any other assets developed from the Acquired Assets pursuant to the Joint Development Program and used by the Parties in the Joint Development Program or commercialization of the Product after the date hereof (the “Future Assets”), in all cases, free and clear of any Encumbrances other than those in favor of the Company, (iii) upon the earlier of (x) the return of all Collateral (as defined in the Security Agreement) pursuant to sub-clause (ii) above and (y) sixty (60) days after termination of this Agreement under this Section 13.6(a), the Security Agreement shall terminate, and (iv) upon a request by the Company pursuant to sub-clause (ii) above and simultaneously with the transfer to the Company of all right, title and interest in and to the Collateral, the Company will pay to KaloBios an amount equal to [***] of the Joint Development Program Costs actually incurred by KaloBios under this Agreement.  Upon termination by KaloBios pursuant to this Section 13.6(a), KaloBios shall deliver to the Company a certificate executed by the Chief Financial Officer of KaloBios certifying in good faith all Joint Development Program Costs actually incurred by KaloBios under this Agreement. KaloBios agrees that upon the termination of this Agreement pursuant to this Section 13.6(a) and thereafter until the Company’s receipt of an MAA for the Product in the United States it shall not engage in any research or development activities with respect to the Compound or the Product in the Licensed Field.

 

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(b)          Upon Termination by KaloBios for Cause or Insolvency.  Except as otherwise provided in this Agreement, in the event of termination of this Agreement by KaloBios pursuant to Section 13.3(a) or Section 13.4, in addition to, and not in lieu of, any rights and remedies of KaloBios under this Agreement (at law or in equity) all rights and licenses granted to KaloBios under this Agreement shall continue perpetually, and, subject to Article 12, the Company’s rights to any payments to be made by KaloBios under this Agreement shall continue for the terms set forth herein.

 

(c)          Upon Termination by the Company for Convenience.  Except as otherwise provided in this Agreement, in the event of termination of this Agreement by the Company pursuant to Section 13.2, in addition to, and not in lieu of, any rights and remedies of the Company under this Agreement (at law or in equity) all rights and licenses granted to the Company under this Agreement, including the right to receive future payments, and the Security Agreement, shall terminate upon the effective date of termination, as will the Security Agreement, and all rights and licenses granted to KaloBios under this Agreement shall continue perpetually.

 

(d)          Upon Termination by the Company for Cause or Insolvency.  Except as otherwise provided in this Agreement, in the event of termination of this Agreement by the Company pursuant to Section 13.3(a) or Section 13.4, (i) all rights and licenses granted to KaloBios under this Agreement shall terminate upon the effective date of such termination, and (ii) KaloBios shall transfer to the Company all right, title and interest in and to the Acquired Assets and Future Assets, free and clear of any Encumbrances other than those in favor of the Company and upon completion of such transfer, the Security Agreement will terminate.

 

Section 13.7          Termination Prior to Closing.  This Agreement may be terminated and the Contemplated Transactions may be abandoned at any time prior to the Closing:

 

(a)          by mutual written agreement of the Parties;

 

(b)          by the Company or KaloBios if any court of competent jurisdiction or other Governmental Authority shall have issued an order, decree or ruling, or taken any other action permanently restraining, enjoining or otherwise prohibiting the Contemplated Transactions and such order, decree, ruling or other action shall have become final and non-appealable;

 

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(c)          by the Company or KaloBios if the Contemplated Transactions shall not have been consummated on or before June 30, 2016; provided, that the right to terminate this Agreement under this Section 13.7(c) shall not be available to any Party whose failure to fulfill any obligation under this Agreement is the primary cause of, or results in, the failure to consummate the Contemplated Transactions on or before such date;

 

(d)          by KaloBios if (i) any of the conditions set forth in Section 2.7(b) shall have become incapable of fulfillment and shall not have been waived by KaloBios or (ii) the Company shall materially breach any of its representations, warranties, covenants or other obligations hereunder prior to the Closing and, within ten (10) days after written notice of such breach to the Company, such breach shall not have been cured or waived by KaloBios and the Company shall not have provided reasonable assurance to KaloBios that such breach will be cured in all material respects on or before the Closing; or

 

(e)          by the Company if (i) any of the conditions set forth in Section 2.7(c) shall have become incapable of fulfillment and shall not have been waived by the Company or (ii) KaloBios shall materially breach any of its representations, warranties, covenants or other obligations hereunder prior to the Closing and, within ten (10) days after written notice of such breach to KaloBios, such breach shall not have been cured or waived by the Company and KaloBios shall not have provided reasonable assurance to the Company that such breach will be cured in all material respects on or before the Closing.

