PHARMACEUTICAL PRODUCT LICENSE AND DISTRIBUTION AGREEMENT

 

PHARMACEUTICAL PRODUCT LICENSE AND DISTRIBUTION AGREEMENT

 

Dated as of October ___, 2006

 

AMONG

 

PACIFIC BIO-PHARMACEUTICAL, INC. PRB PHARMACEUTICALS, INC.

 

 AND

 

CERTAIN SHAREHOLDERS OF PRB PHARMACEUTICALS, INC.

 

TABLE OF CONTENTS

 

TABLE OF CONTENTS

 

1. DEFINITIONS AND USAGE

1.1 Definitions

1.2 Usage

 

2. EXCLUSIVE LICENSE; ASSET PURCHASE; CLOSING

2.1 Exclusive License

2.2 Assignment of Contracts and Accounts Receivable

2.3 Consideration

2.4 Liabilities

2.5 Allocation

2.6 Closing

2.7 Closing Obligations

2.8 Consents

 

3. REPRESENTATIONS AND WARRANTIES OF PRB AND SHAREHOLDERS

3.1 Enforceability; Authority; No Conflict

3.2 Capitalization

3.3 Title to Assets; Encumbrances

3.4 PRB Accounts Receivable

3.5 Compliance with Legal Requirements; Governmental Authorizations

3.6 Legal Proceedings; Orders

3.7 Contracts; No Defaults

3.8 Environmental Matters

3.9 Intellectual Property Assets

3.10 Compliance with the Foreign Corrupt Practices Act and Export Control and Antiboycott Laws

3.11 Relationships with Related Persons

3.12 Brokers or Finders

3.13 Securities Law Matters

3.14 Solvency

 

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3.15 Disclosure

 

4. REPRESENTATIONS AND WARRANTIES OF PACIFIC

4.1 Organization and Good Standing

4.2 Authority; No Conflict

4.3 Certain Proceedings

4.4 Brokers or Finders

 

5.COVENANTS OF PRB PRIOR TO CLOSING

5.1 Access and Investigation

5.2 Operation of the Business of PRB

5.2 Negative Covenant

5.3 Required Approvals

5.4 Notification

5.6 No Negotiation

5.7 Best Efforts

5.8 Interim Financial Statements

5.9 Change of Name

5.8 Payment of Liabilities

5.11 Current Evidence of Title

 

6. COVENANTS OF PACIFIC PRIOR TO CLOSING

6.1 Required Approvals

6.2 Best Efforts

 

7.CONDITIONS PRECEDENT TO PACIFIC'S OBLIGATION TO CLOSE

7.1 Accuracy of Representations

7.2 PRB's Performance

7.3 Consents

7.4 Additional Documents

7.5 No Proceedings

7.6 No Conflict

7.7 Governmental Authorizations

 

8. CONDITIONS PRECEDENT TO PRB'S OBLIGATION TO CLOSE

8.1 Accuracy of Representations

8.2 PACIFIC's Performance

8.3 Consents

8.4 Additional Documents

8.5 No Injunction

 

9. TERMINATION

9.1 Termination Events

9.2 Effect of Termination

 

 

 

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10. ADDITIONAL COVENANTS

10.1 Employees and Employee Benefits

10.1 Payment of All Taxes

10.2 Payment of Other Retained Liabilities

10.3 Restrictions on PRB Dissolution and Distributions

10.4 Assistance in Proceedings

10.5 Noncompetition, Nonsolicitation and Nondisparagement

10.6 Further Assurances

 

11. INDEMNIFICATION; REMEDIES

11.1 Survival

11.2 Indemnification and Reimbursement by PRB and Shareholders

11.3 Indemnification and Reimbursement by PRB--Environmental Matters

11.4 Indemnification and Reimbursement by PACIFIC

11.5 Time Limitations

11.6 Third-Party Claims

11.7 Other Claims

11.8 Indemnification in Case of Strict Liability or Indemnitee Negligence

 

12. CONFIDENTIALITY

12.1 Definition of Confidential Information

12.2 Restricted Use of Confidential Information

12.3 Exceptions

12.4 Legal Proceedings

12.5 Return or Destruction of Confidential Information

12.6 Attorney-Client Privilege

 

13. GENERAL PROVISIONS

13.1 Expenses

13.2 Public Announcements

13.3 Notices

13.4 Jurisdiction; Service of Process

13.5 Enforcement of Agreement

13.6 Waiver; Remedies Cumulative

13.7 Entire Agreement and Modification

13.8 Disclosure Letter

13.9 Assignments, Successors and No Third-Party Rights

13.10 Severability

13.11 Construction

13.12 Time of Essence

13.13 Governing Law

13.14 Execution of Agreement

13.15 Shareholder Obligations

13.16 Representative of PRB and Shareholders

 

 

 

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PHARMACEUTICAL PRODUCT LICENSE AND DISTRIBUTION AGREEMENT

 

This PHARMACEUTICAL PRODUCT LICENSE AND DISTRIBUTION AGREEMENT ("Agreement") is dated October __, 2006, by and among Pacific Bio-Pharmaceutical, Inc., a Nevada corporation ("PACIFIC"), PRB Pharmaceuticals, Inc., a Delaware corporation ("PRB"), Charles B. Hensley ("Hensley") and Richard S. Pyo, (“Pyo“) (Hensley and Pyo are referred to herein as "Shareholders").

 

RECITALS

 

WHEREAS, PRB is the owner of and has the right to grant licenses with respect to certain Technology (as hereinafter defined), the Trademark (as hereinafter defined), the Intellectual Property Assets (as hereinafter defined) and the Product (as hereinafter defined);

 

WHEREAS, PRB wishes to grant to PACIFIC an exclusive license to the Technology and the Intellectual Property Assets so that PACIFIC can use and sell the Product in the Territory (as hereinafter defined) related to the Licensed Use (as hereinafter defined) and further develop the Technology and the Intellectual Property Assets, and PACIFIC wishes to receive such a license, on the terms and subject to the conditions set forth in this Agreement;

 

WHEREAS, Shareholders own fourteen million (13,250,000) shares of the common stock, par value dollars ($0.001) per share, of PRB, which constitute twenty seven percent (27%) of the issued and outstanding shares of capital stock of PRB;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties, intending to be legally bound, agree as follows:

 

Article 1.

Definitions and Usage

 

SECTION 1.1  DEFINITIONS

 

For purposes of this Agreement, the following terms and variations thereof have the meanings specified or referred to in this Section 1.1:

 

"Assets"--as defined in Section 2.1.

 

"Assumed Liabilities"--as defined in Section 2.4(a).

 

"Best Efforts"--the efforts that a prudent Person desirous of achieving a result would use in similar circumstances to achieve that result as expeditiously as possible, provided, however, that a Person required to use Best Efforts under this Agreement will not be thereby required to take actions that would result in a material adverse change in the benefits to such Person of this Agreement and the Contemplated Transactions or to dispose of or make any change to its business, expend any material funds or incur any other material burden.

 

 

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"Breach"--any breach of, or any inaccuracy in, any representation or warranty or any breach of, or failure to perform or comply with, any covenant or obligation, in or of this Agreement or any other Contract, or any event which with the passing of time or the giving of notice, or both, would constitute such a breach, inaccuracy or failure.

 

"Bulk Sales Laws"--as defined in Section 5.8.

 

"Business Day"--any day other than (a) Saturday or Sunday or (b) any other day on which banks in California are permitted or required to be closed.

 

"PACIFIC"--as defined in the first paragraph of this Agreement.

 

"PACIFIC Indemnified Persons"--as defined in Section 11.2.

 

"Closing"--as defined in Section 2.6.

 

"Closing Date"--the date on which the Closing actually takes place.

 

"Code"--the Internal Revenue Code of 1986.

 

"Confidential Information"--as defined in Section 12.1.

 

"Consent"--any approval, consent, ratification, waiver or other authorization.

 

"Contemplated Transactions"--all of the transactions contemplated by this Agreement.

 

"Contract"--any agreement, contract, Lease, consensual obligation, promise or undertaking

(whether written or oral and whether express or implied), whether or not legally binding.

 

"Copyrights"--as defined in Section 3.9(a)(iii).

 

"Damages"--as defined in Section 11.2.

 

"Disclosure Letter"--the disclosure letter delivered by PRB and Shareholders to PACIFIC concurrently with the execution and delivery of this Agreement.

 

"Effective Time"--The time at which the Closing is consummated.

 

"Consulting Agreement"--as defined in Section 2.7(a)(vi).

 

"Encumbrance"--any charge, claim, community or other marital property interest, condition, equitable interest, lien, option, pledge, security interest, mortgage, right of way, easement, encroachment, servitude, right of first option, right of first refusal or similar restriction, including any restriction on use, voting (in the case of any security or equity interest), transfer, receipt of income or exercise of any other attribute of ownership.

 

 

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"Environment"--soil, land surface or subsurface strata, surface waters (including navigable waters and ocean waters), groundwaters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life and any other environmental medium or natural resource.

 

"Environmental, Health and Safety Liabilities"--any cost, damages, expense, liability, obligation or other responsibility arising from or under any Environmental Law or Occupational Safety and Health Law, including those consisting of or relating to:

 

(a)

any environmental, health or safety matter or condition (including on-site or off-site contamination, occupational safety and health and regulation of any chemical substance or product);

(b)

any fine, penalty, judgment, award, settlement, legal or administrative proceeding, damages, loss, claim, demand or response, remedial or inspection cost or expense arising under any Environmental Law or Occupational Safety and Health Law;

(c)

financial responsibility under any Environmental Law or Occupational Safety and Health Law for cleanup costs or corrective action, including any cleanup, removal, containment or other remediation or response actions ("Cleanup") required by any Environmental Law or Occupational Safety and Health Law (whether or not such Cleanup has been required or requested by any Governmental Body or any other Person) and for any natural resource damages; or

(d)

any other compliance, corrective or remedial measure required under any Environmental Law or Occupational Safety and Health Law.

 

The terms "removal," "remedial" and "response action" include the types of activities covered by the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA).

 

"Environmental Law"--any Legal Requirement that requires or relates to:

 

(a)

advising appropriate authorities, employees or the public of intended or actual Releases of pollutants or hazardous substances or materials, violations of discharge limits or other prohibitions and the commencement of activities, such as resource extraction or construction, that could have significant impact on the Environment;

(b)

preventing or reducing to acceptable levels the Release of pollutants or hazardous substances or materials into the Environment;

(c)

reducing the quantities, preventing the Release or minimizing the hazardous characteristics of wastes that are generated;

(d)

assuring that products are designed, formulated, packaged and used so that they do not present unreasonable risks to human health or the Environment when used or disposed of;

(e)

protecting resources, species or ecological amenities;

(f)

reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil or other potentially harmful substances;

(g)

cleaning up pollutants that have been Released, preventing the Threat of Release or paying the costs of such clean up or prevention; or

 

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(h)

making responsible parties pay private parties, or groups of them, for damages done to their health or the Environment or permitting self-appointed representatives of the public interest to recover for injuries done to public assets.

 

"Exchange Act"--the Securities Exchange Act of 1934.

 

"Exclusive License"--as defined in Section 2.1.

 

"Facilities"--any real property, leasehold or other interest in real property currently owned or operated by PRB, including the Tangible Personal Property used or operated by PRB at the respective locations of the Real Property specified in Section 3.7. Notwithstanding the foregoing, for purposes of the definitions of "Hazardous Activity" and "Remedial Action" and Sections 3.8 and 11.3, "Facilities" shall mean any real property, leasehold or other interest in real property currently or formerly owned or operated by PRB, including the Tangible Personal Property used or operated by PRB at the respective locations of the Real Property specified in Section 3.7.

 

"GAAP"--generally accepted accounting principles for financial reporting in the United States, applied on a basis consistent with the basis on which the Balance Sheet and the other financial statements referred to in Section 3.4 were prepared.

 

"Governing Documents"--with respect to any particular entity, (a) if a corporation, the articles or certificate of incorporation and the bylaws; (b) if a general partnership, the partnership agreement and any statement of partnership; (c) if a limited partnership,  the limited partnership agreement and the certificate of limited partnership; (d) if a limited liability company, the articles of organization and operating agreement; (e) if another type of Person, any other charter or similar document adopted or filed in connection with the creation, formation or organization of the Person; (f) all equityholders' agreements, voting agreements, voting trust agreements, joint venture agreements, registration rights agreements or other agreements or documents relating to the organization, management or operation of any Person or relating to the rights, duties and obligations of the equityholders of any Person; and (g) any amendment or supplement to any of the foregoing.

 

"Governmental Authorization"--any Consent, license, registration or permit issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

 

"Governmental Body"--any:

 

(a)

nation, state, county, city, town, borough, village, district or other jurisdiction;

(b)

federal, state, local, municipal, foreign or other government;

(c)

governmental or quasi-governmental authority of any nature (including any agency, branch, department, board, commission, court, tribunal or other entity exercising governmental or quasi-governmental powers);

(d)

multinational organization or body;

 

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(e)

body exercising, or entitled or purporting to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; or

(f)

official of any of the foregoing.

 

"Hazardous Activity"--the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment or use (including any withdrawal or other use of groundwater) of Hazardous Material in, on, under, about or from any of the Facilities or any part thereof into the Environment and any other act, business, operation or thing that increases the danger, or risk of danger, or poses an unreasonable risk of harm, to persons or property on or off the Facilities.

 

"Hazardous Material"--any substance, material or waste which is or will foreseeably be regulated by any Governmental Body, including any material, substance or waste which is defined as a "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "contaminant," "toxic waste" or "toxic substance" under any provision of Environmental Law, and including petroleum, petroleum products, asbestos, presumed asbestos-containing material or asbestos-containing material, urea formaldehyde and polychlorinated biphenyls.

 

"Indemnified Person"--as defined in Section 11.6.

 

"Indemnifying Person"--as defined in Section 11.6.

 

"Intellectual Property Assets"--as defined in Section 3.9(a).

 

"Interim Balance Sheet"--as defined in Section 3.4.

 

"Inventories"--all inventories of PRB, wherever located, including all finished goods, work in process, raw materials, spare parts and all other materials and supplies to be used or consumed by PRB in the production of finished goods.

 

"IRS"--the United States Internal Revenue Service and, to the extent relevant, the United States Department of the Treasury.

 

"Knowledge"--an individual will be deemed to have Knowledge of a particular fact or other matter if:

 

(a)

that individual is actually aware of that fact or matter; or

(b)

a prudent individual could be expected to discover or otherwise become aware of that fact or matter in the course of conducting a reasonably comprehensive investigation regarding the accuracy of any representation or warranty contained in this Agreement.

 

 

A Person (other than an individual) will be deemed to have Knowledge of a particular fact or other matter if any individual who is serving, or who has at any time served, as a director, officer, partner, executor or trustee of that Person (or in any similar capacity) has, or at any time had,

 

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Knowledge of that fact or other matter (as set forth in (a) and (b) above), and any such individual (and any individual party to this Agreement) will be deemed to have conducted a reasonably comprehensive investigation regarding the accuracy of the representations and warranties made herein by that Person or individual.

 

"Legal Requirement"--any federal, state, local, municipal, foreign, international, multinational or other constitution, law, ordinance, principle of common law, code, regulation, statute or treaty.

 

"Liability"--with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such Person.

“Licensed Use”—means use of the Product as a flu vaccine.

 

"Marks"--as defined in Section 3.9(a)(i).

 

"Material Consents"--as defined in Section 7.3.

 

"Order"--any order, injunction, judgment, decree, ruling, assessment or arbitration award of any Governmental Body or arbitrator.

 

"Ordinary Course of Business"--an action taken by a Person will be deemed to have been taken in the Ordinary Course of Business only if that action:

 

(a)

is consistent in nature, scope and magnitude with the past practices of such Person and is taken in the ordinary course of the normal, day-to-day operations of such Person;

(b)

does not require authorization by the board of directors or shareholders of such Person (or by any Person or group of Persons exercising similar authority) and does not require any other separate or special authorization of any nature; and

(c)

is similar in nature, scope and magnitude to actions customarily taken, without any separate or special authorization, in the ordinary course of the normal, day-to-day operations of other Persons that are in the same line of business as such Person.

 

"Patents"--as defined in Section 3.9(a)(ii).

 

"Permitted Encumbrances"--as defined in Section 3.9.

 

"Person"--an individual, partnership, corporation, business trust, limited liability company, limited liability partnership, joint stock company, trust, unincorporated association, joint venture or other entity or a Governmental Body.

 

"Proceeding"--any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, judicial or investigative, whether formal or informal,

 

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whether public or private) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

 

“Product”—means Vira 38 and Vira 38 FluStat, as described on SCHEDULE 2.1(a) .

 

"Purchase Price"--as defined in Section 2.3.

 

"Record"--information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

 

"Related Person"--

 

With respect to a particular individual:

 

(a)

each other member of such individual's Family;

(b)

any Person that is directly or indirectly controlled by any one or more members of such individual's Family;

(c)

any Person in which members of such individual's Family hold (individually or in the aggregate) a Material Interest; and

(d)

any Person with respect to which one or more members of such individual's Family serves as a director, officer, partner, executor or trustee (or in a similar capacity).

 

With respect to a specified Person other than an individual:

 

(a)

any Person that directly or indirectly controls, is directly or indirectly controlled by or is directly or indirectly under common control with such specified Person;

(b)

any Person that holds a Material Interest in such specified Person;

(c)

each Person that serves as a director, officer, partner, executor or trustee of such specified Person (or in a similar capacity);

(d)

any Person in which such specified Person holds a Material Interest; and

(e)

any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity).

 

For purposes of this definition, (a) "control" (including "controlling," "controlled by," and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and shall be construed as such term is used in the rules promulgated under the Securities Act; (b) the "Family" of an individual includes (i) the individual, (ii) the individual's spouse, (iii) any other natural person who is related to the individual or the individual's spouse within the second degree and (iv) any other natural person who resides with such individual; and (c) "Material Interest" means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities or other voting interests representing at least ten percent (10%) of the outstanding voting power of a Person or equity securities or other equity interests representing at least ten percent (10%) of the outstanding equity securities or equity interests in a Person.

 

 

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"Release"--any release, spill, emission, leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching or migration on or into the Environment or into or out of any property.

 

"Remedial Action"--all actions, including any capital expenditures, required or voluntarily undertaken (a) to clean up, remove, treat or in any other way address any Hazardous Material or other substance; (b) to prevent the Release or Threat of Release or to minimize the further Release of any Hazardous Material or other substance so it does not migrate or endanger or threaten to endanger public health or welfare or the Environment; (c) to perform pre-remedial studies and investigations or post-remedial monitoring and care; or  (d) to bring all Facilities and the operations conducted thereon into compliance with Environmental Laws and environmental Governmental Authorizations.

 

"Representative"--with respect to a particular Person, any director, officer, manager, employee, agent, consultant, advisor, accountant, financial advisor, legal counsel or other representative of that Person.

 

"Retained Liabilities"--as defined in Section 2.4(b).

 

"SEC"--the United States Securities and Exchange Commission.

 

"Section"--a part or section of the Disclosure Letter.

 

"Securities Act”--the Securities Act of 1933.

 

"PRB"--as defined in the first paragraph of this Agreement.

 

“PRB Accounts Receivable”—as defined in Section 2.2(b).

 

"PRB Contract"--as defined in Section 2.1(a).

 

"Shareholders"--as defined in the first paragraph of this Agreement.

 

“Shares”—as defined in Section 2.3.

 

"Subsidiary"--with respect to any Person (the "Owner"), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation's or other Person's board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred), are held by the Owner or one or more of its Subsidiaries.

 

"Tangible Personal Property"--all machinery, equipment, tools, furniture, office equipment, computer hardware, supplies, materials, vehicles and other items of tangible personal property (other than Inventories) of every kind owned or leased by PRB (wherever located and whether or not carried on PRB's books), together with any express or implied warranty by the manufacturers or

 

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PRBs or lessors of any item or component part thereof and all maintenance records and other documents relating thereto.

 

"Tax"--any income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental, windfall profit, customs, vehicle, airplane, boat, vessel or other title or registration, capital stock, franchise, employees' income withholding, foreign or domestic withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, value added, alternative, add-on minimum and other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever and any interest, penalty, addition or additional amount thereon imposed, assessed or collected by or under the authority of any Governmental Body or payable under any tax-sharing agreement or any other Contract.

 

"Tax Return"--any return (including any information return), report, statement, schedule, notice, form, declaration, claim for refund or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.

 

"Third Party"--a Person that is not a party to this Agreement.

 

"Third-Party Claim"--any claim against any Indemnified Person by a Third Party, whether or not involving a Proceeding.

 

"Threat of Release"--a reasonable likelihood of a Release that may require action in order to prevent or mitigate damage to the Environment that may result from such Release.

 

"Technology" means PRB's information and know-how related to the Product and the Intellectual Property Assets.

