Common use of Equity Payment Clause in Contracts

Equity Payment. In further consideration of the rights granted by Hanmi hereunder, Kinex shall pay Hanmi an equity payment upon occurrence of a Liquidity Event at Kinex and Regulatory Approval in the United States (as provided below) if such Liquidity Event occurs during the Agreement Term (“Equity Payment”). Notwithstanding the above sentence, (i) Hanmi can still receive an Equity Payment without Regulatory Approval as set forth in paragraph (c), (ii) any Equity Payment to be paid by Kinex upon a Liquidity Event or Regulatory Approval is intended by the parties to be a one-time payment and not apply to any subsequent Liquidity Event or Regulatory Approval, and (iii) for all purposes in this Section 4.2, “Regulatory Approval” shall refer only to the first Licensed Product and only to the first Regulatory Approval in either the United States from the US Federal Drug Administration or the European Union from the European Medicines Agency. The Equity Payment shall be made immediately prior to or on the date of the first Liquidity Event by the issuance by Kinex of its Series A Convertible Preferred Units or, if no shares of Series A Convertible Preferred Units are then currently outstanding, any cash, publicly tradable securities or class of securities to which the Series A Convertible Preferred Units have been exchanged or converted (“Kinex Unit(s)”). As long as Kinex treats Hanmi on the same terms as the holders of Kinex Common Units and all other holders of Series A Convertible Preferred Units regarding the registration rights of their units, and the Kinex Common Unit and Series A Convertible Preferred Units are not registered as of the Liquidity Event, Kinex can issue unregistered Kinex Units to Hanmi with the understanding that Kinex will treat Hanmi on the same terms as all Common Unit holders and all other Series A Convertible Preferred Unitholders regarding registration rights. The valuation of Kinex Units to be received by Hanmi shall be determined according to the “regulatory bonus” and “exit bonus” schedules set forth in paragraphs (a), (b), and (c) below. The actual number of Kinex Units to be issued or paid to Hanmi upon a Liquidity Event shall be calculated by dividing the “valuation” of the Kinex Units to be received by Hanmi as set forth in paragraphs (a), (b) or (c) by the last price paid for the Kinex Units immediately prior to the Liquidity Event that results in the issuance of the Kinex Units to Hanmi. With respect any cash received by Kinex equity owners in the Liquidity Event in partial or full consideration for their ownership of a Kinex Unit, Kinex shall pay Hanmi cash to the extent that each Kinex Unit to be issued to Hanmi would have received cash in the Liquidity Event. The actual number of Kinex Units to be issued or paid to Hanmi upon a Regulatory Approval following a Liquidity Event shall be calculated (i) based on the last price paid for Kinex Units in the last to occur of (1) a public offering by Kinex (excluding the initial public offering) or any successor entity or (2) a private investment in public entity (PIPE) by Kinex or any successor entity, either of which occurs prior to the Regulatory Approval but after the Liquidity Event, or (ii) if no such follow on public offering or PIPE has occurred prior to the Regulatory Approval but after the Liquidity Event, the average mean price between the highest and lowest quoted selling prices for any publicly traded securities for the sixty (60) business days immediately preceding the date of the Regulatory Approval. (a) If Regulatory Approval occurs prior to a Liquidity Event, Kinex shall not make any Equity Payment until the occurrence of a Liquidity Event. If no Liquidity Event has occurred after the Regulatory Approval and prior to the date on which Kinex and its Affiliates have accumulated Net Sales of Licensed Product in excess of US$***, the parties shall meet and negotiate in good faith for a cash payment to Hanmi in lieu of the Equity Payment. In any such negotiations, the parties agree that the maximum cash payment to Hanmi shall not exceed the amount of the Equity Payment. After any such cash payment to Hanmi, Kinex shall have no further obligations to Hanmi under this Section 4.2 upon the occurrence of a subsequent Liquidity Event. (b) When a Liquidity Event occurs after Regulatory Approval, Hanmi shall receive the Equity Payment both in a “regulatory bonus” and “exit bonus”. The “regulatory bonus” shall be equal to US$24,000,000. In addition, Hanmi will receive the “exit bonus” to be calculated as follows: • US$*** if the total pre-money valuation of Kinex immediately prior to the Liquidity Event is US$*** or less, or • US$*** if the total pre-money valuation of Kinex immediately prior to the Liquidity Event is more than US$*** but $*** or less, or • US$*** if the total pre-money valuation of Kinex immediately prior to the Liquidity Event is more than US$*** but $*** or less, or • US$*** if the total pre-money valuation of Kinex immediately prior to the Liquidity Event was more than US$*** but $*** or less, or • US$*** if the total pre-money valuation of Kinex immediately prior to the Liquidity Event is more than US $***. (c) If the Liquidity Event occurs prior to the Regulatory Approval, Hanmi shall receive only an “exit bonus” equal to US$5,000,000 immediately prior to or on the date of the Liquidity Event. If no Regulatory Approval occurs subsequent to a Liquidity Event, Kinex will have no further Equity Payment obligation to Hanmi. If the