UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K 

 

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported) March 9, 2020

 

 

 

Menlo Therapeutics Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware 001-38356 45-3757789

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification Number)

 

520 U.S. Highway 22, Suite 204

Bridgewater, New Jersey 08807

(Address of principal executive offices, including Zip Code)

 

(800) 755-7936

(Registrant’s telephone number, including area code)

 

200 Cardinal Way, 2nd Floor
Redwood City, California 94063

(Former name or former address, if changed since last report)

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading
Symbol(s) 		 

Name of each exchange

on which registered 

Common Stock, $0.0001 par value   MNLO   The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company  x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  x

 

 

 

 

 

Introductory Note

 

On March 9, 2020 (the “Closing Date”), pursuant to the Agreement and Plan of Merger, dated as of November 10, 2019, as amended on December 4, 2019 (as amended, the “Merger Agreement”), by and among Menlo Therapeutics Inc. (“Menlo” or the “Company”), Foamix Pharmaceuticals Ltd., a company organized under the laws of Israel (“Foamix”), and Giants Merger Subsidiary Ltd., a direct, wholly owned subsidiary of the Company (“Merger Sub”), Merger Sub merged with and into Foamix, with Foamix surviving as a wholly owned subsidiary of the Company (the “Merger”).

 

Item 1.01     Entry into a Material Definitive Agreement

 

CSR Agreement

 

On the Closing Date, Menlo and American Stock Transfer & Trust Company, LLC entered into a Contingent Stock Rights Agreement (the “CSR Agreement”) governing the terms of the contingent stock rights (the “CSRs”) received by Foamix’s shareholders. Pursuant to the CSR Agreement, each CSR will become convertible upon the occurrence of the following triggering events (and upon certain triggering events will entitle its holder to receive from Menlo a number of shares of Menlo common stock, par value $0.0001 per share (the “Menlo Common Stock”)):

 

(A) If the top-line primary endpoint results of one or both of the Phase III double-blinded, placebo-controlled trials for the treatment of pruritus associated with prurigo nodularis, referenced by Protocol Numbers MTI-105 (United States) and MTI-106 (Europe) (each, a “Phase III PN Trial”) (the “Efficacy Determination”) reports that Serlopitant Significance (as defined in the Merger Agreement) was achieved in both Phase III PN Trials on or before May 31, 2020, then each CSR will be terminated and the holders thereof will not be entitled to additional shares of Menlo Common Stock;

 

(B) If the Efficacy Determination reports that (1) Serlopitant Significance was achieved in only one Phase III PN Trial on or before May 31, 2020 and (2) Serlopitant Significance was not achieved or has not been determined on or before May 31, 2020 in the other Phase III PN Trial, then each CSR will be converted into 0.6815 shares of Menlo Common Stock, resulting in an effective exchange ratio in the Merger of 1.2739 shares of Menlo Common Stock for each Foamix Share (as defined below); and

 

(C) If the Efficacy Determination reports that Serlopitant Significance was not achieved in either of the Phase III PN Trials or the Efficacy Determination has not been delivered on or before May 31, 2020, then each CSR will be converted into 1.2082 shares of Menlo Common Stock, resulting in an effective exchange ratio in the Merger of 1.8006 shares of Menlo Common Stock for each Foamix Share.

 

No fractional shares of Menlo Common Stock will be issued upon the conversion of the CSRs, and former Foamix shareholders will receive cash in lieu of fractional shares, as specified in the CSR Agreement.

 

If the CSRs become convertible, each person holding a Foamix restricted stock unit award immediately prior to the Effective Time (as defined below) will get additional Menlo restricted stock unit awards based on the additional shares that each Foamix Share will get upon conversion of a CSR. Similarly, if the CSRs become convertible post-closing, then the Menlo board of directors (the “Board”) will make equitable adjustments to the exercise price per share of and the number of shares of Menlo common stock that are subject to Menlo options that were issued in exchange for Foamix options on the Closing Date. Each Foamix warrant assumed by Menlo on the Closing Date will become exercisable for (in addition to the number of Menlo shares issuable based on the Exchange Ratio (as defined in Item 2.01 below) multiplied by the number of Foamix Shares underlying the warrant immediately prior to the Closing Date) one CSR for each Foamix share that the holder of such Foamix warrant would have been entitled to receive had such Foamix warrant been exercised prior to the Closing Date.

 

The CSRs are not transferable except under certain limited circumstances, will not be evidenced by a certificate or other instruments and will not be registered or listed for trading. The CSRs do not have any voting or dividend rights and do not represent any equity or ownership interest in Menlo, Foamix or any of their affiliates.

 

There can be no assurance that Serlopitant Significance will be achieved in either of the Phase III PN Trials.

 

 

 

The foregoing description of the CSR Agreement does not purport to be complete and is qualified in its entirety by reference to the CSR Agreement, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

 

Credit Facility

 

As previously disclosed by Foamix, in connection with entering into the Merger Agreement, Foamix also entered into a Waiver and Consent to Credit Agreement and Guaranty (the “Waiver Agreement”) among Foamix, Foamix Pharmaceuticals Inc., a Delaware corporation (the “Borrower”), the lenders party thereto, and Perceptive Credit Holdings II, LP, as administrative agent for the lenders (the “Administrative Agent”), relating to the Credit Agreement and Guaranty, dated as of July 29, 2019 (the “Credit Agreement”). Pursuant to the Waiver Agreement, the lenders under the Credit Agreement, among other things, (i) granted consent to Foamix’s entry into the Merger Agreement and waived events of default under the Credit Agreement that would result therefrom and (ii) granted consent to the consummation of the transactions set forth under the Merger Agreement and waived certain events of default under the Credit Agreement as would result therefrom, subject, in each case, to satisfaction of certain closing conditions as specified therein (including amendments to the Credit Agreement and other applicable loan documents so as to ensure that Menlo becomes a guarantor and an obligor under the Credit Agreement and grants a first priority security interest in substantially all of Menlo’s assets).

 

Accordingly, on the Closing Date, Menlo, Foamix, the Borrower, the Administrative Agent and the lenders party thereto (the “Lenders”) amended and restated the existing Credit Agreement pursuant to that certain Amended and Restated Credit Agreement and Guaranty (the “Amended Credit Agreement”). As a result of entering into the Amended Credit Agreement, Menlo (along with Foamix and the Borrower) is an obligor and a guarantor of the Borrower’s indebtedness obligations under the Amended Credit Agreement and in that regard has granted a first-priority lien on substantially all of its assets (subject to limited exceptions).

 

The Amended Credit Agreement provides a senior secured delayed draw term loan facility (the “Credit Facility”) to the Borrower in an aggregate principal amount of up to $50 million, of which $35 million remains outstanding as of the Closing Date. The Borrower will be permitted to borrow an additional $15 million before September 30, 2020 provided that the Borrower achieves certain revenue targets set forth in the Amended Credit Agreement. The Credit Facility will mature on July 29, 2024 (the “Maturity Date”).

 

Interest Rate

 

As set forth in the Amended Credit Agreement, any outstanding principal amount of the loans accrue interest monthly at a rate equal to the sum of (i) 8.25% (subject to increase in accordance with the terms of the Amended Credit Agreement) (the “Applicable Margin”) plus (ii) the greater of (x) the one-month LIBOR and (y) two and three-quarters percent (2.75%).

 

No scheduled repayments of the principal amount outstanding under the Amended Credit Agreement is required to be made prior to July 2023. Thereafter, on each payment date prior to the scheduled Maturity Date, the Borrower is required to make a payment on the loans in an amount equal to one and one half percent (1.5%) of the aggregate principal amount of the loans outstanding on July 29, 2023.

 

Representations, Warranties, Covenants and Events of Default

 

The Amended Credit Agreement contains certain representations and warranties, affirmative covenants, negative covenants, financial covenants, and conditions that are customarily required for similar financings. The negative covenants, among other things and subject to certain exceptions contained in the Amended Credit Agreement, include limitations on the ability of each of Menlo, Foamix, the Borrower, and the Subsidiary Guarantors regarding incurring additional indebtedness, granting liens, entering into mergers or acquisitions, making investments, paying dividends and entering into transactions with affiliates. In addition, Menlo and its subsidiaries (including Foamix) on a consolidated basis must (i) at all times maintain a minimum aggregate cash balance of $2.5 million and (ii) as of the last day of each fiscal quarter commencing on the fiscal quarter ending September 30, 2020, receive a minimum net revenue for the trailing 12-month period in amounts set forth in the Amended Credit Agreement, which range from $10.5 million for the fiscal quarter ending September 30, 2020 to $109.5 million for the fiscal quarter ending June 30, 2024.

 

 

 

The Amended Credit Agreement also contains certain customary Events of Default which include, among others, non-payment of principal, interest, or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments, cross-defaults to material contracts, certain regulatory-related events and events constituting a Change of Control (as defined in the Amended Credit Agreement). The occurrence of an Event of Default could result in, among other things, the declaration that all outstanding principal and interest under the loans are immediately due and payable in whole or in part.

 

Other Related Matters

 

The foregoing summary of the Amended Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the Amended Credit Agreement, a copy of which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2020.

 

The representations, warranties, and covenants contained in the Amended Credit Agreement and related documentation were made solely for purposes of such documents and as of specific dates, were made solely for the benefit of the parties to the applicable documents, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Amended Credit Agreement and such other documents instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to stockholders. The Company’s stockholders are not third-party beneficiaries under the foregoing agreements and should not rely on the representations, warranties, and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Menlo, Foamix, the Borrower, or any of its Subsidiary Guarantors or other affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the documents, which subsequent information may or may not be fully reflected in the Company’s public disclosure.

 

Item 2.01      Completion of Acquisition or Disposition of Assets

 

The disclosures under the Introductory Note are incorporated herein by reference.

 

At the effective time of the Merger (the “Effective Time”), each ordinary share, par value NIS 0.16 per share, of Foamix (“Foamix Shares”) issued and outstanding immediately prior to the Effective Time was deemed transferred under Israeli law to the Company in exchange for the right to receive (i) 0.5924 (the “Exchange Ratio”) of a share of Menlo Common Stock and (ii) one CSR, which is subject to the terms and conditions of the CSR Agreement described above (collectively, the “Merger Consideration”). No fractional shares of Menlo Common Stock were issued in the Merger, and former Foamix shareholders are entitled to receive cash in lieu of any such fractional shares.

 

Also, at the Effective Time, each Foamix option and Foamix restricted stock unit award that was outstanding immediately prior to the Effective Time was assumed by the Company. Each Foamix restricted stock unit award was converted into a restricted stock unit award relating to Menlo Common Stock (an “Adjusted RSU Award”) and has the same terms and conditions as applied to the Foamix restricted stock unit award immediately prior to the Effective Time. The Adjusted RSU Award will settle in the number of shares of Menlo Common Stock equal to the product obtained by multiplying (i) the number of Foamix Shares subject to the Foamix restricted stock unit award immediately prior to the Effective Time by (ii) the Exchange Ratio. Additionally, at the Effective Time, each Foamix option was converted into an option to purchase Menlo Common Stock (an “Adjusted Option”) with the same terms and conditions as applied to the Foamix option immediately prior to the Effective Time; however, the Adjusted Option covers a number of shares of Menlo Common Stock equal to the product of (i) the number of Foamix Shares subject to the Foamix option immediately prior to the Effective Time and (ii) the Exchange Ratio, and has an exercise price per share equal to the quotient of (i) the exercise price per Foamix Share subject to such Foamix option immediately prior to the Effective Time divided by (ii) the Exchange Ratio.

 

 

 

Also, at the Effective Time, each warrant to purchase Foamix Shares has been assumed by the Company and converted into a warrant that upon its exercise will entitle the holder to receive such number of shares of Menlo Common Stock and CSRs that the holder of such warrant would have been entitled to receive had such warrant been exercised prior to the Effective Time (each such warrant, a “Menlo Warrant”). Promptly following the conversion of each CSR into shares of Menlo Common Stock or alternatively the termination of the CSRs, in each case in accordance with the terms of the CSR Agreement, each Menlo Warrant will be amended and restated in accordance with its terms to reflect that such warrant will no longer be exercisable for CSRs but instead will entitle the holder to receive upon the exercise of such warrant, such number of additional shares of Menlo Common Stock, if any, that the CSRs which the holder was entitled to receive upon exercise of the Menlo Warrant would have converted had they been issued to such holder prior to the date on which the CSRs converted into shares of Menlo Common Stock.

 

Upon completion of the Merger, approximately 36.6 million shares of Menlo Common Stock were issued by the Company as consideration for the Merger in respect of issued and outstanding Foamix Shares and immediately after completion of the Merger, there were approximately 61.1 million shares of Menlo Common Stock outstanding.

 

The issuance of Menlo Common Stock in connection with the Merger, as described above, was registered under the Securities Act of 1933, as amended, pursuant to the Company’s registration statement on Form S-4 (File No. 333- 235351), filed with the Securities and Exchange Commission (the “SEC”) and declared effective on January 7, 2020.

 

The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement that was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 12, 2019, and the full text of the amendment to the Merger Agreement that was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 4, 2019, each of which is incorporated herein by reference. The foregoing description of each Menlo Warrant does not purport to be a complete description and is qualified in its entirety by reference to the full text of the form of Menlo Warrant, which is attached hereto as Exhibit 4.1 and is incorporated herein by reference.

 

Item 2.03      Creation of a Direct Financial Obligation or an Obligation Under an Off- Balance Sheet Arrangement of a Registrant

 

The information included under the heading “Credit Facility” in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.

 

Item 3.03      Material Modification to the Rights of Security Holders

 

The information set forth in Items 2.01 and 5.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.03.

 

Item 5.01      Changes in Control of Registrant

 

The information set forth in the Introductory Note and Item 2.01 of this Current Report on Form 8-K is incorporated by reference into this Item 5.01.

 

In accordance with the Merger Agreement, on March 9, 2020, immediately prior to the Effective Time, each of the directors of the Company, other than Elisabeth Sandoval, resigned from the Board. Following such resignations and effective as of the Effective Time, Steve Basta was reappointed as a director of the Company and the following individuals, all of whom were directors of Foamix prior to the Merger, were appointed to the Board: Sharon Barbari and Rex Bright, as directors whose terms expire at the Company’s 2020 annual meeting of stockholders; David Domzalski and Stanley Hirsch, as directors whose terms will expire at the Company’s 2021 annual meeting of stockholders; and Anthony Bruno, as a director whose term will expire at the Company’s 2022 annual meeting of stockholders. Mr. Basta’s and Ms. Sandoval’s term will expire at the Company’s 2022 annual meeting of stockholders.

 

 

 

Item 5.02      Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

Resignations of Executive Officers and Directors of the Company

 

In accordance with the Merger Agreement, on March 9, 2020, immediately prior to the Effective Time, (i) Mr. Basta resigned as President, Chief Executive Officer and Principal Executive Officer, (ii) Kristine Ball resigned as Senior Vice President, Corporate Strategy, Chief Financial Officer and Principal Financial and Accounting Officer, (iii) Paul Kwon resigned as Chief Scientific Officer, and (iv) Paul Berns, Ted Ebel, David McGirr and Scott Whitcup resigned from the Board and any respective committee of the Board to which they belonged, which resignations were not the result of any disagreements with the Company relating to the Company’s operations, policies or practices.

 

Appointment of Certain Officers of the Company

 

In accordance with the Merger Agreement, on March 9, 2020, the Board appointed the following officers of the Company, effective immediately after the Effective Time:

 

David Domzalski (age 53) is the Company’s Chief Executive Officer and also serves as a director. From July 2017 until the Closing Date, Mr. Domzalski served as the Chief Executive Officer of Foamix. He also served as a director of Foamix beginning in January 2018. Mr. Domzalski’s tenure with Foamix began in April 2014 and previously served as President of its U.S. subsidiary. Previously, Mr. Domzalski was the Vice President of Sales and Marketing at LEO Pharm Inc. from 2009 to 2013. Mr. Domzalski holds a B.A. in economics and political science from Muhlenberg College, Allentown, Pennsylvania.

 

Ilan Hadar (age 50) is the Company’s Chief Financial Officer. From February 2014 until the Closing Date, Mr. Hadar served as the Chief Financial Officer of Foamix. He also served as Foamix’s Israel Country Manager beginning in July 2017. Mr. Hadar holds a B.A. in business administration and economics and an M.B.A. from The Hebrew University of Jerusalem.