 

"Territory" means, anywhere in the world except in the United States of America and its territories and possessions, both retail and wholesale sales outlets, including but not limited to drug stores, food stores, health food stores and mass merchandise outlets.

 

"Trademark" means the mark "Vira 38 and “Vira 38 FluStat”, and any other marks used by PRB with the Product in the Territory during the term of this Agreement.

 

SECTION 1.2  USAGE

 

(a)

Interpretation. In this Agreement, unless a clear contrary intention appears:

 

(i)

the singular number includes the plural number and vice versa;

(ii)

reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

(iii)

reference to any gender includes each other gender;

 

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(iv)

reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;

(v)

reference to any Legal Requirement means such Legal Requirement as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Legal Requirement means that provision of such Legal Requirement from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

(vi)

"hereunder," "hereof," "hereto,"  and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof;

(vii)

"including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term;

(viii)

"or" is used in the inclusive sense of "and/or";

(ix)

with respect to the determination of any period of time, "from" means "from and including" and "to" means "to but excluding"; and

(x)

references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

 

(b)

Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP.

 

(c)

Legal Representation of the Parties. This Agreement was negotiated by the parties with the benefit of legal representation, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction or interpretation hereof.

 

Article 2.

Exclusive License; Asset Purchase; Closing

 

SECTION 2.1  EXCLUSIVE LICENSE

 

(a)

Pursuant to the terms of this Agreement, PRB hereby appoints PACIFIC as the exclusive licensee: (a) to market, sell and distribute the Product (described on SCHEDULE 2.1(a) ) in the Territory, and (b) to use the Trademark, Technology and Intellectual Property Assets in the Territory solely in connection with marketing, selling and distributing the Product, both solely for the Licensed Use in the Territory (the “Exclusive License”).

 

(b)

For purposes of this Agreement, "exclusive" shall mean that PRB will not directly or indirectly market, sell or distribute the Product to: (1) any other person or entity in the Territory for the Licensed Use in the Territory; or (2) any other person or entity outside the Territory to market, sell or distribute the Product for the Licensed Use in the Territory.

 

 

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(c)

PACIFIC will not directly or indirectly market, promote, encourage, exploit, offer for sale or sell, or otherwise dispose of the Product: (a) outside the Territory; or (b) inside the Territory for use other than the Licensed Use, without prior written consent from PRB.

 

(d)

If, during the term of this Agreement, PRB, PACIFIC, or jointly PRB or the Shareholders and PACIFIC, develop or otherwise modify or acquire any modifications to the Technology, the Intellectual Property Assets or to the formulation of the Product, such modifications shall be the sole and exclusive property of PACIFIC.

 

(e)

PACIFIC shall promote, market, and sell the Product for the Licensed Use in the Territory. PRB shall from time to time furnish PACIFIC with Technology as and to the extent PRB reasonably determines to assist PACIFIC's efforts to promote, market, and sell the Product for the Licensed Use in the Territory.

 

(f)

PRB and the Shareholders shall also furnish such additional Technology as PACIFIC may reasonably request in connection with any regulatory compliance regarding the promotion, marketing, or sale of the Product for the Licensed Use in the Territory.

 

(g)

PRB shall be responsible for all decisions and actions regarding regulatory matters relating to or involving the Product. PRB shall, with respect to any such regulatory matters, (a) act as liaison with the FDA or other governmental authority; (b) prepare and make all submissions regarding the regulatory matter; (c) monitor all studies pertinent to the regulatory matter; and (d) obtain regulatory approvals, as reasonably deemed necessary by PRB. PACIFIC shall promptly cooperate with PRB with respect to such regulatory matters by providing data and information at PRB's reasonable request. Nevertheless, PACIFIC shall maintain its own counsel for FDA or other regulatory matters, for the sole purpose of advising PACIFIC with regard to such regulatory matters and to any data, information, or suggestions that PACIFIC may provide to PRB, either at PRB's request or at PACIFIC's discretion.

 

(h)

Each of the parties shall promptly notify the other party in writing of any technical or clinical advances, useful modifications, side effects, or new government regulations relating to the Product that shall come to its knowledge. PRB must promptly inform PACIFIC of all actions and communications (even if believed by PRB to be without foundation) by or threatened by a regulatory or other governmental authority outside of the Territory relating to the Product.

