THIS ROYALTY AGREEMENT (the Agreement) is entered into as of January , 2019 (the Effective Date), by and among FLEX INNOVATION GROUP LLC, a Delaware limited liability company, having offices at 800 Boylston Street, 24th Floor, Boston, MA 02199 (the Company), Bruce Bean, an individual with an address of ***** (Bean), Donald MacKinnon, an individual with an address of ***** (D. MacKinnon), Roderick MacKinnon, an individual with an address of ***** (R. MacKinnon, and together with Bean and D. MacKinnon, the Scientific Founders) and Christoph Westphal, an individual with an address of ***** (Westphal, and together with the Scientific Founders, the Founders). Each of Company, Bean, D. MacKinnon, R. MacKinnon and Westphal may be referred to in this Agreement as a Party and collectively as the Parties.
WHEREAS, pursuant to that certain Founders Agreement between Westphal on behalf of Flex Pharma, Inc. (Flex Pharma) and the Scientific Founders dated as of February 25, 2014 and in consideration for the mutual covenants set forth therein, and the agreements executed pursuant thereto, including, without limitation, that certain Patent Assignment Agreement dated March 20, 2014, and that certain Technology Assignment Agreement dated March 20, 2014, Flex Pharma, Inc. agreed to pay the Founders certain royalty payments in accordance with the terms and conditions of that certain Royalty Agreement dated as of March 20, 2014; and
WHEREAS, the Company has been granted exclusive rights to certain intellectual property as set forth in the License Agreement (as defined below) by Flex Pharma, and, in connection with such grant, the Company is willing to assume the obligation to make certain payments to the Founders as provided in this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the covenants and promises set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
1.1 Affiliate with respect to any entity, shall mean any company or entity controlled by, controlling, or under common control with such referenced entity and shall include any company more than 50% of whose voting stock or participating profit interest is owned or controlled, directly or indirectly, by such referenced entity, and any company which owns or controls, directly or indirectly, more than fifty percent (50%) of the voting stock of such entity.
1.2 Competitive Activity has the meaning set forth in Section 3.4(a).
1.3 Gross Sales shall mean the gross amount invoiced by the Company or its Affiliates or Licensees for sales of a Product to Third Parties, including sales to distributors, reduced by any amounts actually paid for product returns, damaged products, refunds, invoice discounts, freight charges, sales taxes and chargebacks (including but not limited to chargebacks related to shipping, theft, loss, or damaged products), in each case that are directly related to sales of the Product.