 

Notwithstanding any else contained in this Agreement, the right to terminate this Agreement under this Section 13.7 shall not be available to any Party (i) that is in material breach of its obligations hereunder prior to the Closing or (ii) whose failure to fulfill its obligations or to comply with its covenants under this Agreement has been the cause of, or resulted in, the failure to satisfy any condition to the obligations of the Parties hereunder unless waived in writing by the other Party.

 

 

 

 

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(c)          Survival.  Notwithstanding any other provision of this Agreement the following provisions, shall survive the termination or expiration of this Agreement for any reason, in accordance with their respective terms and conditions, and for the duration stated, and where no duration is stated, shall survive for so long as required to give effect to the subject matter of the provision: Articles 1, 11, 12, 13, 14 and 15 and Sections 3.6, 3.8, 3.9 and 7.10 as well as any applicable definitions in Article 1 and any other provisions which are expressed to survive termination or expiration or which are required to give effect to such termination or expiration.

 

ARTICLE 14
DISPUTE RESOLUTION

 

Section 14.1          Governing Law.  This Agreement and all disputes arising out of or related to this Agreement or any breach hereof shall be governed by and construed under the laws of the State of Delaware, without giving effect to any choice of law principles that would require the application of the laws of a different state.

 

Section 14.2          Dispute Resolution.  Unless otherwise set forth in this Agreement or required by Law, in the event of a dispute, claim or controversy between the Parties arising under or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this Agreement, (each, a “Dispute”), the Party shall refer such Dispute to their respective Executive Officers, and such Executive Officers shall attempt in good faith to resolve such Dispute.  If the Executive Officers are unable to resolve a given Dispute pursuant to this Section 14.2 within [***] of referring such Dispute to the Executive Officers (other than prior to the Closing, in which case within [***] of such dispute), either Party may bring suit exclusively in the state and federal courts of competent jurisdiction located in the State of Delaware and in no other jurisdiction; provided, however, that with respect to any suit brought prior to Closing, such suit shall be exclusively brought before the United States Bankruptcy Court for the District of Delaware.  Each Party hereby consents to personal jurisdiction and venue in, and agrees to service of process issued or authorized by, such courts and all such actions shall first be brought before such courts.

ARTICLE 15
GENERAL PROVISIONS

 

Section 15.1          Force Majeure.  Neither Party shall be liable for failure of or delay in performing obligations set forth in this Agreement, and neither shall be deemed in breach of its obligations, if such failure or delay is due to any occurrence beyond the reasonable control of such Party that (a) prevents or substantially interferes with the performance by such Party of any of its obligations hereunder, and (b) occurs by reason of any act of God, flood, fire, explosion, earthquake, strike, lockout, labor dispute, casualty or accident, war, revolution, civil commotion, act of terrorism, blockage or embargo, or injunction, law, order, proclamation, regulation, ordinance, demand or requirement of any government or of any subdivision, authority or representative of any such government. In event of such force majeure, the Party affected shall use reasonable efforts to cure or overcome the same and resume performance of its obligations hereunder.

 

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Section 15.2          Assignment.  This Agreement (i) may be assigned by KaloBios in whole or in part to any Third Party without the consent of the Company, and (ii) may not be assigned by the Company in whole or in part without the consent of KaloBios; provided, that the Company may assign this Agreement in whole without the consent of KaloBios to an Affiliate or in the event of a Change of Control of the Company.  Any permitted assignee will expressly assume all obligations imposed on the assigning Party by this Agreement in writing.  Further (a) if the assignee of KaloBios is of equal or superior (i) creditworthiness and (ii) ability to perform obligations under this Agreement to KaloBios as of the date of assignment, as demonstrated by the assignee’s (x) ability to fund the Joint Development Program for the first [***] after assignment and (y) track record of research and development and product commercialization in the biopharmaceutical industry, then KaloBios shall not remain liable for the assignee’s performance of its obligations under this Agreement, and (b) if the assignee of KaloBios is not of equal or superior creditworthiness and ability to KaloBios as of the date of assignment, then KaloBios shall remain directly liable to the Company for all performance obligations (including payment obligations) of the assignee under this Agreement.  This Agreement shall bind and inure to the benefit of the Parties hereto and their respective successors and permitted assigns.  Any purported assignment in violation of this Section 15.2 shall be null and void.