Regulatory Approval occurs after the Liquidity Event, Hanmi shall receive a “regulatory bonus” equal to US$24,000,000. (d) If, prior to both the Liquidity Event and the Regulatory Approval, Kinex sublicenses (i) all of its Commercialization rights in the Territory, or (ii) sublicenses all of its Development and Commercialization rights in North America or the European Union, Kinex shall immediately pay Hanmi on a one time basis only from the first such sublicense (i) a minimum of US$*** in cash or (ii) a maximum equal to the lesser of US$*** in cash or an amount equal to the following percentage, applicable to the development phase of the first Licensed Product as of the date of the sublicense, multiplied by any upfront cash payment received by Kinex from the sublicensee: Prior to initiation of Phase I Clinical Studies in US ***% Prior to initiation of Phase II Clinical Studies in US ***% Prior to initiation of Phase III Clinical Studies in US ***% Prior to New Drug Approval submission to FDA in US ***% No payment under this subsection (d) shall be required after the occurrence of either the Liquidity Event or the Regulatory Approval. Under this paragraph (d), the payment to Hanmi shall not be less than US$*** regardless of the amount of the upfront cash payment Kinex receives from its sublicensee. The payment to Hanmi shall not be more than US$*** regardless of the amount of the upfront cash payment Kinex receives from its sublicensee. Any payment Hanmi shall receive under this paragraph (d) shall be credited toward to the “exit bonus” on the date of the Liquidity Event. (e) If, other than in a transaction that qualifies as a Liquidity Event, Kinex decides to sell all of its Development and Commercial rights in the Licensed Products prior to both the Regulatory Approval and the Liquidity Event, Kinex shall immediately contact Hanmi and negotiate Hanmi for fair compensation. Hanmi shall negotiate, in good faith, for such fair compensation giving consideration to the total value of such sale transaction to Kinex. (f) If, prior to the Liquidity Event but after the Regulatory Approval, Kinex sublicenses (i) all of its Commercialization rights in the Territory, or (ii) sublicenses all of its Development and Commercialization rights in North America or the European Union, Kinex shall immediately pay Hanmi on a one time basis only from the first such sublicense the greater of (i) US$*** or (ii) the lesser of US$24,000,000 or ***% of any upfront payments received by Kinex from the sublicensee. Any such payment would reduce, on a dollar for dollar basis, the “regulatory bonus” payable to Hanmi upon Regulatory Approval. (g) Kinex’s obligation to pay the Equity Payment and issue the Kinex Units shall be contingent upon Hanmi (1) executing such agreements, documents, forms, representations and restrictive covenants as may be required by (i) the Kinex organizational documents, (ii) the SEC or comparable national securities agency, (iii) the applicable taxing authorities, or (iv) any underwriter utilized by Kinex with respect to the Liquidity Event if such underwriter required such agreements or restrictive covenants from all founders and major equity owners of Kinex, and (2) Hanmi providing Kinex with the cash necessary to make all US withholding payments required with respect to the Equity Payment to the extent the Equity Payment consists of securities. Notwithstanding the foregoing, Hanmi shall not be required to consent to any lock-up required by an underwriter or purchaser of the Kinex Units for more than 12 months from the date of issuance of the Kinex Units to Hanmi. Hanmi shall have 12 months from the date of the Liquidity Event or Regulatory Event, as applicable, to complete all of the requirements set forth above in paragraph (f), including payment of all US withholding tax. If Hanmi fails to complete such requirements within 12 months from the date of the applicable Liquidity Event or Regulatory Approval, Kinex’s obligation to make the applicable Equity Payment shall expire and Kinex shall have no further obligation to make such Equity Payment to Hanmi. If a Liquidity Event occurs prior to Regulatory Approval, the expiration of Kinex’s obligation to make an Equity Payment after the Liquidity Event as provided in the preceding sentence shall not affect its obligation to make an Equity Payment upon the subsequent Regulatory Approval at which time Hanmi shall again have 12 months after the date of the Regulatory Approval to complete all of the requirements of this paragraph (g) before Kinex’s obligation to make the Equity Payment shall expire. The Kinex Units shall be issued to Hanmi within 45 days of the completion by Hanmi of the requirements of this paragraph (g). (h) Hanmi and Kinex agree to comply with all US securities laws in connection with the issuance of the Equity Payment. Hanmi understands that any securities included in the Equity Payment may be restricted securities under US securities laws and regulations unless registered under US securities law, and it may be required to retain ownership of such securities until such securities have been registered with the SEC or an exemption from such registration is available. Hanmi is familiar with Regulation S and Rule 144 promulgated under the US Securities Act of 1933, as amended, and conditions on resale imposed thereby. Hanmi agrees to comply with all US securities laws in connection with the resale of any securities received as part of the Equity Payment, and Kinex will cooperate and assist Hanmi in connection with any such resale.