 

Mutya Harsch (age 45) is the Company’s General Counsel and Chief Legal Officer. From January 2019 until the Closing Date, Ms. Harsch served as the General Counsel and Chief Legal Officer of Foamix. She previously served as Foamix’s General Counsel and Senior Vice President of Legal Affairs from January 2018 to January 2019. Ms. Harsch has over 19 years of legal experience, previously holding positions as Special Counsel, Mergers & Acquisitions at Cooley LLP from 2015 to 2017 and as a corporate lawyer at Davis Polk & Wardwell from 2005 to 2015. Ms. Harsch received her J.D. and B.A. from the University of California at Berkeley.

 

Iain Stuart, Ph.D. (age 47) is the Company’s Chief Scientific Officer. From January 2019 until the Closing Date, Dr. Stuart served as the Chief Scientific Officer of Foamix. Dr. Stuart previously served as Foamix’s Senior Vice President of Research & Development from August 2017 to January 2019 and as Vice President of Clinical Development from October 2016 to 2017. Prior to joining Foamix, Dr. Stuart held several positions, including Vice President of Medical Strategy and Scientific Affairs at LEO Pharma, Inc. from 2008 to 2016. Dr. Stuart holds a Ph.D. from Glasgow Caledonian University in Scotland.

 

Matthew Wiley (age 48) is the Company’s Chief Commercial Officer. From November 2018 until the Closing Date, Mr. Wiley served as the Chief Commercial Officer of Foamix. Mr. Wiley has more than 20 years of commercial experience across a broad range of specialty pharmaceutical categories. Prior to joining Foamix, Mr. Wiley held several positions of increasing responsibility at Jazz Pharmaceuticals from 2012 to 2018, including as Vice President of Marketing and Business Unit Lead for the company’s sleep disorder portfolio. He holds a B.A. in English from Syracuse University.

 

 

 

Appointment of Non-Employee Directors of the Company

 

In accordance with the Merger Agreement, on March 9, 2020, effective immediately after the Effective Time, the following individuals were appointed to the Board as non-employee directors:

 

Stanley Hirsch, D.Phil. (age 62) served as a director of Foamix from February 2005 until the Closing Date and as its chairman since May 2016. Dr. Hirsch has over 30 years of experience in executive positions, including director of business development for a privately held group of healthcare companies. He has also served as general manager of two diagnostics development companies. Dr. Hirsch has served as Chief Executive Officer of FuturaGene Ltd. and its predecessor company, CBD Technologies Ltd., since 1995, and has also held the position of General Manager of Portman Pharmaceutical Industries. Since the acquisition of FuturaGene Plc by Suzano Pulp and Paper, a Brazilian industrial public corporation in July 2010, he has held a position equivalent to a vice president at Suzano. Dr. Hirsch currently serves as chairman of the board of directors of OWC Pharmaceutical Research Corp, a position he has held since July 2017. Dr. Hirsch holds a D. Phil. in Cell Biology and Immunology from Oxford University, England.

 

Rex Bright (age 79) served as a director of Foamix from September 2014 until the Closing Date. Mr. Bright is currently retired, but previously held chief executive officer positions in the health care industry for over 20 years. Mr. Bright was the co-founder and Chief Executive Officer of SkinMedica, a specialty pharmaceutical business that was later acquired by Allergan in 2012. Mr. Bright also held executive positions for Johnson & Johnson and GlaxoSmithKline. Mr. Bright previously served as a director of RestorGenex Corporation until 2016 when the company was acquired. Mr. Bright holds a B.A. in Business Administration and Marketing from Drury University.

 

Anthony Bruno (age 63) served as a director of Foamix from November 2018 until the Closing Date. Mr. Bruno also served as a strategic advisor to Foamix from 2014 until August 2018. Mr. Bruno is currently retired. He previously served as a strategic consultant to various healthcare-focused investment funds from 2011 to January 2018 and was employed at Warner Chilcott from 2000 to 2011, most recently as Executive Vice President, with responsibility for all business development activities including product acquisitions and divestitures as well as licensing agreements. Mr. Bruno also spent 16 years at Warner Lambert, holding several positions of increasing strategic responsibility. Mr. Bruno began his legal career as an associate with Shearman & Sterling. Mr. Bruno holds a B.A. in Political Science from Syracuse University, and a J.D. from The George Washington University Law School.

 

Sharon Barbari (age 65) served as a director of Foamix from January 2019 until the Closing Date. She is currently retired. She previously served as the Executive Vice President of Finance and Chief Financial Officer of Cytokinetics Inc. from July 2009 to July 2017, and prior to then, she served as Senior Vice President of Finance and Chief Financial Officer from September 2004 through June 2009. From September 2002 to August 2004, Ms. Barbari served as Chief Financial Officer and Senior Vice President of Finance and Administration of InterMune, Inc., a biopharmaceutical company. From January 1998 to June 2002, she served at Gilead Sciences, Inc., a biopharmaceutical company, and held several positions of increasing responsibility including most recently as its Vice President and Chief Financial Officer. Ms. Barbari has served on the board of directors of Sonoma Pharmaceuticals, Inc. since March 2014. Ms. Barbari received a B.S. in Accounting from San Jose State University.

 

Appointment of Directors of Foamix

 

In accordance with the Merger Agreement, on March 9, 2020, effective immediately after the Effective Time, Ilan Hadar and Mutya Harsch were appointed to the board of directors of Foamix as directors.

 

Item 8.01. Other Events.

 

Tax Rulings

 

Under applicable tax laws of Israel, any consideration to Foamix's shareholders and beneficiaries of equity-based compensation is subject to withholding tax obligations.

 

On March 5, 2020, Foamix obtained a ruling from the Israeli tax authority under which all shareholders, registered and others, other than shareholders and beneficiaries of equity-based compensation, that beneficially own 5% or more of Foamix’s share capital shall be exempt from any Israeli tax withholding, with no further action required by them. The consideration to the owners of equity based compensation is or shall be governed by a separate customary tax ruling(s).

 

 

 

On March 8, 2020, Foamix obtained a ruling from the Israeli tax authority under which all non-Israeli equity award holders shall be exempt from any Israeli tax withholding on their consideration subject to the completion of a tax declaration form, as provided in the tax ruling.

 

On March 9, 2020, Foamix obtained a ruling from the Israeli tax authority under which two shareholders that beneficially own more than 5% of Foamix’s share capital, shall be exempt from any Israeli tax withholding on their consideration.

 

Press Release

 

On March 9, 2020, the Company issued a press release announcing the completion of the Merger. A copy of the press release is attached hereto as Exhibit 99.1.

 

Change of Address of Principal Executive Office

 

The Company has changed its principal executive office address to 520 U.S. Highway 22, Suite 204, Bridgewater, New Jersey 08807.

 

Item 9.01. Financial Statements and Exhibits.

 

(a) Financial Statements of Business Acquired

 

The required financial statements for the transaction described in Item 1.01 of this Current Report on Form 8-K will be filed as soon as practicable and no later than the required filing date.

 

(b) Pro Forma Financial Information

 

The required pro forma financial information for the transaction described in Item 1.01 of this Current Report on Form 8-K will be filed as soon as practicable and no later than the required filing date.

 

(d) Exhibits

 

The following exhibits are filed herewith.

 

Exhibit No. Description
4.1   Form of Warrant, by and among Menlo Therapeutics Inc. and certain warrant holders of Foamix Pharmaceuticals Ltd.
10.1 Contingent Stock Rights Agreement, dated as of March 9, 2020, by and between Menlo Therapeutics Inc. and American Stock Transfer & Trust Company, LLC.
99.1 Press release, dated March 9, 2020

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  MENLO THERAPEUTICS INC.
     
Date: March 9, 2020 By: /s/ Mutya Harsch    
    Mutya Harsch
    Chief Legal Officer and General Counsel

 

 

 

Exhibit 4.1

 

FORM OF AMENDED AND RESTATED WARRANT CERTIFICATE

 

THIS AMENDED AND RESTATED WARRANT certificate (THIS “WARRANT CERTIFICATE”) AND THE SECURITIES (INCLUDING THE WARRANT CSRS) ISSUABLE UPON EXERCISE OF THE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING THE OFFER AND SALE OF SUCH SECURITIES IS EFFECTIVE UNDER THE SECURITIES ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IN EACH CASE, IF THE COMPANY REQUESTS, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

 

Date of Amendment and Restatement of Warrant Certificate (the Restatement Date”) March 9, 2020
Warrant Shares and CSRs issuable upon exercise of this Warrant Certificate (i) 325,820 shares of Common Stock (the “Warrant Shares”) and (ii) 550,000 CSRs (as defined in the Contingent Stock Rights Agreement), convertible into additional shares of Common Stock (the “CSR Shares”) pursuant to the terms, conditions and exchange ratios set forth herein and in the Contingent Stock Rights Agreement.

 

WHEREAS, in connection with the execution and delivery of that certain Credit Agreement and Guaranty, dated as of July 29, 2019 (the “Credit Agreement”), and as a condition precedent to the making of loans pursuant thereto, Foamix Pharmaceuticals Ltd. (“Foamix”) issued a Warrant Certificate (the “Original Warrant Certificate”) to [•] (the “Initial Holder” and, together with its successors and permitted transferees and assigns, a “Holder”) exercisable into up to 550,000 ordinary shares of Foamix;

 

WHEREAS, Foamix, Menlo Therapeutics Inc. (the “Company”) and Giants Merger Subsidiary Ltd. have entered into that certain Agreement and Plan of Merger, dated as of November 10, 2019 (as subsequently amended or otherwise modified from time to time, the “Merger Agreement”), pursuant to which, among other things, (i) Foamix will become a wholly-owned Subsidiary of the Company and (ii) all issued and outstanding ordinary shares of Foamix will be exchanged (the “Exchange”) for Common Stock and CSRs;

 

 

 

WHEREAS, upon the amendment and restatement of the Original Warrant Certificate as provided herein, and as a result of the Exchange and the other transactions contemplated pursuant to the Merger Agreement, upon exercise of this Warrant Certificate pursuant to the terms hereof the Holder will be entitled to receive in lieu of Foamix ordinary shares, Common Stock, with the initial aggregate amount of such Common Stock issuable hereunder being determined on the basis of a 0.5924 exchange ratio (the “Original Exchange Ratio”) for each Foamix ordinary share that would have been issuable to the Holder pursuant to the Original Warrant Certificate immediately prior to the Closing (as defined in the Merger Agreement), and up to 550,000 CSRs, such amounts of Common Stock and CSRs and ratios be subject to adjustment as provided herein;

 

WHEREAS, in connection with the transactions contemplated by the Merger Agreement, the parties to the Credit Agreement will amend and restate such Credit Agreement as of the Restatement Date; and

 

WHEREAS, in furtherance of the forgoing and in connection with the transactions contemplated by the Merger Agreement, including the Exchange, the Company and the Initial Holder desire to amend and restate the Original Warrant Certificate in its entirety in order to reflect, among other things, that the Company will be the issuer of the Warrant Certificate and the adjustments to be made pursuant to Section 4(a) of the Original Warrant Certificate as a result of the transactions contemplated by the Merger Agreement, including the Exchange.

 

NOW, THEREFORE, FOR VALUE RECEIVED, the Company and the Initial Holder hereby acknowledge, consent and agree that the Original Warrant Certificate is hereby amended and restated in its entirety to read as set forth herein.

 

Section 1.               Definitions. Capitalized terms used in this Warrant Certificate (including in the foregoing preambles and recitals) but not otherwise defined herein have the meanings ascribed thereto in the Credit Agreement as in effect on the date hereof. The following terms when used herein have the following meanings:

 

“Aggregate Exercise Price” means, with respect to any exercise of this Warrant Certificate, an amount equal to the product of (i) the number of Warrant Shares in respect of which this Warrant Certificate is then being exercised pursuant to Section 3 and the Exercise Certificate applicable thereto, multiplied by (ii) the Exercise Price. For the avoidance of doubt, the Aggregate Exercise Price is only determined by reference to the number of Warrant Shares being purchased by the Holder in connection with an exercise hereof, and not the issuance or receipt by the Holder of any CSRs or CSR Shares.

 

“Bloomberg” has the meaning set forth within the definition of “VWAP”.

 

“Cashless Exercise” has the meaning set forth in Section 3(c).

 

“Charter” means the Company's Amended and Restated Certificate of Incorporation dated January 26, 2018.

 

“Common Stock” means the Company’s shares of Common Stock, par value $0.0001 per share, which carry voting rights.

 

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“Common Stock Deemed Outstanding” means, at any given time, the sum of (i) the number of shares of Common Stock actually outstanding at such time, plus (ii) the number of shares of Common Stock issuable upon exercise of Options actually outstanding at such time, plus (iii) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities actually outstanding at such time (treating as actually outstanding any Convertible Securities issuable upon exercise of Options actually outstanding at such time), in each case, regardless of whether the Options or Convertible Securities are actually exercisable at such time; provided that Common Stock Deemed Outstanding at any given time shall not include shares of Common Stock owned or held by or for the account of the Company or any or its wholly-owned Subsidiaries.

 

“Common Stock Distribution” means any issuance or sale by the Company of any of its shares of Common Stock, Options or Convertible Securities, including in connection with any dividend, distribution or similar action, other than in connection with a dividend or distribution to holders of its Common Stock of the type described in Section 4(c) below.

 

“Common Stock Reorganization” has the meaning set forth in Section 4(a).

 

“Company” has the meaning set forth in the second recital.

 

“Contingent Stock Rights Agreement” means the Contingent Stock Rights Agreement by and between the Company and American Stock Transfer & Trust Company, LLC dated as of March 9, 2020.

 

“Convertible Securities” means any Equity Interests that, directly or indirectly, are convertible into or exchangeable for Common Stock, including CSRs.

 

“Credit Agreement” has the meaning set forth in the preamble.

 

“CSR” has the meaning given to such term in the Contingent Stock Rights Agreement.

 

“CSR Shares” has the meaning set forth in the table on the first page hereof.

 

“Determination Date” has the meaning set forth in the definition of “VWAP”.

 

“Exchange” has the meaning set forth in the second recital.

 

“Exercise Certificate” has the meaning set forth in Section 3(b)(i).

 

“Exercise Date” means, for any given exercise of this Warrant Certificate, whether in whole or in part, a Business Day on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., New York City time, including, without limitation, the receipt by the Company of the Exercise Certificate.

 

“Exercise Period” means the period from (and including) the Restatement Date to (and including) 5:00 p.m., New York City time, on the Expiration Date.

 

“Exercise Price” means $3.528.

 

“Expiration Date” means July 29, 2026.

 

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“Fair Market Value” means, if the shares of Common Stock are traded on a Trading Market, (i) the VWAP of such shares of Common Stock for such day or (ii) if there have been no sales of such shares of Common Stock on any Trading Market on any such day, the average of the highest bid and lowest asked prices for such shares of Common Stock on all applicable Trading Markets at the end of such day; provided that if at any time the shares of Common Stock are not listed, quoted or otherwise available for trading on any Trading Market (so that no Trading Date shall have occurred), or if VWAP cannot be calculated for the shares of Common Stock for such day for any other reason, the “Fair Market Value” of such shares of Common Stock shall be the fair market value per share of such shares of Common Stock as determined jointly by the Company and the Holder; provided further, that, in the event the Company and Holder are unable to so mutually agree, Fair Market Value shall be determined pursuant to Section 9(a).

 

“Foamix” has the meaning set forth in the first recital.

 

“Holder” has the meaning set forth in the first recital.

 

“Independent Advisor” has the meaning set forth in Section 9(a).

 

“Initial Holder” has the meaning set forth in the first recital.

 

“Marketable Securities” means equity securities meeting each of the following requirements: (i) the issuer thereof is subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act, and is current in its filing of all required reports and other information under the Securities Act and the Exchange Act; (ii) such equity securities are traded on a Trading Market; and (iii) if delivered (or to be delivered) as payment or compensation to the Holder in connection with an automatic Cashless Exercise pursuant to Section 3(d), following the closing of the related Sale of the Company, the Holder would not be restricted from publicly re-selling all of such equity securities delivered to it, except to the extent that any such restriction (x) arises solely under federal or state securities laws, rules or regulations, or (y) does not extend beyond six (6) months from the closing of such Sale of the Company to the extent such restrictions may be lifted at such time under the applicable federal or state securities laws, rules or regulations.

 

“Merger Agreement” has the meaning set forth in the second recital.

 

“Nasdaq” means The Nasdaq Stock Market, Inc.

 

“NYSE” means the New York Stock Exchange.

 

“Options” means any warrants, options or similar rights to subscribe for or purchase shares of Common Stock or Convertible Securities.

 

“Original Exchange Ratio has the meaning set forth in the third recital.

 

“Original Issue Date” means July 29, 2019.

 

“Original Warrant Certificate” has the meaning set forth in the first recital.

 

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“OTC Bulletin Board” means the Financial Industry Regulatory Authority, Inc. OTC Bulletin Board.

 

“Pre-emptive Rights” has the meaning set forth in Section 11.

 

“Registration Statement” means, in connection with any public offering of securities, any registration statement required pursuant to the Securities Act that covers the offer and sales of any such securities, including any prospectus, amendments or supplements to such Registration Statement, including post-effective amendments and all exhibits and all materials incorporated by reference in such Registration Statement.

 

“Restatement Date” has the meaning set forth in the table on the first page hereof.

 

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

 

“Sale of the Company” means a transaction pursuant to which (i) (x) any Person or group of Persons acting jointly or otherwise in concert (other than the Holder and any other parties to the Credit Agreement) acquires ownership, directly or indirectly, beneficially or of record, of Equity Interests of the Borrower having more than fifty percent (50%) of the aggregate ordinary voting power, determined on a fully diluted basis, (y) any Person or group of Persons acting jointly or otherwise in concert (other than the Holder and any other parties to the Credit Agreement) acquires, by Contract or otherwise, the right to appoint or elect a majority of the Board of the Company, or (z) all or substantially all of the assets of the Borrower and its Subsidiaries, taken as a whole, are sold, and (ii) all Obligations (as defined in the Credit Agreement) outstanding under the Credit Agreement are to be paid in full in cash, whether pursuant to the terms of the transaction, pursuant to the terms of the Credit Agreement (including Section 11 thereof) or otherwise.

 

“SEC” means the Securities and Exchange Commission or any successor thereto.

 

“Second Amended and Restated Warrant Certificate” has the meaning set forth in Section 2(b).

 

“Trading Day” means, with respect to the shares of Common Stock or any other Marketable Securities, a date on which the relevant Trading Market is open and conducting business.

 

“Trading Market” means, with respect to the shares of Common Stock or any other Marketable Securities, the Nasdaq, the NYSE or the OTC Bulletin Board.

 

“Unrestricted Conditions” has the meaning set forth in Section 10(a)(ii).

 

“VWAP” means, with respect to any shares of Common Stock, as of any day of determination (a “Determination Date”), the volume weighted average sale price for the period of five (5) consecutive Trading Days immediately preceding such Determination Date on the Trading Market for such shares of Common Stock as reported by, or based upon data reported by, Bloomberg Financial Markets or an equivalent, reliable reporting service reasonably acceptable to the Holder and the Company (collectively, “Bloomberg”) or, if the volume weighted average sale price has not been reported for such security by Bloomberg for such five (5) day period, then the simple average of the last closing trade prices of such security for such five (5) day period, as reported by Bloomberg, or, if no last closing trade price is reported for such security by Bloomberg, the simple average of the bid prices of any market makers for such security that are listed in the over the counter market by the Financial Industry Regulatory Authority, Inc. or on the OTC Bulletin Board (or any successor) or in the “pink sheets” (or any successor) by the OTC Markets Group, Inc. over such five (5) day period; provided that if VWAP cannot be calculated for such security on such date in the manner provided above (including because the applicable security is not listed or publicly traded), the VWAP shall be the Fair Market Value as mutually determined by the Company and the Holder; provided further that, in the event the Company and Holder are unable to so mutually agree, Fair Market Value shall be determined pursuant to Section 9(a).

 

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“Warrant Certificate” means this Warrant Certificate and all subsequent warrant certificates issued upon division, combination or transfer of, or in substitution for, this Warrant Certificate.

 

“Warrant Register” has the meaning set forth in Section 5.

 

“Warrant Shares” has the meaning set forth in the table on the first page hereof; provided that, for purposes of this Warrant Certificate, in no event shall Warrant Shares include or be deemed to include any CSR Shares.

 

Section 2.               Term of Warrants.

 

(a)               Subject to the terms and conditions hereof, from time to time during the Exercise Period the Holder may exercise this Warrant Certificate for all or any part of the unexercised Warrant Shares and CSRs issuable upon exercise hereof. To the extent the Holder exercises this Warrant Certificate in whole (and not in part), in addition to the Warrant Shares designated for purchase in the related Exercise Notice, the Holder shall simultaneously receive, at no additional cost to the Holder, all remaining unissued CSRs issuable upon exercise hereof. To the extent the Holder exercises this Warrant Certificate in part (and not in whole), in addition to the number of Warrant Shares designated for purchase in the related Exercise Notice, in consideration of the Exercise Price paid for the Warrant Shares, the Holder shall simultaneously receive, at no additional cost to the Holder, a number of CSRs equal to the pro rata equivalent of the percentage of Warrant Shares issued upon such exercise relative to the total aggregate amount of Warrant Shares available for issuance hereunder immediately prior to such exercise and issuance. To the extent any CSRs are issued pursuant to this clause (a), the Holders rights to convert such CSRs into CSR Shares shall be subject to the terms and provisions of the Contingent Stock Rights Agreement.

 

(b)               Without limiting clause (a) above, promptly following the earlier of (i) the date on which the Efficacy Determination (as defined in the Contingent Stock Rights Agreement) is delivered and (ii) May 31, 2020, the parties hereto shall amend and restate this Warrant Certificate (as amended and restated, the “Second Amended and Restated Warrant Certificate”), which Second Amended and Restated Warrant Certificate shall (i) be in substantially the same form as this Warrant Certificate, (ii) take into account any prior exercise of this Warrant Certificate, (iii) provide that upon any exercise thereof the Aggregate Exercise Price shall also represent (and be inclusive of) consideration for any CSRs (or CSR Shares); and (iv) reflect the following (provided that all amounts of Common Stock, Warrant Shares or CSR Shares referenced below shall be subject to adjustment as provided herein):

 

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(i)                 In the event that (A) the Efficacy Determination reports that Serlopitant Significance (as defined in the Contingent Stock Rights Agreement) was not achieved in both Phase III PN Trials (as defined in the Merger Agreement) or (B) the Milestone Date (as defined in the Contingent Stock Rights Agreement) has not occurred prior to May 31, 2020, then (x) the Original Exchange Ratio shall be increased to 1.8006, (y) as a result, the maximum aggregate amount of shares of Common Stock issuable upon full exercise of this Warrant Certificate shall be 990,330, representing 325,820 Warrant Shares and 664,510 CSR Shares, and (z) all CSRs issued to or held by the Holder shall be deemed to have terminated and shall no longer be convertible into CSR Shares.

 

(ii)              In the event that the Efficacy Determination reports that (A) Serlopitant Significance was achieved in only one Phase III PN Trial on or before May 31, 2020 and (B) Serlopitant Significance was not achieved or has not been determined in the other Phase III PN Trial on or before May 31, 2020, then (x) the Original Exchange Ratio shall be increased to 1.2739, (y) as a result, the maximum aggregate amount of shares of Common Stock issuable hereunder upon full exercise of this Warrant Certificate shall be 700,645, representing 325,820 Warrant Shares and 374,825 CSR Shares, and (z) all CSRs issued to or held by the Holder shall be deemed to have terminated and shall no longer be convertible into CSR Shares.

 

(iii)            In the event that the Efficacy Determination reports that Serlopitant Significance was achieved in both Phase III PN Trials on or before May 31, 2020, (x) each CSR issued under the Contingent Stock Rights Agreement (including pursuant to Section 2(a) above) shall be automatically terminated, (y) upon the exercise of this Warrant Certificate the Holder shall only be entitled to receive a maximum aggregate amount of 325,820 Warrant Shares, and (z) any CSRs previously issued upon a partial exercise of this Warrant Certificate shall be deemed to have terminated and shall no longer be convertible into CSR Shares.

 

Section 3.               Exercise of Warrant Certificate.

 

(a)               Issuance of CSRs, CSR Shares, etc. Notwithstanding any other provision of this Warrant Certificate, in the event that the Efficacy Determination reports that Serlopitant Significance was achieved in both Phase III PN Trials on or before May 31, 2020 and each CSR issued under the Contingent Stock Rights Agreement is automatically terminated, the Holder shall have no right to receive any CSRs upon exercise hereof. In the event that pursuant to Section 2(a) above the Holder becomes entitled to receive CSRs upon exercise hereof, (i) such CSRs will only be issued to the Holder upon its exercise of this Warrant Certificate for Warrant Shares, and (ii) aside from the payment of the Aggregate Purchase Price payable by the Holder in respect of the purchase of Warrant Shares upon its exercise of this Warrant Certificate no additional or other consideration will be due or payable in respect of the CSRs to be issued in connection with such purchase and issuance of Warrant Shares.

 

(b)               Exercise Procedure. This Warrant Certificate may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares (and subject to Section 2(b) above) CSRs, subject to the following:

 

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(i)                 delivery to the Company at its then registered office of a duly completed and executed Exercise Certificate in the form attached hereto as Exhibit A (each, an “Exercise Certificate”), which certificate will specify (x) the number of Warrant Shares to be purchased in connection with such exercise and the Aggregate Exercise Price in respect thereof, and (y) the number of CSRs issuable in connection with such exercise; provided, that any partial exercise of this Warrant Certificate shall be for at least 50,000 Warrant Shares; and

 

(ii)              simultaneously with the delivery of the Exercise Certificate, payment to the Company of the Aggregate Exercise Price in accordance with Section 3(c) below.

 

(c)               Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise Price shall be made, at the option of the Holder as set forth in the applicable Exercise Certificate, by any of the following methods:

 

(i)              by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price;

 

(ii)              by instructing the Company to withhold a number of Warrant Shares then issuable upon exercise of this Warrant Certificate with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price; or

 

(iii)            any combination of the foregoing.

 

In the event of any withholding of Warrant Shares pursuant to Section 3(c)(ii) or (iii) (solely to the extent of such withholding, a “Cashless Exercise”) where the number of such Warrant Shares whose value is equal to the Aggregate Exercise Price is not a whole number, the number of shares of Warrant Shares withheld by the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a Warrant Share being so withheld by the Company in an amount equal to the product of (x) such incremental fraction of a share being so withheld multiplied by (y) the Fair Market Value per Warrant Share as of the Exercise Date.

 

(d)               Automatic Cashless Exercise. To the extent this Warrant Certificate has not been exercised in full by the Holder prior to the earlier of (i) the occurrence of the Expiration Date, and (ii) the date on which a Sale of the Company is consummated pursuant to which the sole consideration payable to the Company or its shareholders in respect of such sale transaction consists of cash, Marketable Securities or a combination thereof, any portion of this Warrant Certificate that remains unexercised on such date shall be deemed to have been exercised automatically pursuant to a Cashless Exercise of the type described in Section 3(c)(ii) above, in whole (and not in part), on the Business Day immediately preceding such date; provided that, unless the Holder otherwise notifies the Company, the automatic Cashless Exercise contemplated by this Section 3(d) shall not occur in the event that, as of the Business Day immediately preceding any such date described above, the per share Fair Market Value of a Warrant Share is less than the Exercise Price per Warrant Share. In the event of any such automatic Cashless Exercise, all remaining CSRs issuable hereunder shall be issued to the Holder. To the extent permitted by applicable Law, and solely for purposes of Rule 144, it is acknowledged and agreed that (i) (A) the Warrant Shares issuable upon any exercise of this Warrant Certificate in any Cashless Exercise transaction shall be deemed to have been acquired on the Original Issue Date, and (B) any CSRs issuable upon exercise of this Warrant Certificate (and any CSR Shares issuable upon conversion thereof) shall be deemed to have been acquired on the Restatement Date, and (ii) (A) the holding period for any such Warrant Shares issuable upon the exercise of this Warrant Certificate in any Cashless Exercise transaction shall be deemed to have commenced on the Original Issue Date, and (B) the holding period for any CSRs issuable upon the exercise of this Warrant Certificate (and any CSR Shares issuable upon conversion thereof) shall be deemed to have commenced on the Restatement Date; provided that the Company makes no representation or warranty regarding the commencement of the holding period of any such Warrant Share, CSR or CSR Share.

 

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(e)               Delivery of Stock Certificates. With respect to any exercise of this Warrant Certificate by the Holder, upon receipt by the Company of an Exercise Certificate and delivery of the Aggregate Exercise Price for the Warrant Shares designated for purchase in such Exercise Certificate, the Company shall, within five (5) Business Days, (i) deliver in accordance with the terms hereof to or upon the order of the Holder that number of Warrant Shares for the portion of this Warrant Certificate so exercised on such date, together with cash in lieu of any fraction of a share to the extent the Company elects to do so pursuant to Section 3(f) below, and (ii) cause any CSRs issuable in connection with such exercise, together with cash in lieu of any fraction of a CSR to the extent provided pursuant to Section 13 of the Contingent Stock Rights Agreement to be registered in the CSR Register (as defined in the Contingent Stock Rights Agreement) in the name of the Holder as provided pursuant to Section 3 of the Contingent Stock Rights Agreement. If such Warrant Shares are issued in certificated form, the Company shall deliver a certificate or certificates, to the extent possible, representing the number of Warrant Shares as the Holder shall request in the Exercise Certificate. If such Warrant Shares are issued in uncertificated form, the Company shall deliver upon request a confirmation evidencing the registration of such shares of Common Stock. CSRs shall be issued in the form provided pursuant to the Contingent Stock Rights Agreement. Unless otherwise provided herein, upon any exercise hereof, this Warrant Certificate shall be deemed to have been exercised and such certificated or uncertificated Warrant Shares and any CSRs shall be deemed to have been issued, and the Holder shall be deemed to have become a holder of record of such Warrant Shares and any CSRs for all purposes as of the Exercise Date. Unless otherwise permitted by federal or state securities laws, rules or regulations, any share certificates issued pursuant to the exercise of this Warrant Certificate will bear a legend in substantially the form set out in Section 10(a)(i) below.

 

(f)                No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares of any Equity Interests shall be issued upon the exercise of this Warrant Certificate. As to any fraction of a share of any Equity Interest which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Fair Market Value of one Warrant Share on the Exercise Date or round up to the next whole share.

 

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(g)               Surrender of this Warrant Certificate; Delivery of New Warrant Certificate.

 

(i)                 The Holder shall not be required to physically surrender this Warrant Certificate to the Company until this Warrant Certificate has been exercised in full by the Holder, in which case, the Holder shall, at the written request of the Company, surrender this Warrant Certificate to the Company for cancellation within three (3) Business Days after the date the final Exercise Certificate is delivered to the Company. Partial exercises of this Warrant Certificate resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares and any CSRs issuable hereunder by an amount equal to the applicable number of Warrant Shares and CSRs that have been issued hereunder as a result of previous exercises or withheld in connection with any Cashless Exercises. The Holder and the Company shall maintain records showing the number of Warrant Shares and any CSRs issued hereunder, the date of such issuances and the number of Warrant Shares withheld in connection with any Cashless Exercises. The Holder and any assignee, by acceptance of this Warrant Certificate, acknowledge and agree that, by reason of the provisions of this Section 3(g), following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder and the number of any CSRs issuable hereunder at any given time may be fewer than the amount stated on the face hereof.

 

(ii)              Notwithstanding the foregoing, to the extent that there are unexpired and unexercised Warrant Shares remaining under the Warrant Certificate, the Holder may request that the Company (and the Company shall), at the time of issuance of any Warrant Shares hereunder and the surrender of this Warrant Certificate, deliver to the Holder a new Warrant Certificate evidencing the rights of the Holder to subscribe for the unexpired and unexercised Warrant Shares and any unissued CSRs called for by this Warrant Certificate. Unless otherwise agreed upon by the Holder in its sole discretion, such new Warrant Certificate shall in all other respects be identical to this Warrant Certificate.

 

(h)               Valid Issuance of Warrant Certificate, Warrant Shares and CSRs; Payment of Taxes. With respect to the exercise of this Warrant Certificate, the Company hereby represents, warrants, covenants and agrees as follows:

 

(i)                 This Warrant Certificate is, and any Warrant Certificate issued in substitution for or replacement of this Warrant Certificate shall be, upon issuance, duly authorized.

 

(ii)              All Warrant Shares and CSRs issuable upon the exercise of this Warrant Certificate (or any substitute or replacement Warrant Certificate), and any CSR Shares issuable upon conversion of such CSRs, shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Equity Interests are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any shareholder of the Company and free and clear of all Liens (other than Liens created by the Holder, or created with regard to income taxes or other taxes payable by the Holder incurred in connection with the exercise of this Warrant Certificate or taxes in respect of any transfer made by the Holder occurring contemporaneously therewith).

 

(iii)            The Company shall take all such actions as may be necessary to (x) comply with Section 3(j) below and (y) ensure that all such Warrant Shares, CSRs and CSR Shares are issued without violation by the Company of any applicable Law or any requirements of any foreign or domestic securities exchange upon which the Common Stock may be listed at the time of such exercise.

 

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(iv)             The Company shall exclusively bear and pay all expenses in connection with, and all governmental charges, taxes, fees, levies, withholdings and all other such payments, that may be imposed on or with respect to, the issuance of this Warrant Certificate, and the issuance or delivery of Warrant Shares, CSRs and CSR Shares issued pursuant to or in connection with this Warrant Certificate; and the Holder shall not be affected by such payments, and the Company shall not be eligible to any indemnification from the Holder for any such payment.

 

(v)               The Company is a corporation duly organized and validly existing under the Laws of the State of Delaware and has the capacity and corporate power and authority to enter into this Warrant Certificate and the Contingent Stock Rights Agreement.

 

(vi)             The Company has taken all action required to be taken by it to authorize the execution, delivery and performance of this Warrant Certificate and the Contingent Stock Rights Agreement.

 

(vii)          This Warrant Certificate and the Contingent Stock Rights Agreement have been duly executed by the Company.

 

(viii)        The obligations of the Company under this Warrant Certificate and the Contingent Stock Rights Agreement are legal, valid and binding obligations, enforceable against the Company in accordance with the terms hereof or thereof (as applicable), except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable principles.

 

(ix)             As of the Restatement Date, the Company has complied with all obligations set forth in Section 3(j), below.

 

(i)                 Conditional Exercise. Notwithstanding any other provision hereof, if an exercise of all or any portion of this Warrant Certificate is to be made in connection with a Sale of the Company, such exercise may, at the election of the Holder, be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

 

(j)                 Reservation of Shares. The Company shall at all times during the Exercise Period reserve and keep available out of its authorized but unissued shares of Common Stock or, if applicable, other Equity Interests issuable upon exercise of this Warrant Certificate, the maximum number of shares of Common Stock or such other Equity Interests, as the case may be, issuable upon exercise in full of this Warrant Certificate and the conversion of all CSRs issuable hereunder into CSR Shares. The Company shall not increase the par value of any Common Stock receivable upon the exercise of this Warrant Certificate above the Exercise Price then in effect, and shall take all such actions within its power as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon exercise hereof and, if applicable, CSR Shares upon conversion of any CSRs.

 

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(k)               Rule 144 Compliance. With a view to making available to the Holder the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a holder to sell securities of the Company to the public without registration or pursuant to a Registration Statement, the Company shall:

 

(i)                 use reasonable commercial efforts to make and keep adequate public information available, as required by clause (c) of Rule 144;

 

(ii)              use reasonable commercial efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (excluding, for avoidance of doubt, any prospectus or registration statement which the Company is under no obligation to file); and

 

(iii)            furnish, or otherwise make available to the Holder so long as the Holder owns Warrant Shares or CSR Shares, promptly upon request, a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed or furnished by the Company as the Holder may reasonably request in connection with the sale of shares of Common Stock without registration.

 

(l)                 Ownership Cap. The Company shall not knowingly effect the exercise of this Warrant Certificate, and the Initial Holder shall not have the right to exercise this Warrant Certificate to the extent that, after giving effect to such exercise, the Initial Holder (together with its Affiliates) would beneficially own in excess of 9.99% of the shares of Common Stock of the Company immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock owned by the Initial Holder and its Affiliates shall include the number of Warrant Shares and CSR Shares issuable upon conversion of any CSRs, in each case issuable upon exercise of this Warrant Certificate with respect to which the determination of such aggregate number is being made, but shall exclude shares of Common Stock (if any, and whether in respect of Warrant Shares or CSR Shares) that would be issuable upon (i) exercise of the remaining, unexercised portion of this Warrant Certificate beneficially owned by the Initial Holder and its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other Equity Interests of the Company beneficially owned by the Initial Holder and its Affiliates (including, without limitation, any CSRs, convertible notes or convertible shares of Common Stock or warrants) subject to a limitation on conversion or exercise analogous to the limitations contained herein. Except as set forth in the preceding sentence, for purposes of this Section 3(l), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. For purposes of this Warrant Certificate, in determining the number of outstanding shares of Common Stock, the Initial Holder of this Warrant Certificate may rely on the number of such outstanding Equity Interests as reflected in the most recent of (i) the Company’s Form 10-K, Form 10-Q or other public filing with the SEC, as the case may be, if available, (ii) a more recent public announcement by the Company, or (iii) any other notice by the Company or its transfer agent setting forth the number of outstanding shares of Common Stock. In addition, upon the written request of the Initial Holder (but not more than once during any calendar quarter), the Company shall, within three (3) Business Days, confirm to the Initial Holder the number of its outstanding shares of Common Stock. Furthermore, upon the written request of the Company (but not more than once during any calendar quarter), the Initial Holder shall promptly confirm to the Company its then current beneficial ownership with respect to the Company’s shares of Common Stock.

 

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(m)             Except as expressly provided herein with respect to cash payments in lieu of the issuance of fractional shares of Equity Interests, and without regard to any exchange of consideration in connection with an automatic Cashless Exercise pursuant to Section 3(d) above or similar event, upon exercise of this Warrant Certificate the Holder shall not otherwise be entitled to receive cash or any Equity Interests that are registered under the Securities Act.

 

Section 4.               Adjustment to Number of Warrant Shares, Exercise Price, etc. The number of Warrant Shares issuable upon exercise of this Warrant Certificate shall be subject to adjustment from time to time as provided in this Section 4. The number of CSRs issuable in connection with any exercise of this Warrant Certificate shall be subject to adjustment from time to time as provided in the Contingent Stock Rights Agreement, including Section 12 thereof.

 

(a)               Adjustment to Number of Warrant Shares Upon Reorganizations, Reclassifications, etc. In the event of any changes in the outstanding number of shares of Common Stock Deemed Outstanding by reason of redemptions, recapitalizations, reclassifications, combinations or exchanges of shares, splits or reverse splits, separations, reorganizations, liquidations, substitutions, replacements or the like (any of the foregoing or combination thereof, whether in connection with a transaction or otherwise, being a “Common Stock Reorganization”), the number and class of Warrant Shares issuable upon exercise of this Warrant Certificate, and CSR Shares issuable upon conversion of any CSRs issuable hereunder, in the aggregate and, with respect to Warrant Shares, the Exercise Price shall be correspondingly adjusted to give the Holder of this Warrant Certificate, on exercise for the same Aggregate Exercise Price, the total number, class, and kind of shares of Equity Interests as the Holder would have owned had this Warrant Certificate been exercised in full for all Warrant Shares and CSRs available to be issued under this Warrant Certificate prior to any such event and had the Holder continued to hold such Warrant Shares and CSRs issued to the Holder in connection with such exercise until after the event requiring adjustment. The form of this Warrant Certificate need not be changed because of any adjustment in the number of Warrant Shares or other Equity Interests, if applicable, subject to this Warrant Certificate.

 

(b)               Adjustment to Exercise Price Upon a Common Stock Distribution. Subject to clause (iv) below, if the Company consummates or effects any Common Stock Distribution for a price per share of Common Stock less than the Exercise Price then in effect, then, effective upon such Common Stock Distribution, the Exercise Price shall be reduced to a price determined by multiplying the Exercise Price then in effect by a fraction, the numerator of which shall be the sum of (A) the number of shares of Common Stock Deemed Outstanding immediately prior to such Common Stock Distribution multiplied by the Exercise Price then in effect, plus (B) the consideration, if any, received by the Company upon such Common Stock Distribution, and the denominator of which shall be the product of (1) the total number of shares of Common Stock Deemed Outstanding immediately after such Common Stock Distribution multiplied by (2) the Exercise Price then in effect.  For purposes of this Section 4(b):

 

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(i)                 In the event Options or Convertible Securities are included in any such Common Stock Distribution, the price per share of Common Stock deemed to have been issued or sold as a result of the sale or issuance of such Options or Convertible Securities, shall be equal to the price per share of Common Stock for which Common Stock is issuable upon the exercise of such Options or upon conversion or exchange of such Convertible Securities, as the case may be (determined by dividing (x) the aggregate amount, if any, received or receivable by the Company as consideration for the issuance, sale, distribution or grant of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration payable to the Company, if any, upon the exercise of all such Options or the conversion or exchange of such Convertible Securities (as the case may be), by (y) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities).

 

(ii)              The provisions of this Section 4(b) shall not in any event operate to increase the Exercise Price.

 

(iii)            This Section 4(b) shall not apply to any of the following:

 

(A) Any issuance, sale or other distribution of shares of Common Stock, Options or Convertible Securities pursuant to (i) any Common Stock Reorganization, which shall instead be governed by Section 4(a) above, or (ii) any dividend or distribution to holders of shares of Common Stock, which shall instead by governed by Section 4(c) below.

 

(B) The issuance of shares of Common Stock upon exercise of any Options or Convertible Securities included in the shares of Common Stock Deemed Outstanding as of the Restatement Date.

 

(C) The grant or issuance of shares of Common Stock, Options or Convertible Securities to board members, officers, employees, consultants or other service providers of the Company pursuant to any employee incentive plan, employee share purchase plan or similar equity-based benefit plans approved by the Company’s Board; provided that the total number of securities issued under this sub-clause for a price per share less than the Exercise Price shall not constitute more than seven percent (7%) of the total number of shares of Common Stock Deemed Outstanding at any time.

 

(D) The issuance or grant of shares of Common Stock, Options or Convertible Securities in connection with Permitted Acquisitions by the Company, or in connection with other transactions or financings with material strategic partners, in each case approved by the Company’s Board; provided, that the total number of securities issued or granted under this sub-clause for a price per share less than the Exercise Price shall not constitute more than seven percent (7%) of the total number of shares of Common Stock Deemed Outstanding at any time.

 

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(c)               Adjustment to Number of Warrant Shares Upon Dividends, Distributions, etc. If the Company declares or pays a dividend or distribution on its outstanding shares of Common Stock, whether payable in cash, Equity Interests or other property, the Holder shall be entitled to receive, at the time such dividend or distribution is paid, without additional cost to the Holder, the total number and kind of cash, Equity Interests or other property which the Holder would have received had the Holder owned, of record as of the date such dividend or distribution was paid, Warrant Shares and, to the extent CSRs are issuable upon exercise hereof, except as otherwise provided in the Contingent Stock Rights Agreement, the CSR Shares into which such CSRs are convertible.

 

(d)               Certificate as to Adjustment.

 

(i)                 As promptly as reasonably practicable following any change or adjustment of the type described above in this Section 4, Section 2.1(g) of the Merger Agreement or Section 12 of the Contingent Stock Rights Agreement, but in any event not later than ten (10) Business Days thereafter, the Company shall furnish to the Holder a certificate of a Responsible Officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

 

(ii)              As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than ten (10) Business Days thereafter, the Company shall furnish to the Holder a certificate of a Responsible Officer certifying the number of Warrant Shares or the amount, if any, of other shares of Common Stock, securities, Equity Interests or assets then issuable upon exercise of this Warrant Certificate (including, if applicable, the number of CSR Shares issuable upon conversion of CSRs issuable hereunder).

 

(e)               Notices. In the event that, at any time during the Exercise Period the Company shall take a record of the holders of its outstanding Equity Interests (including Warrant Shares issuable hereunder) for the purpose of:

 

(i)                 entitling or enabling such holders to receive any dividend or other distribution, to receive any right to subscribe for or purchase any shares of any class of its Equity Interests or any other securities, or to receive any other security;

 

(ii)              (x) any Common Stock Reorganization, any consolidation or merger of the Company with or into another Person, or (y) a Sale of the Company; or

 

(iii)            the voluntary or involuntary dissolution, liquidation or winding-up bankruptcy or similar event involving the Company;

 

then, and in each such case, the Company shall send or cause to be sent to the Holder at least ten (10) Business Days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution or other right or action, and a description of such dividend, distribution or other right or action, or (B) the effective date on which such Common Stock Reorganization, consolidation, merger, sale, dissolution, liquidation, winding-up or bankruptcy is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of its Equity Interests (or such other Equity Interests at the time issuable upon exercise of the Warrant Certificate) shall be entitled to exchange their shares of Common Stock or other Equity Interests, for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or bankruptcy, and the amount per share and character of such exchange applicable to this Warrant Certificate, the Warrant Shares, the CSRs and the CSR Shares. The above notwithstanding, the Company shall not be required to provide the Holder with notice containing such information if the Company reasonably believes that it constitutes material non-public information, unless the Holder (i) confirms to the Company in writing that it consents to receive such information, and (ii) executes a customary market standstill or equivalent agreement pursuant to which the Holder will agree not to trade in the Company’s shares of Common Stock or other Equity Interests while in possession of such material non-public information or until such information is no longer material or non-public.

 

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Section 5.               Warrant Register. The Company shall keep and properly maintain at its principal executive offices a register (the “Warrant Register”) for the registration of this Warrant Certificate and any transfers thereof. The Company may deem and treat the Person in whose name this Warrant Certificate is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of this Warrant Certificate effected in accordance with the provisions of this Warrant Certificate.

 

Section 6.               Transfer of Warrant Certificate. Subject to Section 10 hereof, this Warrant Certificate and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant Certificate to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B. Upon such compliance, surrender and delivery, the Company shall execute and deliver a new Warrant Certificate or Warrant Certificates in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant Certificate evidencing the portion of this Warrant Certificate, if any, not so assigned, and this Warrant Certificate shall promptly be cancelled.

 

Section 7.               The Holder Not Deemed a Shareholder; Limitations on Liability. Except as otherwise specifically provided herein (including in Sections 4(c) and 4(e) above and Section 11 below), (i) prior to the Exercise Date, the Holder shall not be entitled to receive dividends, nor shall anything contained in this Warrant Certificate be construed to confer upon the Holder, as such, any of the rights of a shareholder of the Company or any right to receive dividends or subscription rights, and (ii) prior to the registration of the Holder in the share register of the Company with respect to the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant Certificate, the Holder shall not be entitled to vote, nor shall anything contained in this Warrant Certificate be construed to confer upon the Holder, as such, any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of Equity Interests, reclassification of Equity Interests, consolidation, merger, conveyance or otherwise) or receive notice of meetings. In addition, nothing contained in this Warrant Certificate shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant Certificate or otherwise) or as a shareholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 7, the Company shall provide the Holder with copies of the same notices and other information given to all shareholders of the Company generally, contemporaneously with the giving thereof to such shareholders, unless such notice or information had been made publicly available on the SEC’s EDGAR system website.

 

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Section 8.               Replacement on Loss; Division and Combination.

 

(a)               Replacement of Warrant Certificate on Loss. Subject to any further requirements in relation to the cancellation of this Warrant Certificate pursuant to applicable Law, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant Certificate and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant Certificate for cancellation to the Company, the Company at its own expense shall execute and deliver to the Holder, in lieu hereof, a new Warrant Certificate of like tenor and exercisable for an equivalent number of Warrant Shares as this Warrant Certificate so lost, stolen, mutilated or destroyed; provided that, in the case of mutilation, no indemnity shall be required if this Warrant Certificate in identifiable form is surrendered to the Company for cancellation.

 

(b)               Division and Combination of Warrant Certificate. Subject to compliance with the applicable provisions of this Warrant Certificate as to any transfer or other assignment which may be involved in such division or combination, this Warrant Certificate may be divided or, following any such division of this Warrant Certificate, subsequently combined with other Warrant Certificates, upon the surrender of this Warrant Certificate or Warrant Certificates to the Company at its then principal executive offices, together with a written notice specifying the names and denominations in which new Warrant Certificates are to be issued, signed by each applicable Holder or its agents or attorneys. Subject to compliance with the applicable provisions of this Warrant Certificate as to any transfer or assignment which may be involved in such division or combination, the Company shall at its own expense execute and deliver a new Warrant Certificate or Warrant Certificates in exchange for this Warrant Certificate or Warrant Certificates so surrendered in accordance with such notice. Such new Warrant Certificate or Warrant Certificates shall be of like tenor to the surrendered Warrant Certificate or Warrant Certificates and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as this Warrant Certificate or Warrant Certificates so surrendered in accordance with such notice.

 

Section 9.               Disputes; No Impairment, etc. The parties hereto agree as follows:

 

(a)               Disputes. In the event of any dispute which arises between the Holder and the Company (including the Board of the Company) with respect to the calculation or determination of Fair Market Value, VWAP, the adjusted Exercise Price, the number or amount of Warrant Shares, CSR Shares, CSRs, other Equity Interests, cash or other property issuable upon exercise of this Warrant Certificate, or, if applicable, upon conversion of any CSRs, the number, amount or type of consideration due to the Holder in connection with any event, transaction or other matter described in Section 4 above or any other matter involving this Warrant Certificate, the Warrant Shares, CSRs or CSR Shares that is not resolved by the parties after good faith discussions and efforts to reach resolution, upon the request of the Holder the disputed issue(s) shall be submitted to a firm of independent investment bankers or public accountants of recognized national standing, which (i) shall be chosen by the Company and be reasonably satisfactory to the Holder and (ii) shall be completely independent of the Company (an “Independent Advisor”), for determination, and such determination by the Independent Advisor shall be binding upon the Company and the Holder with respect to this Warrant Certificate, any Warrant Shares, CSR Shares or CSRs issued in connection herewith or the matter in dispute, as the case may be, absent manifest error. Costs and expenses of the Independent Advisor shall be shared 50/50 by the Company and the Holder.

 

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(b)               Equitable Equivalent. In case any event shall occur as to which the provisions of Section 4 above are not strictly applicable but the failure to make any adjustment would not, in the reasonable, good faith opinion of the Holder, fairly protect the rights and benefits of the Holder represented by this Warrant Certificate in accordance with the essential intent and principles of Section 4, then, in any such case, at the request of the Holder, the Company shall submit the matter and issues raised by the Holder to an Independent Advisor, which shall give its opinion upon the adjustment, if any, on a basis consistent with the essential intent and principles established in Section 4, to the extent necessary to preserve, without dilution, the rights and benefits represented by this Warrant Certificate. Upon receipt of such opinion, the Company will promptly mail a copy thereof to the Holder and shall make the adjustments described therein, if any. Costs and expenses of the Independent Advisor shall be shared 50/50 by the Company and the Holder.

 

(c)               No Avoidance. The Company shall not, by way of amendment of any of its Charter or other Organic Documents (including the Merger Agreement or the Contingent Stock Rights Agreement) or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant Certificate, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment as if the Holder was a shareholder of the Company entitled to the benefit of fiduciary duties afforded to shareholders under Delaware law.

 

Section 10.           Compliance with the Securities Act.

 

(a)               Agreement to Comply with the Securities Act, etc.

 

(i)                 Legend. The Holder, by acceptance of this Warrant Certificate, agrees to comply in all respects with the provisions of this Section 10 and the restrictive legend requirements set forth on the face of this Warrant Certificate and further agrees that it shall not offer, sell or otherwise dispose of this Warrant Certificate, any Warrant Shares or, if applicable, any CSR Shares issued hereunder or in connection herewith, except under circumstances that will not result in a violation of the Securities Act. Subject to clause (ii) below, this Warrant Certificate, all Warrant Shares and, if applicable, any CSR Shares (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:

 

“THIS WARRANT Certificate AND ANY SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT Certificate INCLUDING THE csrS (AND, IF APPLICABLE, ANY SECURITIES ISSUABLE UPON EXERCISE HEREOF OR UPON CONVERSION OF ANY SECURITIES ISSUABLE UPON EXERCISE HEREOF (INCLUDING THE CSRS)) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING THE OFFER AND SALE OF SUCH SECURITIES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IN EACH CASE, IF THE COMPANY REQUESTS, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.”

 

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(ii)              Removal of Restrictive Legends. Neither this Warrant Certificate nor any certificates evidencing Warrant Shares or, if applicable, any CSRs or CSR Shares, issuable or deliverable under or in connection with this Warrant Certificate shall contain any legend restricting the transfer thereof (including the legend set forth above in clause (i)) in any of the following circumstances: (A) following any sale of this Warrant Certificate, any Warrant Shares, any CSRs or any CSR Shares issued or delivered to the Holder pursuant to Rule 144, (B) if this Warrant Certificate, Warrant Shares, CSRs or CSR Shares are eligible for sale under clause (b)(1) of Rule 144, or (C) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC) (collectively, the “Unrestricted Conditions”). If the Unrestricted Conditions are met at the time of issuance of this Warrant Certificate, Warrant Shares, CSRs or CSR Shares, as the case may be, to the reasonable satisfaction of Company’s counsel, such Equity Interests shall be issued free of all legends.

 

(iii)            Replacement Warrant Certificate. The Company agrees that at such time as the Unrestricted Conditions have been satisfied it shall promptly (but in any event within ten (10) Business Days) following written request from the Holder issue a replacement Warrant Certificate or replacement certificates evidencing Warrant Shares or CSR Shares, as the case may be, free of all restrictive legends.

 

(iv)             Sale of Unlegended Shares of Common Stock. The Holder agrees that the removal of the restrictive legend from this Warrant Certificate and any certificates representing securities as set forth in Section 10(a)(ii) above is predicated upon the Company’s reliance that the Holder will sell this Warrant Certificate or any such securities pursuant to either an effective Registration Statement or otherwise pursuant to the requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if such securities are sold pursuant to a Registration Statement, they will be sold in compliance with the plan of distribution set forth therein.

 

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(v)               Notwithstanding the foregoing, all CSRs issued to the Holder are subject to the terms and conditions of the Contingent Stock Rights Agreement, including the restrictions on transfer set forth in Section 5 therein.

 

(b)               Representations of the Holder. In connection with the issuance of this Warrant Certificate, the Holder represents, as of the Restatement Date, to the Company by acceptance of this Warrant Certificate as follows:

 

(i)                 The Holder is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant Certificate, the Warrant Shares, the CSRs to be issued upon exercise hereof and any CSR Shares into which the CSRs convert for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant Certificate, the Warrant Shares, the CSRs or any CSR Shares into which the CSRs convert, except pursuant to sales registered or exempted under the Securities Act.

 

(ii)              The Holder understands and acknowledges that this Warrant Certificate, the Warrant Shares and CSRs, to be issued upon exercise hereof are “restricted securities” under the Securities Act inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such Laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. Notwithstanding the foregoing, all CSRs issued to the Holder are subject to the terms and conditions of the Contingent Stock Rights Agreement, including the restrictions on transfer set forth in Section 5 therein.

 

(iii)            The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in this Warrant Certificate, the Warrant Shares, the CSRs and any CSR Shares into which the CSRs convert. The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant Certificate and the business, properties, prospects and financial condition of the Company.

 

Section 11.           Pre-Emptive Rights. In addition to any adjustments pursuant to Section 4 above, if at any time the Company grants, issues, offers or sells (i) any shares of Common Stock or (ii)  any Options or Convertible Securities, in each case pro rata to the record holders of shares of Common Stock (the “Pre-emptive Rights”), then the Holder shall be entitled to (but shall not be obligated to) acquire, upon the same terms applicable to such Pre-emptive Rights, the aggregate Pre-emptive Rights which the Holder would have acquired if the Holder had held the number of Warrant Shares and CSR Shares acquirable upon complete exercise of this Warrant Certificate immediately before the date on which a record is taken for the grant, issuance or sale of such Pre-emptive Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Pre-emptive Rights.

 

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Section 12.           Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (i) when delivered by hand (with written confirmation of receipt); (ii) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (iii) on the date sent by e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient, in each case provided that sender did not receive an automated failed delivery notification; or (iv) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 12).

 

If to the Company: Menlo Therapeutics Inc.
  520 U.S. Highway 22
  Suite 204
  Bridgewater, NJ 08807
  Attn:   General Counsel
  Tel.:     908-458-9213
  Email:  mutya.harsh@foamix.com
   
with copies to (which shall not qualify as notice to any party hereto):
   
  Cooley LLP
  55 Hudson Yards
  New York, NY 10001-2157
  Attention: Patrick J. Flanagan
  Fax:        (212) 479-6275
  Email:  pflanagan@cooley.com
   
  Skadden, Arps, Slate, Meagher & Flom LLP
  One Manhattan West
  New York City, NY, 10001
  Atten:  Marie L. Gibson
  Email:marie.gibson@skadden.com
If to the Holder:  
  [·]
  Attention: [·]
  E-mail: [·]
   
with a copy to (which shall not qualify as notice to any party hereto):
 
  Morrison & Foerster LLP
  250 West 55th Street
  New York, NY 10019
  Attention: Mark Wojciechowski, Esq.
  Facsimile: (212) 468-7900
  E-mail: mwojciechowski@mofo.com

 

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Section 13.           Cumulative Remedies. Except to the extent expressly provided in Section 6 to the contrary, the rights and remedies provided in this Warrant Certificate are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at Law, in equity or otherwise.

 

Section 14.           Entire Agreement. Subject to Section 24 below, this Warrant Certificate constitutes the sole and entire agreement of the parties to this Warrant Certificate with respect to the subject matter contained herein and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter.

 

Section 15.           Successor and Assigns. This Warrant Certificate and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successor or permitted assign of the Holder shall be deemed to be the “Holder” for all purposes hereunder.

 

Section 16.           No Third-Party Beneficiaries. This Warrant Certificate is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns, and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant Certificate.

 

Section 17.           Headings. The headings in this Warrant Certificate are for reference only and shall not affect the interpretation of this Warrant Certificate.

 

Section 18.           Amendment and Modification; Waiver. Except as otherwise provided herein, this Warrant Certificate may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant Certificate shall operate or be construed as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

Section 19.           Severability. If any term or provision of this Warrant Certificate is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant Certificate or invalidate or render unenforceable such term or provision in any other jurisdiction.

 

Section 20.           Governing Law. This Warrant Certificate shall be governed by and construed in accordance with the internal Laws of the State of New York without effect to any choice or conflict of Law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of Laws of any jurisdiction other than those of the State of New York.

 

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Section 21.           Submission to Jurisdiction. Any legal suit, action or proceeding arising out of or based on this Warrant Certificate or the transactions contemplated hereby may be instituted in the federal courts of the United States or the courts of the State of New York, in each case located in the city and county of New York. Each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party’s address set forth in Section 12 shall be effective service of process for any suit, action or other proceeding, and the parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding has been brought in an inconvenient forum.

 

Section 22.           Counterparts. This Warrant Certificate may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant Certificate delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant Certificate.

 

Section 23.           No Strict Construction. This Warrant Certificate shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

 

Section 24.           Mutatis Mutandis. The rights, title, interests and benefits of the Holder pursuant to the Contingent Stock Rights Agreement in respect of any CSRs issued to it hereunder and any CSR Shares issuable to it upon conversion of such CSRs shall continue to be effective and in full force and effect notwithstanding whether the Contingent Stock Rights Agreement terminates or is terminated earlier than the Expiration Date. To that end, the CSRs shall remain in full force and effect until the earliest of the time when this Warrant Certificate is exercised in full, the Expiration Date and the date when the Second Amended and Restated Warrant Certificate is executed and delivered and, among other things, gives effect to the adjustments contemplated pursuant to Section 2(b). In the event of any such earlier termination of the Contingent Stock Rights Agreement, all applicable terms and provisions thereof necessary to protect and continue the rights, interests, title and benefits of the Holder with respect to the CSRs and the CSR Shares pursuant to the Contingent Stock Rights Agreement (including in respect of conversion of the CSRs into CSR Shares at the Exchange Ratio) shall be deemed to be incorporated by reference herein, mutatis mutandis (subject to the terms and conditions relating to the Efficacy Determination as set forth in Section 2(b) hereof).

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has duly executed this Warrant Certificate on the Restatement Date.

 

  MENLO THERAPEUTICS INC.
   
  By:  [·]           
     
  By: [·]                              

 

 

 

Accepted and agreed,

 

  [Initial Holder]  
     
  By:    
    Name:  
    Title:  

 

 

 

Exhibit A
to Warrant Certificate

 

FORM OF EXERCISE CERTIFICATE

 

(To be signed only upon exercise of Warrant Certificate and the Warrants)

 

To: Menlo Therapeutics Inc.

520 U.S. Highway 22

Suite 204

Bridgewater, NJ 08807

Attention: General Counsel

 

Reference is made to that certain Amended and Restated Warrant Certificate, issued on March [9], 2020 (as subsequently amended or otherwise modified from time to time, the “Warrant Certificate”), by Menlo Therapeutics, Inc., a copy of which is attached to this Exercise Certificate. Unless otherwise defined, capitalized terms used herein have the meanings ascribed thereto in the Warrant Certificate.

 

The undersigned, as holder of a right to purchase Warrant Shares and receive CSRs, in each case pursuant to the terms of the Warrant Certificate, hereby irrevocably elects to exercise the purchase right represented by such Warrant Certificate for, and to purchase thereunder, [________ (_____)] Warrant Shares and herewith elects to make payment of the Aggregate Exercise Price for such Warrant Shares by the following method:

 

The undersigned hereby elects to make payment of the Aggregate Exercise Price of [                                      Dollars ($                )] for (            ) Warrant Shares using the method described in Section 3(c)(i).

 

The undersigned hereby elects to make payment of the Aggregate Exercise Price of [                                      Dollars ($                )] for (            ) Warrant Shares using the method described in Section 3(c)(ii).

 

The undersigned hereby elects to make payment of the Aggregate Exercise Price of [                Dollars ($              )] for (            ) Warrant Shares using the method described in Section 3(c)(iii).

 

[In addition, as required pursuant to Section 2(a) of the Warrant Certificate, the undersigned hereby directs the Company to issue to the undersigned [_______ (____)] CSRs at no additional cost.]1

 

Unless otherwise defined herein, capitalized terms have the meanings provided in the Warrant Certificate.

 

 

1 Use if CSR Shares are issuable pursuant to Section 3(a) of the Warrant Certificate.

 

Exhibit A-1

 

 

DATED:      
      [HOLDER]
       
      By  
        Name:
        Title:

 

Exhibit A-2

 

  

Exhibit B
to Warrant Certificate

 

FORM OF ASSIGNMENT

 

[DATE OF ASSIGNMENT]

 

Reference is made to that certain Amended and Restated Warrant Certificate, issued on March [9], 2020 (as subsequently amended or otherwise modified from time to time, the “Warrant Certificate”), by Menlo Therapeutics, Inc. to the undersigned (herein referred to as the “Holder”). A copy of Warrant Certificate is attached to this Assignment. Unless otherwise defined, capitalized terms used herein have the meanings ascribed thereto in the Warrant Certificate.

 

FOR VALUE RECEIVED, the Holder hereby sells, assigns and transfers to [NAME OF ASSIGNEE] (the “Assignee”) the right to acquire [(i)] [all Warrant Shares entitled to be purchased upon exercise of the Warrant Certificate] [_____ of the Warrant Shares entitled to be purchased upon exercise of the Warrant Certificate] [, and (ii) [all] [____] CSRs issuable in connection with the exercise of the Warrant Certificate for Warrant Shares]. In furtherance of the foregoing assignment, the Holder hereby irrevocably instructs the Company to (i) memorialize such assignment on the Warrant Register as required pursuant to Section 5 of the Warrant Certificate, and (ii) pursuant to Section 6 of the Warrant Certificate, execute and deliver to the Assignee [and the Holder] [a new Warrant Certificate] [new Warrant Certificates] reflecting the foregoing assignment ([each] a “Substitute Warrant Certificate”).

 

The Assignee acknowledges and agrees that its Substitute Warrant Certificate and the Warrant Shares [and, the CSRs] to be issued upon exercise thereof are being acquired for investment and that the Assignee will not offer, sell or otherwise dispose of its Substitute Warrant Certificate or any Warrant Shares [or any CSRs] except under circumstances which will not result in a violation of the Securities Act or any applicable state securities laws. The Assignee represents and warrants for the benefit of the Company that the Assignee is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act.