 

Section 15.3          Severability.  If any provision hereof should be held invalid, illegal or unenforceable in any jurisdiction, the Parties shall negotiate in good faith a valid, legal and enforceable substitute provision that most nearly reflects the original intent of the Parties and all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the Parties hereto as nearly as may be possible.  Such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction.

 

Section 15.4          Notices.  All notices which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by electronic mail (and promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

 

If to the Company:


Savant Neglected Diseases, LLC
P.O. Box 620732
Woodside, CA 94062
Attn:          Stephen L. Hurst
Email:[          ***]

 

with a copy (which shall not constitute notice) to:

 

Dorsey & Whitney LLP
305 Lytton Avenue
Palo Alto, CA, 94301
Attn:          Evan Ng
Email:          [***]

 

 

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If to KaloBios:


KaloBios Pharmaceuticals, Inc.
1000 Marina Blvd, Suite 250
Brisbane, CA 94005
Attn:          Cameron Durrant, CEO
Email:          [***]

with a copy (which shall not constitute notice) to:

 

Hogan Lovells US LLP
100 International Drive, Suite 2000
Baltimore, MD 21202
Attn:          Asher M. Rubin
Email: [***]

or to such other address(es) as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith.  Any such notice shall be deemed to have been given:  (a) when delivered if personally delivered or sent by electronic mail on a Business Day (or if delivered or sent on a non-Business Day, then on the next Business Day); (b) on the Business Day after dispatch if sent by nationally-recognized overnight courier; or (c) on the fifth (5th) Business Day following the date of mailing, if sent by mail.

 

Section 15.5          Construction of Agreement.  In the event an ambiguity or a question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring either Party by virtue of the authorship of any provisions of this Agreement.  The language in this Agreement is to be construed in all cases according to its fair meaning.

 

Section 15.6          Headings; Interpretation.  Headings used herein are for convenience only and shall not in any way affect the construction of or be taken into consideration in interpreting this Agreement.  Further, in this Agreement: (a) the word “including” shall be deemed to be followed by the phrase “without limitation” or like expression; (b) the singular shall include the plural and vice versa; and (c) masculine, feminine and neuter pronouns and expressions shall be interchangeable.  A Party includes its permitted assignees and/or the respective successors in title to substantially the whole of its undertaking.  A statute or statutory instrument or any of their provisions is to be construed as a reference to that statute or statutory instrument or such provision as the same may have been or may from time to time hereafter be amended, restated, modified, supplemented, or re-enacted.  The Exhibits and other attachments form part of the operative provisions of this Agreement and references to this Agreement shall, unless the context otherwise requires, include references to the recitals and the Exhibits and attachments.

 

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Section 15.7          Independent Contractors.  Nothing herein shall be construed to create any relationship of employer and employee, agent and principal, partnership or joint venture between the Parties.  Each Party is an independent contractor.  Neither Party shall assume, either directly or indirectly, any liability of or for the other Party.  The Parties shall not have the authority to bind or obligate the other Party and neither Party shall represent that it has such authority.

 

Section 15.8          Performance by Affiliates.  Each Party may discharge any obligations and exercise any right hereunder through any of its Affiliates.  Each Party hereby guarantees the performance by its Affiliates of such Party’s obligations under this Agreement, and shall cause its Affiliates to comply with the provisions of this Agreement in connection with such performance.  Any breach by a Party’s Affiliate of any of such Party’s obligations under this Agreement shall be deemed a breach by such Party, and the other Party may proceed directly against such Party without any obligation to first proceed against such Party’s Affiliate.

 

Section 15.9          Waiver.  Neither Party may waive or release any of its rights or interests in this Agreement except in writing.  The failure of either Party to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement shall not constitute a waiver of that right or excuse a similar subsequent failure to perform any such term or condition.  No waiver by either Party of any condition or term in any one or more instances shall be construed as a continuing waiver of such condition or term or of another condition or term.