 

SECTION 2.2  ASSIGNMENT OF CONTRACTS AND ACCOUNTS RECEIVABLE

 

Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, but effective as of the Effective Time, Seller shall assign, transfer and deliver to Buyer, and Buyer shall assume from Seller, free and clear of any Encumbrances other than Permitted Encumbrances, all of Seller's right, title and interest in and to the following assets of Seller (but excluding the Excluded Assets):

 

(a)

Contracts. The contracts  as described on SCHEDULE 2.2(a) attached hereto (“PRB Contracts”), including those listed in Section 3.7(a); and

 

 

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(b)

Accounts Receivable.  Accounts receivable on account of the distribution contract described on SCHEDULE 2.2(b) .

 

All of the contracts to be transferred to PACIFIC hereunder are herein referred to collectively as the "Assets."

 

Notwithstanding the foregoing, the transfer of the Assets pursuant to this Agreement shall not include the assumption of any Liability related to the Assets unless PACIFIC expressly assumes that Liability pursuant to Section 2.4(a).

 

SECTION 2.3  CONSIDERATION

 

The consideration for the Exclusive License and Assets (the "Purchase Price") will be: (a) Ten Million Five Hundred Thousand (10,500,000) shares of common stock, no par value, of PACIFIC (the “Shares”); (b) a royalty of two percent (2%) on annual gross revenues attributable to sales of the Product, provided that in no case shall the annual royalty exceed One Million Dollars ($1,000,000); and (c) the assumption of the Assumed Liabilities (as defined below). The Purchase Price shall be delivered to PRB in accordance with Section 2.7(b) at the Closing.

 

SECTION 2.4  LIABILITIES

 

(a)

Assumed Liabilities. On the Closing Date, but effective as of the Effective Time, PACIFIC shall assume and agree to discharge only the following Liabilities of PRB (the "Assumed Liabilities"): any Liability arising after the Effective Time under the PRB Contracts described in Section 2.2(b) (other than any Liability arising out of or relating to a Breach that occurred prior to the Effective Time).

 

(b)

Retained Liabilities. The Retained Liabilities shall remain the sole responsibility of and shall be retained, paid, performed and discharged solely by PRB. "Retained Liabilities" shall mean every Liability of PRB other than the Assumed Liabilities, including:

 

(i)

any Liability arising out of or relating to products of PRB to the extent manufactured or sold prior to the Effective Time other than to the extent assumed under Section 2.4(a);

 

(ii)

any Liability under any Contract assumed by PACIFIC pursuant to Section 2.4(a) that arises after the Effective Time but that arises out of or relates to any Breach that occurred prior to the Effective Time;

 

(iii)

any Liability for Taxes, including (A) any Taxes arising as a result of PRB's operation of its business or ownership of the Assets prior to the Effective Time, (B) any Taxes that will arise as a result of the sale of the Assets pursuant to this Agreement and (C) any deferred Taxes of any nature;

 

 

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(iv)

any Liability under any Contract not assumed by PACIFIC under Section 2.4(a), including any Liability arising out of or relating to PRB's credit facilities or any security interest related thereto;

 

(v)

any Liability of PRB to any Shareholder or Related Person of PRB or any Shareholder;

 

(vi)

any Liability to indemnify, reimburse or advance amounts to any officer, director, employee or agent of PRB;

 

(vii)

any Liability to distribute to any of PRB's shareholders or otherwise apply all or any part of the consideration received hereunder;

 

(viii)

any Liability arising out of any Proceeding pending as of the Effective Time;

 

(ix)

any Liability arising out of any Proceeding commenced after the Effective Time  and arising out of or relating to any occurrence or event happening prior to the Effective Time;

 

(x)

any Liability arising out of or resulting from PRB's compliance or noncompliance with any Legal Requirement or Order of any Governmental Body;

 

(xi)

any Liability of PRB under this Agreement or any other document executed in connection with the Contemplated Transactions; and

 

(xii)

any Liability of PRB based upon PRB's acts or omissions occurring after the Effective Time.

 

 

SECTION 2.5  ALLOCATION

 

The Purchase Price shall be allocated in accordance with Exhibit 2.5.  After the Closing, the parties shall make consistent use of the allocation, fair market value and useful lives specified in Exhibit 2.5 for all Tax purposes and in all filings, declarations and reports with the IRS in respect thereof, including the reports required to be filed under Section 1060 of the Code.  PACIFIC shall prepare a