 

To the extent required pursuant to Section 10(a) of the Warrant Certificate, the Assignee acknowledges and agrees that a restrictive legend shall be applied to the Assignee’s Substitute Warrant, the Warrant Shares issuable upon exercise of the substitute Warrant Certificate [and, if applicable, any CSR Shares issued upon conversion of any CSRs assigned pursuant hereto] exercise of such the Substitute Warrant Certificate, substantially consistent with the legend set forth in Section 10(a)(i).

 

[SIGNATURE PAGE FOLLOWS]

 

Exhibit B-1

 

 

IN WITNESS WHEREOF, the parties hereto agree as set forth above as of the date first written above.

 

     
    [HOLDER]
     
    By  
      Name:
      Title:

 

   
Accepted and agreed,  
   
[NAME OF ASSIGNEE]  
   
By    
  Name:  
  Title:  

 

Exhibit B-2

 

 

Exhibit 10.1

 

EXECUTION VERSION

 

CONTINGENT STOCK RIGHTS AGREEMENT

 

by and between

 

Menlo Therapeutics Inc.

 

and

 

American Stock Transfer & Trust Company, LLC

 

as

 

Rights Agent

 

 

 

Dated as of March 9, 2020

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
Section 1. Holders of CSRs; Appointment of Rights Agent 2
Section 2. No Certificates 2
Section 3. Registration by the Rights Agent 2
Section 4. Rights of CSR Holder 2
Section 5. Non-transferability 3
Section 6. Transfer of CSRs 4
Section 7. Exercisability of CSRs 4
Section 8. Conversion Procedures 6
Section 9. Payment of Taxes; Tax Reporting 7
Section 10. Reservation of Menlo Common Stock 7
Section 11. Listing of Common Stock 8
Section 12. Adjustment of CSRs 8
Section 13. No Fractional Shares 10
Section 14. Dividends or Other Distributions 10
Section 15. Notices to CSR Holders 10
Section 16. Notices to the Company and Rights Agent 10
Section 17. Supplements and Amendments; Actions 11
Section 18. Enforcement of Rights of Holders 13
Section 19. Certain Rights of the Rights Agent 13
Section 20. Designation; Removal; Successor Rights Agent 15
Section 21. Successors 15
Section 22. Termination 15
Section 23. Governing Law 16
Section 24. Benefits of this Agreement 16
Section 25. Counterparts 16
Section 26. Headings 16

 

i

 

 

INDEX OF DEFINED TERMS

 

Agreement 1
Commission 1
Company 1
CSR 1
CSR Register 2
CSRs 1
Current Stock Price 10
Effective Time 1
Efficacy Determination 4
Exchange Ratio 5
Foamix 1
Foamix Share 1
Holder 2
Menlo Common Stock 1
Menlo Merger Sub 1
Merger 1
Merger Agreement 1
Milestone Date 4
Outside Expiration Date 5
Permitted Transfer 3
Registration Statement 1
Reorganizations 8
Rights Agent 1
Securities Act 1
Serlopitant Efficacy Expiration Date 5
Serlopitant Significance 5
shares of Menlo Common Stock 9
Statistical Significance 5
Termination Date 6
Transfer Agent 8
Withholding Agent 7

 

ii

 

 

This CONTINGENT STOCK RIGHTS AGREEMENT (this “Agreement”), dated as of March 9, 2020, is entered into by and between Menlo Therapeutics Inc., a Delaware corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, a New York limited liability trust company, as Rights Agent (the “Rights Agent”).

 

W I T N E S S E T H:

 

WHEREAS, the Company, Giants Merger Subsidiary Ltd., a company incorporated under the laws of the State of Israel and registered under No. 516103165 with the Israeli Registrar of Companies, and a direct, wholly-owned subsidiary of the Company (“Menlo Merger Sub”), and Foamix Pharmaceuticals Ltd., a company incorporated under the laws of the State of Israel and registered under No. 51-336881-1 with the Israeli Registrar of Companies (“Foamix”), have entered into an Agreement and Plan of Merger, dated as of November 10, 2019 (as may be amended and restated from time to time, the “Merger Agreement”), pursuant to which, at the Effective Time (as defined in the Merger Agreement, the “Effective Time”), Menlo Merger Sub will be merged (the “Merger”) with and into Foamix, with Foamix continuing as the surviving corporation and as a wholly owned subsidiary of the Company;

 

WHEREAS, the consideration to be paid by the Company pursuant to the Merger Agreement includes one contingent stock right as hereinafter described (a “CSR” and collectively, the “CSRs”) for each ordinary share, par value NIS 0.16 per share, of Foamix (each, a “Foamix Share”) issued and outstanding immediately prior to the Effective Time;

 

WHEREAS, each person who from time to time holds one or more CSRs shall be entitled to the conversion of such CSRs for such number of shares of Common Stock, par value $0.0001 per share, of the Company (the “Menlo Common Stock”), in the amounts and subject to the terms and conditions set forth herein;

 

WHEREAS, a registration statement on Form S-4 (No. 333-235351) (the “Registration Statement”) with respect to, among other securities, the shares of Menlo Common Stock issuable pursuant to the CSRs, has been prepared and filed by the Company with the Securities and Exchange Commission (the “Commission”) and has become effective in accordance with the Securities Act of 1933, as amended (the “Securities Act”);

 

WHEREAS, the parties have done all things necessary to make the CSRs, when issued pursuant to the Merger Agreement and hereunder, the valid obligations of the Company, and to make this Agreement a valid agreement of the Company, in accordance with its terms;

 

WHEREAS, the Company desires the Rights Agent to act on behalf of the Company, and the Rights Agent is willing to act in connection with the issuance, transfer, exchange and conversion of CSRs as provided herein; and

 

WHEREAS, terms used herein but not defined herein, shall have the meanings set forth in the Merger Agreement.

 

NOW, THEREFORE, in consideration of the premises and mutual agreements herein, the Company and the Rights Agent hereby agree as follows:

 

 

 

Section 1.          Holders of CSRs; Appointment of Rights Agent.

 

(a)               As provided in the Merger Agreement, effective as of the Closing, (i) each Holder will be entitled to one CSR for each Foamix Share issued and outstanding immediately prior to the Effective Time that is validly accepted for payment, and paid for, pursuant to Section 2.1(a)(ii) of the Merger Agreement, and (ii) each Foamix Warrant that is assumed by the Company pursuant to Section 5.20 of the Merger Agreement will become exercisable for one CSR for each Foamix Share that the holder of such Foamix Warrant would have been entitled to receive had such Foamix Warrant been exercised prior to the Effective Time.

 

(b)               The Company hereby appoints American Stock Transfer & Trust Company, LLC as the Rights Agent to act as agent for the Company in accordance with the instructions hereinafter set forth in this Agreement, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-rights agents as it may deem necessary or desirable. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such co-rights agents. In the event of the appointment of a co-rights agent pursuant to this Section 1, the Company shall cause such co-rights agent to become vested with the same powers, rights, duties and responsibilities as if it had originally been named as Rights Agent.

 

Section 2.          No Certificates. The CSRs shall not be evidenced by a certificate or other instrument.

 

Section 3.          Registration by the Rights Agent.

 

(a)               The Company and the Rights Agent may deem and treat the registered holder (the “Holder”) of a CSR as the absolute owner thereof for all purposes, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary.

 

(b)               The Company shall cause to be kept at the Rights Agent’s principal office a register (the “CSR Register”) in which the Rights Agent shall provide for the up-to-date registration of CSRs. CSRs shall be registered in the names and addresses of, and in the denomination as set forth in, the applicable letter of transmittal accompanying the Foamix Shares surrendered by the holder thereof in connection with the Merger pursuant to the Merger Agreement. The CSRs issued in consideration for 102 Common Stock shall be registered in the name of the 102 Trustee (as defined in the Merger Agreement) in the CSR Register for the benefit of the applicable beneficial holder. A Holder may make a written request to the Rights Agent or the Company to change such Holder’s address of record in the CSR Register. The written request must be duly executed by the Holder. Upon receipt of such written request by the Rights Agent or the Company, the Rights Agent shall promptly record the change of address in the CSR Register. The Rights Agent shall provide a copy of the CSR Register to the Company upon request.

 

Section 4.          Rights of CSR Holder.

 

(a)               Nothing contained in this Agreement shall be construed as conferring upon any Holder, by virtue of being a Holder of a CSR, the right to receive dividends, or the right to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other matter, or any rights of any kind or nature whatsoever as a stockholder of the Company, either at law or in equity.

 

2

 

 

(b)               The CSRs will not represent any equity or ownership interest in the Company, any constituent company to the Merger or any of their respective affiliates. It is hereby acknowledged and agreed that a CSR shall not constitute a security of the Company or of the Surviving Corporation. The rights of a Holder in respect of the CSRs are limited to those expressed in this Agreement. Notwithstanding anything herein or in the Merger Agreement to the contrary, none of the Company, Menlo Merger Sub, or any of their representatives shall have any liability, responsibility or obligation of any kind to any Holder in their capacity as such on any basis (including in contract, tort, under federal or state securities law or otherwise) with respect to, arising out of, or relating to, this Agreement, the CSRs or the Merger, except to the extent otherwise expressly provided for in this Agreement.

 

(c)               A Holder may at any time, at such Holder’s option, abandon all of such Holder’s remaining rights represented by CSRs by transferring such CSR to the Company or a person nominated in writing by the Company without consideration in compensation therefor, and such rights will be cancelled. Nothing in this Agreement is intended to prohibit the Company or its affiliates from offering to acquire or acquiring the CSRs, in private transactions or otherwise, for consideration in its sole discretion.

 

Section 5.          Non-transferability. The CSRs and any interest therein shall not be sold, assigned, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, directly or indirectly, other than through a Permitted Transfer (as defined herein) and, in the case of a Permitted Transfer, only in accordance with Section 6 hereof and in compliance with applicable United States federal and state securities laws and the terms and conditions hereof. Any attempted sale, assignment, transfer, pledge, encumbrance or disposition of CSRs, in whole or in part, in violation of this Section 5 shall be void ab initio and of no effect. In addition, each Holder, by virtue of its acceptance of a CSR, shall be deemed to have agreed to not facilitate or recognize any attempt by any beneficial owner of such CSR, including any former street holder of Foamix Shares or any broker, dealer, custodian bank or other nominee of a former street holder of Foamix Shares to sell, assign, transfer, pledge, encumber or in any other manner transfer or dispose of, in whole or in part, directly or indirectly, an interest in such CSR other than through a Permitted Transfer. A “Permitted Transfer” shall mean (a) with respect to all CSRs, the transfer of any or all of the CSRs on death by will or intestacy; (b) with respect to all CSRs other than CSRs issued in consideration for 102 Common Stock (as defined in the Merger Agreement), a transfer of CSRs (i) by instrument to an inter vivos or testamentary trust in which the CSRs are to be passed to beneficiaries upon the death of the trustee; (ii) pursuant to a court order of a court of competent jurisdiction (such as in connection with divorce, bankruptcy or liquidation); or (iii) a transfer made by operation of law (such as a merger); provided that any such transferred CSR shall remain subject to the terms and conditions of this Agreement.

 

3

 

 

Section 6.          Transfer of CSRs.

 

(a)               Subject to the restrictions on transferability set forth in Section 5 hereof, the Rights Agent shall, from time to time, register the transfer of any outstanding CSRs pursuant to a Permitted Transfer upon the CSR Register, upon delivery to the Rights Agent of a written instrument or instruments of transfer and other requested documentation in form satisfactory to the Company and the Rights Agent, duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney, such signature to be guaranteed by a participant in a recognized Signature Guarantee Medallion Program. A request for a transfer of a CSR shall be accompanied by such documentation establishing satisfaction of the conditions set forth in Section 5 hereof, as applicable, as may be reasonably requested by the Company (including opinions of counsel, if appropriate). Upon receipt of documentation reasonably satisfactory to the Company, the Company shall authorize the Rights Agent to permit the transfer of a CSR. The Rights Agent shall not permit the transfer of a CSR until it is so authorized by the Company. No transfer of a CSR shall be valid until registered in the CSR Register and any transfer not duly registered in the CSR Register will be void ab initio. All transfers of CSRs registered in the CSR Register shall be the valid obligations of the Company, representing the same rights to receive shares of Menlo Common Stock as the CSRs transferred then entitled such transferee to receive, and shall entitle the transferee to the same benefits and rights under this Agreement as those held by the transferor. No fractional CSRs will be registered. Notwithstanding anything herein to the contrary, and subject to any other provision in the Withholding Tax Ruling, the 104H Interim Ruling, and the 104H Tax Ruling (as such terms are defined in the Merger Agreement) or any other written instructions provided by the Israel Tax Authority, it is hereby clarified that no transfer of a CSR under this Agreement shall be permitted and/or effected, unless the Company and the Rights Agent are fully satisfied that any and all withholding obligations with respect to Israeli taxes have been met. For this purpose, the provisions of Section 9 below shall be applicable to any transfers hereto.

 

(b)               No service charge shall be made for any registration of transfer of CSRs, but the Company may require payment of a sum sufficient to cover any stamp or other tax or other governmental charge that is imposed in connection with any such registration of transfer. The Rights Agent shall have no duty or obligation to take any action under any Section of this Agreement which requires the payment by a Holder of a CSR of applicable taxes and charges unless and until the Rights Agent is satisfied that all such taxes and/or charges have been paid.

 

Section 7.          Exercisability of CSRs.

 

(a)               As used herein, “Milestone Date” shall mean the date on which the Efficacy Determination is delivered to the Company. For purposes of this Agreement, “Efficacy Determination” means (i) the top-line primary endpoint results of both Phase III PN Trials as delivered in the form set forth (and subject to the terms and conditions set forth) in Exhibit 2.4(g)(ii) hereto by QST Consultations, LTD to the Company; or (ii) if the top-line primary endpoint results of only one Phase III PN Trials is delivered in the form set forth (and subject to the terms and conditions set forth) in Exhibit 2.4(g)(ii) hereto by QST Consultations, LTD to the Company on or before May 31, 2020, such results as delivered in such form.

 

(b)               Subject to the terms of this Agreement, each CSR shall become convertible and shall entitle the Holder thereof to receive from the Company the number of fully paid and nonassessable shares of Menlo Common Stock equal to the Exchange Ratio (as defined below) together, if applicable, with cash payable in lieu of fractional shares as provided in Section 13 hereof and any dividends or distributions payable as provided in Section 14 hereof, in each case subject to any applicable withholding tax.

 

4

 

 

(i)           The “Exchange Ratio” shall mean:

 

(1)      (A) if the Efficacy Determination reports that Serlopitant Significance was not achieved in both Phase III PN Trials or (B) the Milestone Date does not occur on or before May 31, 2020 (the “Outside Expiration Date”), then each CSR will be converted into 1.2082 shares of Menlo Common Stock pursuant to the terms and conditions of this Agreement;

 

(2)      if the Efficacy Determination reports that (A) Serlopitant Significance was achieved in only one Phase III PN Trial on or before the Outside Expiration Date, and (B) Serlopitant Significance was not achieved or has not been determined in the other Phase III PN Trial on or before the Outside Expiration Date, then each CSR will be converted into 0.6815 shares of Menlo Common Stock pursuant to the terms and conditions of this Agreement; or

 

(3)      if the Efficacy Determination reports that Serlopitant Significance was achieved in both Phase III PN Trials on or before the Outside Expiration Date, then the CSR will automatically be terminated, and the Holder thereof shall not be entitled to any shares of Menlo Common Stock relating to the CSR or any other rights under this Agreement (the date on which the CSR will be automatically terminated, the “Serlopitant Efficacy Expiration Date”).

 

(4)      “Serlopitant Significance” shall mean (as set forth in and in accordance with the Efficacy Determination) achievement of proof of statistically significant superiority of serlopitant treatment over placebo treatment on the primary endpoint (meaning that (A) the Serlopitant 5 mg percent success rate is numerically greater than the placebo percent success rate and (B) the P-value is less than 0.05) determined when comparing Worst Itch-Numerical Rating Scale (WI-NRS) 4-point responder rates between treatments at Week 10, which analysis shall be based upon the “Intent-to-Treat” population where missing data is imputed using a Markov Chain Monte Carlo (MCMC) multiple imputation method and where the primary analytical method is a Cochran-Mantel-Haenszel test.