 

Section 15.10          Counterparts.  This Agreement may be signed in counterparts, each and every one of which shall be deemed an original, notwithstanding variations in format or file designation which may result from the electronic transmission, storage and printing of copies of this Agreement from separate computers or printers.  Signatures transmitted via .pdf shall be treated as original signatures.

 

Section 15.11          Expenses.  Each of the Parties will bear its own direct and indirect expenses incurred in connection with the negotiation and preparation of this Agreement and, except as set forth in this Agreement, the performance of the obligations contemplated hereby and thereby.

 

Section 15.12          Time of the Essence. Time is of the essence for the performance of each Party’s obligations under this Agreement.

 

CONFIDENTIAL

 

 

Section 15.13          Entire Agreement; Amendments.  This Agreement, including the Exhibits and Schedules hereto, together with the other Transaction Documents, sets forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties with respect to the subject matter hereof and supersedes, as of the Effective Date, all prior and contemporaneous agreements and understandings between the Parties with respect to the subject matter hereof, including, without limitation, the Confidential Disclosure Agreement, the Letter of Intent and the Prior Letter of Intent; provided, that Sections 1.B, 4, 5, 6, 7, 8, 11 and 12 of the Letter of Intent shall survive until the Closing in accordance with the terms thereof, subject to Sections 13.6 and 13.8 of this Agreement.  There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties with respect to the subject matter of this Agreement other than as are set forth in this Agreement, the other Transaction Documents, and the surviving provisions of the Letter of Intent set forth above.  No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party.  In the event of any conflict between the terms of this Agreement and the terms of any Transaction Document, the terms of this Agreement shall prevail.

 

[Signature Page Follows]

 

 

 

 

CONFIDENTIAL

 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized officers as of the date first above written.

 

	SAVANT NEGLECTED DISEASES, LLC
	By:	/s/ Stephen L. Hurst
		Name: Stephen L. Hurst
		Title:   Managing Member

 

	KALOBIOS PHARMACEUTICALS, INC.
	By:	/s/Cameron Durrant
		Name: Cameron Durrant
		Title:   Chairman and Chief Executive Officer

 

 

 

[Signature Page to Agreement for the Manufacture, Development and Commercialization of Benznidazole for Human Use]

CONFIDENTIAL

 

 

	SAVANT NEGLECTED DISEASES, LLC
	By:
	Name:  Stephen L. Hurst
	Title:  Managing Member

	KALOBIOS PHARMACEUTICALS, INC.
	By:
	Name:  Cameron Durrant
	Title:  Chairman and Chief Executive Officer

Hogan Lovells US LLP Columbia Square 555 Thirteenth Street, NW Washington, DC 20004 T  +1 202 637 5600 F  +1 202 637 5910 www.hoganlovells.com

Savant Neglected Diseases, LLC

- 2 -

June [●], 2016

Savant Neglected Diseases, LLC

- 3 -

June [●], 2016

Savant Neglected Diseases, LLC

- 4 -

June [●], 2016

Warrant Shares: 200,000

Initial Exercise Date:  [●], 2016

	KALOBIOS PHARMACEUTICALS, INC.
	By:
	Name:  Cameron Durrant
	Title:  Chairman and Chief Executive Officer

Name of Investing Entity:

Signature of Authorized Signatory of Investing Entity:

Name of Authorized Signatory:

Title of Authorized Signatory:

Date:

	OBLIGOR:
	KALOBIOS PHARMACEUTICALS, INC.
	By:
		Name:  Cameron Durrant
		Title:  Chairman and Chief Executive Officer

	SECURED PARTY:
	SAVANT NEGLECTED DISEASES, LLC
	By:
		Name:  Stephen L. Hurst
		Title:  Managing Member

By:
	Name:  Cameron Durrant
	Title:  Chairman and Chief Executive Officer

By:
Name:  Stephen L. Hurst
Title:  Managing Member

By:
Name:  Dale Chappell
Title:  Manager of General Partnership
Black Horse Capital Master Fund Ltd.
By:
Name:  Dale Chappell
Title:  Director
Cheval Holdings, Ltd.
By:
Name:  Dale Chappell
Title:  Director

By:
Name:
Title:

Purchaser	Deposit
Black Horse Entities:	$[***]

	[NAME OF PARTY]
	By:
	Name:
	Title:

	NOMIS OR CORTLEIGH, AS APPLICABLE
	By:
	Name:
	Title: