Emmaus Life Sciences,Inc.Files An 8-K Entry into a Material Definitive Agreement

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Emmaus Life Sciences,Inc.Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement

On June 12, 2017, Emmaus Life Sciences, Inc. (“we,” “our,” “us,” “Emmaus,” or the “Company”) entered into a Management Control Acquisition Agreement (the “MCAA”) with Telcon Holdings Corporation (“Telcon Holdings”), a Korean corporation, and Telcon Inc. (“Telcon”), a Korean-based public company whose shares are listed on KOSDAQ, a trading board of Korea Exchange in South Korea. The MCAA provides that the Emmaus will invest $35.5 Billion KRW (approximately $31.3 million USD) to purchase 6,501,831 shares of Telcon’s common stock shares at a purchase price of 5,460 KRW (approximately $4.83 USD) per share. Upon consummation of the MCAA, Emmaus will be Telcon’s largest shareholder owning approximately 10.0% of Telcon’s outstanding common stock shares.

The MCAA further provides that Telcon will hold board of directors and shareholders meetings on June 27, 2017 or the date agreed to by both parties for Emmaus to assume management control of Telcon and to elect seven board members as follows: one member appointed by Telcon Holdings; two members appointed by Vivozon, Inc.; and four members appointed by Emmaus, including the Chairman of the Board and the Chief Executive Officer.

Under the MCAA, Telcon and Telcon Holdings make certain representations and warranties, including that Telcon Holdings must ensure that Emmaus is not threatened by hostile mergers and acquisitions, and Telcon Holding grants to Emmaus the first right of refusal to purchase Telcon shares owned by Telcon Holdings and if Telcon shares sold by Telcon Holdings are used to vote against Emmaus, Telcon Holdings agrees to compensate Emmaus for any damages Emmaus incurs, unless the share transfer was previously agreed by Emmaus. In addition, Telcon agrees to take the necessary procedures to amend its articles of incorporation and bylaws as necessary to comply with the MCAA.

In connection with the execution of the MCAA, on June, 12, 2017, Emmaus entered into an API Supply Agreement (the “API Agreement”) with Telcon to which Telcon will pay Emmaus about $36 billion KRW (approximately $31.8 million USD) in consideration of the right to supply 25% of Emmaus requirements for bulk containers of Pharmaceutical Grade L-glutamine for a fifteen-year term. Under the API Agreement, Emmaus guarantees that each calendar year, for the duration of the term, Telcon will receive at least $5 million USD revenue and an annual profit of $2.5 million USD and grants to Telcon a security interest in shares of KPM Tech common stock held by the Emmaus until the first $5 million in revenue and $2.5 million in profit are reached.

Additionally, on June 15, 2017, Emmaus and Telcon entered into exclusive distribution agreements for the distribution of L-glutamine powder for diverticulosis treatment for the Australia territory, and the South Korea, Japan and China Territories, respectively (each a “Distribution Agreement” and collectively, the “Distribution Agreements”). Each Distribution Agreement is for a two-year term which is to automatically renew for an additional one-year period, unless terminated by either party by written notice given no less than 30 days prior to lapse of the initial term. Further, in consideration of the exclusive distribution rights under the South Korea, Japan and China Distribution Agreement, Telcon agrees to make an upfront payment of $5 million USD to Emmaus by June 19, 2017 and another payment of $5 million USD within one month after December 27, 2017. Under the Australia Distribution Agreement,


Telcon agrees to make a payment of $5 million to Emmaus within two months after December 27, 2017. Under the Distribution Agreements, Telcon shall use commercially reasonable best efforts to maintain a competent and experienced sales force sufficient to adequately serve each territory and use commercially reasonable best efforts to actively and diligently promote the sale of the products in the territories. Telcon has the sole authority to determine the prices of the products sold by it during the term and to establish its own pricing policy for the products in the territories, including price increases or decreases.


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