 

(c)               From and after the Effective Time, (i) the Company shall use reasonable best efforts to cause Synteract, Inc. and TFS International AB to complete the Phase III PN Trials and QST Consultations, LTD to deliver the Efficacy Determination, concurrently for both Phase III PN Trials, to the Company, on or before the Outside Expiration Date; and (ii) the Company shall publicly disclose a summary of the results reported in any Efficacy Determination within three (3) Business Days of the Milestone Date. In the event that either Phase III PN Trial does not demonstrate Serlopitant Significance, then the Company shall have no further obligations under this Section 7(c) or otherwise to conduct any further clinical trials with respect to Serlopitant in the United States, or Europe, as applicable.

 

5

 

 

Section 8.          Conversion Procedures.

 

(a)               Subject to the provisions of Section 7 hereof, if Serlopitant Significance was not achieved in either Phase III PN Trial on or before the Outside Expiration Date, then within ten (10) Business Days of the occurrence of the earlier of the Milestone Date or the Outside Expiration Date and, subject to the tax withholding procedure described in Sections 8(e) and 9(b) below, the Company shall credit (or shall cause its Transfer Agent to credit) the appropriate number of book-entry shares of Menlo Common Stock (as determined in accordance with Section 7(b)) to each Holder in the name of such Holder as recorded in the CSR Register. Such book-entry shares of Menlo Common Stock shall be deemed to have been issued and any person so named therein shall be deemed to have become a holder of record of such shares of Menlo Common Stock as of the Milestone Date or Outside Expiration Date, as applicable.

 

(b)               If Serlopitant Significance was not achieved in either Phase III PN Trial on or before the Outside Expiration Date, then within ten (10) Business Days of the Company informing the Rights Agent in writing of the occurrence of the Milestone Date or the Outside Expiration Date (as applicable) and the consideration to be paid to each Holder pursuant to Section 7(b), and subject to the tax withholding procedure described in Sections 8(e) and 9(b) below, the Company shall deliver to the Rights Agent any cash necessary to be paid to Holders in lieu of fractional shares as provided in Section 13 hereof, and the Rights Agent shall deliver to each Holder at his, her or its address appearing on the CSR Register, (i) a written notice specifying the number of shares of Menlo Common Stock (if any) that each CSR was converted into and to whom the shares of Menlo Common Stock were issued and the Rights Agent shall promptly record such issuance in the CSR Register and (ii) a check reflecting the amount of any cash in lieu of fractional shares to be provided to such Holder as provided in Section 13 hereof and, if applicable, amounts payable pursuant to Section 14. Notwithstanding the foregoing, any cash necessary to be paid to holders who received the CSRs in consideration for 102 Common Stock, shall be payable by a wire transfer to the 102 Trustee.

 

(c)               Notwithstanding any other provisions of this Agreement, any portion of the cash provided by the Company to the Rights Agent as a reserve for purposes of payments to Holders of cash in lieu of fractional shares pursuant to Section 13 hereof and, if applicable, amounts payable pursuant to Section 14 that remains unclaimed after the first anniversary of the Milestone Date (including by means of uncashed checks or invalid addresses on the CSR Register) (the “Termination Date”) (or such earlier date immediately prior to such time as such amounts would otherwise escheat to, or become property of, any governmental entity) shall, to the extent permitted by law, become the property of the Company free and clear of any claims or interest of any person previously entitled thereto, and no consideration or compensation shall be payable therefor.

 

(d)               The Rights Agent shall keep copies of this Agreement available for inspection by the Holders during normal business hours at its office. The Company shall supply the Rights Agent from time to time with such numbers of copies of this Agreement as the Rights Agent may request.

 

6

 

 

(e)               Prior to crediting (or causing its Transfer Agent to credit) the appropriate number of book-entry shares of Menlo Common Stock to each Holder in the name of such Holder pursuant to Section 8(a) hereof and delivering cash to the Rights Agent for payment to the Holders in lieu of fractional shares pursuant to Section 13 hereof, the Company shall deliver to the Withholding Agent (as defined in Section 9(b)) a list of all Holders and the number of shares to be credited thereto and/or cash to be paid thereto, and the Withholding Agent shall be entitled to deduct or withhold from such shares and/or cash (if required, in accordance with Section 9(b) below). Upon completion of any required withholding the Company shall credit (or cause its Transfer Agent to credit) the appropriate number of shares of Menlo Common Stock to the Holders pursuant to Section 8(a) and deliver to the Rights Agent the appropriate amount of cash in lieu of fractional shares to be paid to the Holders pursuant to Section 8(b).

 

Section 9.          Payment of Taxes; Tax Reporting.

 

(a)               The Company will pay all stamp, transfer or other taxes or governmental charges, if any, attributable to the initial issuance of shares of Menlo Common Stock upon the conversion of any CSR; provided, however, that neither the Company nor the Rights Agent shall be required to pay any tax or taxes which may be payable in respect of any transfer of a CSR or, upon conversion of a CSR, issuance of any shares of Menlo Common Stock in a name other than that of the Holder of a CSR as recorded in the CSR Register, and the Company shall not be required to issue or deliver such CSR unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

(b)               Foamix, the Company, Exchange Agent (as defined in the Merger Agreement), the 102 Trustee, the Surviving Company, and any other Person who has any obligation to deduct or withhold from any consideration payable pursuant to this Agreement (each such Person, a “Withholding Agent”) shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement such amounts as are required to be deducted or withheld therefrom, all in accordance with the provisions of Sections 2.2(h) through 2.2(k) of the Merger Agreement, which shall apply to the consideration payable pursuant to this Agreement, mutatis mutandis, including the issuance or transfer of any CSR, the conversion thereof, the issuance of shares or the payment of cash in lieu of fractional shares.

 

(c)               The Rights Agent shall comply with all applicable laws and shall adhere to the provisions set forth in the Withholding Tax Ruling, the 104H Interim Ruling, and the 104H Tax Ruling (as such terms are defined in the Merger Agreement), and any other written instructions provided by the Israel Tax Authority, including, for the avoidance of doubt, regarding Tax reporting and withholding (including under the tax laws the State of Israel) with respect to any consideration payable or deliverable to any Holder of CSRs pursuant to this Agreement.

 

Section 10.      Reservation of Menlo Common Stock.

 

(a)               The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Menlo Common Stock or the authorized and issued Menlo Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue shares of Menlo Common Stock upon conversion of CSRs, the maximum number of shares of Menlo Common Stock which may then be deliverable upon conversion of all outstanding CSRs.

 

7

 

 

(b)               The Company will keep a copy of this Agreement on file with the transfer agent for Menlo Common Stock (the “Transfer Agent”) and with every subsequent transfer agent for any shares of the Company’s capital stock issuable upon conversion of the CSRs. The Company will provide or otherwise make available any cash which may be payable as provided in Section 13 and Section 14 hereof. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto transmitted to each Holder pursuant to Section 15 hereof.

 

(c)               The Company covenants that all shares of Menlo Common Stock which may be issued upon conversion of CSRs will, upon issue, be validly authorized and issued, fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issuance thereof. The Company will use its reasonable best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Agreement.

 

Section 11.      Listing of Common Stock. The Company shall from time to time use its reasonable best efforts so that immediately upon their issuance upon the conversion of any CSR the shares of Menlo Common Stock will be listed on the principal national securities exchange in the United States of America, if any, on which the Company’s other shares of Menlo Common Stock is then listed.

 

Section 12.      Adjustment of CSRs.

 

(a)               The Exchange Ratio shall be adjusted to reflect fully the appropriate effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Menlo Common Stock), reorganization, recapitalization, reclassification or other like change with respect to Menlo Common Stock having a record date on or after the date hereof and prior to the Milestone Date.

 

(b)               In case of (i) any capital reorganization, other than in the cases referred to in Section 13(a) hereof and other than any capital reorganization that does not result in any reclassification of the outstanding shares of Menlo Common Stock into shares of other stock or other securities or property, or (ii) the consolidation or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the continuing corporation and which does not result in any reclassification of the outstanding shares of Menlo Common Stock into shares of other stock or other securities or property), or (iii) the sale of all or substantially all of the assets of the Company, in each case on or after the date hereof and prior to the Milestone Date (collectively such actions being hereinafter referred to as “Reorganizations”), there shall thereafter be deliverable upon conversion of any CSR in accordance with the terms hereof (in lieu of the number of shares of Menlo Common Stock theretofore deliverable) the number of shares of stock or other securities, property or cash to which a holder of the number of shares of Menlo Common Stock that would otherwise have been deliverable upon the conversion of such CSR would have been entitled upon such Reorganization if the Milestone Date had occurred and such CSR had been converted in full immediately prior to such Reorganization. In case of any Reorganization, appropriate adjustment, as determined in good faith by the board of directors of the Company, whose determination shall be described in a duly adopted resolution certified by the Company’s Secretary or Assistant Secretary, shall be made in the application of the provisions herein set forth with respect to the rights and interests of Holders so that the provisions set forth herein shall thereafter be applicable, as nearly as possible, in relation to any such shares or other securities, property or cash thereafter deliverable upon conversion of CSRs.

 

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(c)               The Company shall not effect any such Reorganization unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such Reorganization or the corporation or other entity purchasing such assets shall expressly assume, by a supplemental contingent stock rights agreement or other acknowledgment executed and delivered to the Rights Agent, the obligation to deliver to the Rights Agent and to cause the Rights Agent to deliver to each such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to in accordance with the terms hereof upon the occurrence of the Milestone Date, and the due and punctual performance and observance of each and every covenant, condition, obligation and liability under this Agreement to be performed and observed by the Company in the manner prescribed herein. The provisions of Section 13(b) and Section 13(c) shall apply to successive Reorganization transactions.

 

(d)               Irrespective of any adjustments in the number or kind of shares issuable upon the conversion of the CSRs, CSRs theretofore or thereafter issued may continue to express the same dollar value and number and kind of shares as are stated in the CSRs initially issuable pursuant to this Agreement.

 

(e)               Whenever an adjustment is made to the terms of the CSRs pursuant to this Section 13, the Company shall provide the notices required by Section 16 hereof.

 

(f)                The Rights Agent has no duty to determine when an adjustment under this Section 13 should be made, how it should be made or what it should be. The Rights Agent has no duty to determine whether any provisions of a supplemental contingent stock rights agreement under Section 13(b) are correct. The Rights Agent makes no representation as to the validity or value of any securities or assets issuable upon conversion of CSRs. The Rights Agent shall not be responsible for the Company’s failure to comply with this Section 13.

 

(g)               For purpose of this Section 13, the term “shares of Menlo Common Stock” shall mean (i) shares of the class of stock designated as Common Stock, par value $0.0001 per share, of the Company as of the date of this Agreement, and (ii) shares of any other class of stock resulting from successive changes or reclassification of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. In the event that at any time, as a result of an adjustment made pursuant to this Section 13, the Holders of CSRs shall become entitled to receive any securities of the Company other than, or in addition to, shares of Menlo Common Stock, thereafter the number or amount of such other securities so issuable upon conversion of each CSR shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Menlo Common Stock issuable hereunder contained in Section 13(a), and the provisions of Section 6, Section 7, Section 8, Section 9, Section 10 and Section 13 with respect to the shares of Menlo Common Stock issuable hereunder or Menlo Common Stock shall apply on like terms to any such other securities.

 

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Section 13.      No Fractional Shares. The Company shall not be required to issue fractional shares of Menlo Common Stock upon conversion of CSRs. If more than one CSR shall be convertible at the same time with respect to the same Holder, the number of full shares of Menlo Common Stock which shall be issuable upon the conversion thereof shall be computed on the basis of the aggregate number of shares of Menlo Common Stock issuable upon the conversion of the CSRs. If any fraction of a share of Menlo Common Stock would, except for the provisions of this Section 13, be issuable on the conversion of any CSRs, the Company shall pay, without interest, an amount determined by the Current Stock Price. The “Current Stock Price” shall equal the average per share closing sale prices of Menlo Common Stock on the Nasdaq Stock Market as reported by the Wall Street Journal for the five (5) full trading days ending on the fifth (5th) trading date after the later of (i) the Milestone Date or (ii) the Expiration Date.

 

Section 14.      Dividends or Other Distributions. No dividend or other distribution declared with respect to Menlo Common Stock with a record date prior to the Milestone Date shall be paid to Holders of CSRs. To the extent any shares of Menlo Common Stock are issued to Holders pursuant to Section 8(a), there shall be paid to such Holders the amount of dividends or other distributions, without interest, declared with a record date after the Milestone Date.

 

Section 15.      Notices to CSR Holders. Upon any adjustment pursuant to Section 13 hereof, the Company shall give prompt written notice of such adjustment to the Rights Agent and shall cause the Rights Agent, on behalf of and at the expense of the Company, within ten (10) days after notification is received by the Rights Agent of such adjustment, to mail by first class mail, postage prepaid, to each Holder a notice of such adjustment(s) and shall deliver to the Rights Agent a certificate of the Chief Financial Officer of the Company, setting forth in reasonable detail (i) the terms of such adjustment(s), (ii) a brief statement of the facts requiring such adjustment(s) and (iii) the computation by which such adjustment(s) was made. Where appropriate, such notice may be given in advance and included as a part of the notice required under the other provisions of this Section 15.

 

Section 16.      Notices to the Company and Rights Agent. Any notice or demand authorized by this Agreement to be given or made by the Rights Agent or by any Holder to or on the Company shall be sufficiently given or made when received at the office of the Company expressly designated by the Company as its office for purposes of this Agreement (until the Rights Agent is otherwise notified in accordance with this Section 16 by the Company), as follows:

 

Menlo Therapeutics Inc.
200 Cardinal Way, 2nd Floor

Redwood City, California 94063
Fax: (650) 249-0205
Attention: Steven Basta

 

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with a copy to:

 

Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, NY 10036
Fax: (212) 735-2000
Attention: Marie L. Gibson, Esq.

 

Meitar Liquornik Geva Leshem Tal
16 Abba Hillel Silver Rd.
Ramat Gan 5250608, Israel
Fax: 972 3 610 3755
Attention: J. David Chertok

 

Latham & Watkins LLP
140 Scott Drive
Menlo Park, CA 94025
Attention: Mark V. Roeder, Joshua M. Dubofsky

Emails: Mark.Roeder@lw.com, Josh.Dubofsky@lw.com

 

Any notice pursuant to this Agreement to be given by the Company or by any Holder(s) to the Rights Agent shall be sufficiently given when received by the Rights Agent at the address appearing below (until the Company is otherwise notified in accordance with this Section 16 by the Rights Agent).

 

American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219

 

Attention: Relationship Management

 

Section 17.      Supplements and Amendments; Actions.

 

(a)               Without the consent of any Holders, the Company, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes:

 

(i)           to evidence the succession of another person to the Company and the assumption by any such successor of the covenants of the Company herein; provided that such succession and assumption is in accordance with the terms of this Agreement;

 

(ii)        to evidence the succession of another person as a successor Rights Agent and the assumption by any successor of the covenants and obligations of such Rights Agent herein; provided that such succession and assumption is in accordance with the terms of this Agreement;

 

(iii)      to add to the covenants of the Company such further covenants, restrictions, conditions or provisions as the Company shall consider to be for the protection of Holders; provided that in each case, such provisions shall not adversely affect the rights of the Holders;

 

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(iv)       to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Agreement; provided that in each case, such provisions shall not adversely affect the rights of Holders;

 

(v)         as may be necessary or appropriate to ensure that CSRs are not subject to registration under the Securities Act or the U.S. Securities Exchange Act of 1934, as amended and the rules and regulations made thereunder, or any applicable state securities or “blue sky” laws;

 

(vi)       to cancel CSRs (i) in the event that any Holder has abandoned its rights in accordance with Section 4(c) or (ii) following the transfer of such CSRs to the Company or its affiliates in accordance with Section 5; or

 

(vii)      as may be necessary or appropriate to ensure that the Company complies with applicable law.

 

In addition to the foregoing, upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 17, the Rights Agent hereby agrees to enter into one or more amendments hereto to evidence the succession of another person as a successor Rights Agent and the assumption by any successor of the covenants and obligations of such Rights Agent herein.

 

(b)               With the written consent of the Holders of not less than a majority of the then outstanding CSRs delivered to the Company, the Company may enter into one or more amendments hereto for the purpose of adding, eliminating or changing any provision of this Agreement if such addition, elimination or change is in any way adverse to the rights of Holders. It shall not be necessary for any written consent of Holders under this Section 17(b) to approve the particular form of any proposed amendment, but it shall be sufficient if such written consent shall approve the substance thereof.

 

(c)               The consent of each Holder affected shall be required for any amendment pursuant to which the number of shares of Menlo Common Stock issuable upon conversion of CSRs would be decreased (not including adjustments contemplated hereunder).

 

(d)               Promptly after the execution by the Company of any amendment pursuant to the provisions of this Section 17, the Company shall mail by first class mail, postage prepaid, a notice thereof to the Holders at their addresses as they shall appear on the CSR Register, setting forth in general terms the substance of such amendment.

 

(e)               Upon the execution of any amendment under this Section 17, this Agreement shall be modified in accordance therewith, such amendment shall form a part of this Agreement for all purposes and every Holder shall be bound thereby.

 

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(f)                The Rights Agent shall be entitled to receive and shall be fully protected in relying upon an officers’ certificate and opinion of counsel as conclusive evidence that any such amendment or supplement is authorized or permitted hereunder, that it is not inconsistent herewith, and that it will be valid and binding upon the Company in accordance with its terms.

 

Section 18.      Enforcement of Rights of Holders. Any actions seeking enforcement of the rights of Holders hereunder may be brought either by the Rights Agent or the Holders of a majority of the issued and then outstanding CSRs.

 

Section 19.      Certain Rights of the Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the Holders, by their acceptance of CSRs, shall be bound:

 

(a)               The statements contained herein and in any notice delivered by the Company shall be taken as statements of the Company, and the Rights Agent assumes no responsibility for the correctness of any of the same except such as describe the Rights Agent or any action taken by it. The Rights Agent assumes no responsibility with respect to the distribution of the CSRs except as herein otherwise provided.

 

(b)               The Rights Agent shall not be responsible for any failure of the Company to comply with the covenants contained in this Agreement or in the CSRs to be complied with by the Company.

 

(c)               The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either by itself (through its employees) or by or through its attorneys or agents (which shall not include its employees) and shall not be responsible for the misconduct of any agent appointed with due care.

 

(d)               The Rights Agent may consult at any time with legal counsel satisfactory to it (who may be counsel for the Company), and the Rights Agent shall incur no liability or responsibility to the Company or to any Holder in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel.

 

(e)               Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless such evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President, Chief Financial Officer, one of the Vice Presidents, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.

 

(f)                The Company agrees to (i) pay the Rights Agent reasonable compensation for all services rendered by the Rights Agent in the performance of its duties under this Agreement as agreed upon in writing by the Rights Agent and the Company on or prior to the date of this Agreement, (ii) reimburse the Rights Agent for all reasonable and properly documented out-of-pocket expenses, taxes and governmental charges and other charges of any kind and nature incurred by the Rights Agent (including reasonable fees and expenses of the Rights Agent’s counsel and agents) in the performance of its duties under this Agreement and (iii) indemnify the Rights Agent and hold it harmless against any and all liabilities, including judgments, costs and counsel fees, for anything done or omitted by the Rights Agent in the performance of its duties under this Agreement, except as a result of (y) the Rights Agent’s gross negligence, bad faith or willful misconduct or breach of this Agreement; or (z) the Rights Agent (or anyone on its behalf) not complying with and/or adhering to the provisions of the Withholding Tax Ruling, the 104H Interim Ruling, and the 104H Tax Ruling (as such terms are defined in the Merger Agreement), or any other written instructions provided by the Israel Tax Authority, or otherwise with respect to any tax withholding made or not made by the Rights Agent (or anyone on its behalf).

 

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(g)               The Rights Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expense unless the Company or one or more Holders shall furnish the Rights Agent with reasonable security and indemnity satisfactory to the Rights Agent for any costs and expenses which may be incurred, but this provision shall not affect the power of the Rights Agent to take such action as the Rights Agent may consider proper, whether with or without any such security or indemnity. All rights of action under this Agreement or under any of the CSRs may be enforced by the Rights Agent, and any such action, suit or proceeding instituted by the Rights Agent shall be brought in its name as Rights Agent, and any recovery of judgment shall be for the ratable benefit of the Holders, as their respective rights or interests may appear.

 

(h)               The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any other securities of the Company or become pecuniarily interested in any transactions in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement or such director, officer or employee. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity, including, without limitation, acting as Transfer Agent or as a lender to the Company or an affiliate thereof.

 

(i)                 The Rights Agent shall act hereunder solely as agent, and its duties shall be determined solely by the provisions hereof. The Rights Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement except for (i) its own gross negligence, bad faith or willful misconduct; and (ii) such actions as provided in Section 19(f)(ii) above.

 

(j)                 The Rights Agent will not incur any liability or responsibility to the Company or to any Holder for any action taken in reliance on any notice, resolution, waiver, consent, order, certificate, or other paper, document or instrument reasonably believed by it to be genuine and to have been signed, sent or presented by the proper party or parties.

 

(k)               The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity of any CSR; nor shall the Rights Agent by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Menlo Common Stock (or other stock) to be issued pursuant to this Agreement or any CSR, or as to whether any shares of Menlo Common Stock (or other stock) will, when issued, be validly issued, fully paid and nonassessable.

 

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(l)                 The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the President, any Vice President or the Secretary of the Company, and to apply to such officers for advice or instructions in connection with its duties, and shall not be liable for any action taken or suffered to be taken by it in good faith and without negligence in accordance with instructions of any such officer or officers.

 

Section 20.      Designation; Removal; Successor Rights Agent. The Rights Agent may resign at any time and be discharged from its duties under this Agreement by giving to the Company thirty (30) days’ notice in writing. The Company may remove the Rights Agent or any successor rights agent by giving to the Rights Agent or successor rights agent thirty (30) days’ notice in writing. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent, subject to the provisions of the Withholding Tax Ruling, the 104H Interim Ruling, and the 104H Tax Ruling (as such terms are defined in the Merger Agreement), and obtaining written approval from the Israel Tax Authority. If the Company shall fail to make such appointment within a period of thirty (30) days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by any Holder (who shall with such notice submit his, her or its CSR for inspection by the Company), then any Holder may apply to any court of competent jurisdiction for the appointment of a successor to the Rights Agent. Pending appointment of a successor rights agent, either by the Company or by such court, the duties of the Rights Agent shall be carried out by the Company. Any successor rights agent, whether appointed by the Company or such a court, shall be a bank or trust company in good standing, incorporated under the laws of the United States of America or any State thereof or the District of Columbia and having at the time of its appointment as rights agent a combined capital and surplus of at least $10,000,000. After appointment, the successor rights agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the former Rights Agent shall deliver and transfer to the successor rights agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for such purpose. In the event of such resignation or removal, the Company or the successor rights agent shall mail by first class mail, postage prepaid, to each Holder, written notice of such removal or resignation and the name and address of such successor rights agent. Failure to file any notice provided for in this Section 20, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor rights agent, as the case may be.

 

Section 21.      Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company, the Rights Agent or any Holder shall bind and inure to the benefit of their respective successors, assigns, heirs and personal representatives.

 

Section 22.      Termination. This Agreement shall terminate on the earlier of (i) the Serlopitant Efficacy Expiration Date and (ii) the Termination Date. Notwithstanding anything to the contrary contained herein, the indemnification contained in Section 19(f) shall survive termination of this Agreement.

 

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Section 23.      Governing Law. THIS AGREEMENT AND EACH CSR ISSUED HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF.

 

Section 24.      Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Rights Agent and the Holders any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the Holders.

 

Section 25.      Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same agreement.

 

Section 26.      Headings. The headings and table of contents contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

  

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written.

 

Menlo Therapeutics Inc.
                                                            
  By:  
    Name: Steve Basta
    Title: Chief Executive Officer
       
  American Stock Transfer & Trust Company, LLC, as Rights Agent
                                                       
  By:  
    Name: Michael Legregin
    Title: Senior Vice President

 

[Signature Page to Contingent Stock Rights Agreement]

 

 

 

Exhibit 99.1

 

 

 

Menlo Therapeutics and Foamix Pharmaceuticals Complete Merger, Creating a Combined Company Focused on the Development and Commercialization of Therapeutics for Dermatologic Indications

 

BRIDGEWATER, N.J., March 9, 2020 – Menlo Therapeutics Inc. (Nasdaq: MNLO) (“Menlo” or the “Company”) announced today the completion of its merger with Foamix Pharmaceuticals Ltd. (Nasdaq: FOMX) (“Foamix”) following the satisfaction of all closing conditions required by the merger agreement.

 

Upon completion of the merger, pursuant to the terms of the merger agreement, Foamix became a wholly owned subsidiary of Menlo. Under the terms of the merger, Foamix shareholders received 0.5924 of a share of Menlo common stock for each Foamix share owned, as well as a non-transferrable contingent stock right. These contingent stock rights potentially allow Foamix shareholders to receive additional shares of Menlo common stock based on the results of Menlo’s Phase 3 trials of serlopitant for the treatment of pruritus associated with prurigo nodularis, as more fully described in the companies’ joint proxy statement/prospectus on Form S-4. Foamix ordinary shares ceased trading as of the close of trading on March 6, 2020. On March 9, 2020, newly issued Menlo shares will commence trading under the ticker “MNLO” on Nasdaq.

 

“This is an exciting day as we take a significant step toward becoming a broad dermatology franchise. The combined company already has an approved, commercial-stage product, AMZEEQ™, and several late-stage product candidates with several meaningful near-term catalysts,” said David Domzalski, who became the Chief Executive Officer of Menlo upon the closing of the merger. “I am excited about the opportunities ahead for the combined company as we work towards improving the lives of patients with a differentiated and innovative product pipeline.”

 

Since announcing the transaction on November 11, 2019, the Company achieved a major milestone with the launch of its first product, AMZEEQ™ for the treatment of inflammatory lesions of non-nodular moderate to severe acne vulgaris in adults and pediatric patients 9 years of age and older. “We are encouraged by the initial performance and activities in support of the launch of AMZEEQ,” continued Mr. Domzalski. In the coming weeks, the Company anticipates announcing the results of its Phase 3 clinical trials of serlopitant for the treatment of pruritus associated with prurigo nodularis. Additionally, the Company expects to announce the results of its Phase 2 clinical trial for FCD105 (minocycline 3% and adapalene 0.3% foam) for the treatment of acne in the second quarter of 2020. The Company has also taken meaningful steps towards facilitating a successful integration and capitalizing on expected cost synergies.

 

 

 

 

Company Management and Board Appointees

 

Effective upon the closing of the merger, Foamix’s management team will manage the Company, led by David Domzalski as Chief Executive Officer.

 

As part of the transaction, Foamix has designated five of its pre-closing directors, David Domzalski, Sharon Barbari, Rex Bright, Anthony Bruno and Stanley Hirsch to serve as members of the Menlo Board of Directors. Menlo has designated two of its pre-closing directors, Steve Basta, Menlo’s Chief Executive Officer prior to the consummation of the merger, and Elisabeth Sandoval, to be directors of the Company following the merger.

 

Tax Consequences

 

For a summary of the tax ruling the parties received from the Israeli Tax Authority relating to the transaction, please see Menlo’s Current Report on Form 8-K it intends to file with the SEC later today.

 

Exchange Agent

 

Foamix shareholders with questions about their shares can contact American Stock Transfer & Trust Company, LLC at (877) 248-6417.

 

Conference Call

 

There will be a conference call at 8:30 a.m. Eastern Time on Thursday, March 12th during which management of Menlo will provide a corporate update.

 

Toll Free: 877-407-0784
   
International: 201-689-8560
   
Conference ID: 13700089
   
Webcast: http://public.viavid.com/index.php?id=138439

 

A replay of the call will be archived on the Company’s website at www.menlotherapeutics.com promptly after the conference call.

 

Advisors

 

Barclays acted as exclusive financial advisor to Foamix. Skadden, Arps, Slate, Meagher & Flom, LLP and Meitar Law Offices acted as Foamix’s legal counsel in connection with the transaction. Guggenheim Securities, LLC acted as exclusive financial advisor to Menlo. Latham & Watkins LLP and Herzog, Fox & Neeman acted as Menlo’s legal counsel in connection with the transaction.

 

About Menlo Therapeutics

 

Menlo Therapeutics Inc. is a different type of biopharmaceutical company working to solve some of today’s most difficult therapeutic challenges in dermatology and beyond.

 

With expertise in topical medicine innovation as a springboard, the Company is working to develop and commercialize a variety of solutions using its proprietary Molecule Stabilizing Technology (MST™), and has received FDA approval for the world’s first topical minocycline, AMZEEQTM. In addition, the Company is focused on the development of serlopitant, a once-daily oral NK1 receptor antagonist, as a novel potential treatment option for pruritus associated with prurigo nodularis.

 

 

 

 

Menlo uses its website as a channel to distribute information about Menlo and its products and product candidates from time to time. Menlo may use its website to comply with its disclosure obligations under Regulation FD. Therefore, investors should monitor Menlo’s website in addition to following its press releases, filings with the U.S. Securities and Exchange Commission, public conference calls, and webcasts. For more information, visit www.menlotherapeutics.com.

 

Cautionary Statement Regarding Forward-Looking Statements

 

This release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding expectations with respect to the anticipated announcement of results of Menlo’s clinical trials for pruritus associated with prurigo nodularis, statements regarding the development and commercialization of Menlo’s products and product candidates and other statements regarding the future expectations, plans and prospects of Menlo. All statements in this press release which are not historical facts are forward-looking statements. Any forward-looking statements are based on Menlo’s current knowledge and its present beliefs and expectations regarding possible future events and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially and adversely from those set forth or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, Menlo’s ability to successfully integrate the two companies; the achievement of certain expected cost synergies; the outcome of any legal proceedings related to the merger; the outcome and cost of clinical trials for current and future product candidates, including those for serlopitant; determination by the FDA that results from Menlo’s clinical trials are not sufficient to support registration or marketing approval of product candidates; adverse events associated with the commercialization of AMZEEQ™; the outcome of pricing, coverage and reimbursement negotiations with third party payors for AMZEEQ™ or any other products or product candidates that Menlo may commercialize in the future; whether, and to what extent, third party payors impose additional requirements before approving AMZEEQ™ prescription reimbursement; the eligible patient base and commercial potential of AMZEEQ™ or any of Menlo’s other product or product candidates; risks that Menlo’s intellectual property rights, such as patents, may fail to provide adequate protection, may be challenged and one or more claims may be revoked or interpreted narrowly or will not be infringed; risks that any of Menlo’s patents may be held to be narrowed, invalid or unenforceable or one or more of Menlo’s patent applications may not be granted and potential competitors may also seek to design around Menlo’s granted patents or patent applications; additional competition in the acne and dermatology markets; inability to raise additional capital on favorable terms or at all; Menlo’s ability to recruit and retain key employees; and Menlo’s ability to stay in compliance with applicable laws, rules and regulations. For a discussion of other risks and uncertainties, and other important factors, any of which could cause Menlo’s actual results to differ from those contained in the forward-looking statements, see the sections titled “Risk Factors” in (i) Menlo’s most recent annual report on Form 10-K, (ii) Foamix’s most recent quarterly report on Form 10-Q and (iii) Menlo’s definitive joint proxy statement/prospectus filed with the U.S. Securities and Exchange Commission under Rule 424(b)(3) on January 7, 2020, as well as discussions of potential risks, uncertainties, and other important factors in Menlo’s subsequent filings with the U.S. Securities and Exchange Commission. Although Menlo believes these forward-looking statements are reasonable, they speak only as of the date of this announcement and Menlo undertakes no obligation to update publicly such forward-looking statements to reflect subsequent events or circumstances, except as otherwise required by law. Given these risks and uncertainties, you should not rely upon forward-looking statements as predictions of future events.

 

 

 

 

Media Relations:

Vusi Moyo

Zeno Group

312-396-9703

vusi.moyo@zenogroup.com

 

Investor Relations:

Joyce Allaire

LifeSci Advisors, LLC

646-889-1200

jallaire@lifesciadvisors.com

 

Exchange Agent:
American Stock Transfer & Trust Company, LLC
(877) 248-6417