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): December 14, 2020
REVIVA PHARMACEUTICALS HOLDINGS, INC. |
(Exact name of registrant as specified in its charter) |
Delaware | 001-38634 | 85-4306526 | ||
(State or other jurisdiction
of incorporation) |
(Commission File Number) |
(IRS Employer
Identification No.) |
19925 Stevens Creek Blvd., Suite 100, Cupertino, CA | 95014 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (408) 501-8881
Not Applicable |
(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 (see General Instruction A.2. below):
¨ | 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, par value $0.0001 per share | RVPH | Nasdaq Capital Market | ||
Warrants to purchase one share of Common Stock | RVPHW | Nasdaq Capital Market |
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. ¨
Introductory Note
On December 14, 2020, Reviva Pharmaceuticals Holdings, Inc., a Delaware corporation and the successor by re-domiciliation to Tenzing Acquisition Corp., a British Virgin Islands exempted company (“Tenzing”), Tenzing Merger Subsidiary Inc., a Delaware corporation and wholly-owned subsidiary of Tenzing (“Merger Sub”), and Reviva Pharmaceuticals, Inc., a Delaware corporation (“Reviva”), consummated the proposed merger (the “Closing”) of Merger Sub with and into Reviva (the “Merger”), contemplated by the previously announced Agreement and Plan of Merger, dated as of July 20, 2020 (as amended, the “Merger Agreement”), by and among Tenzing, Merger Sub, Reviva, Tenzing LLC, a Delaware limited liability company (“Sponsor”), solely in the capacity as the representative from and after the effective time of the Closing (the “Effective Time”) for the shareholders of Tenzing (other than the Reviva Security Holders (as defined in the Merger Agreement)) (the “Purchaser Representative”), and Laxminarayan Bhat Ph.D. (“Dr. Bhat”), solely in his capacity as the representative from and after the Effective Time for the Reviva Security Holders (the “Seller Representative”). Pursuant to the Merger Agreement, at the Effective Time, Merger Sub merged with and into Reviva, with Reviva as the surviving company in the Merger and, after giving effect to such Merger, Reviva becoming a wholly-owned subsidiary of Reviva Pharmaceuticals Holdings, Inc.
In accordance with the terms and subject to the conditions of the Merger Agreement, at the Effective Time, (i) all shares of Reviva common stock and Reviva preferred stock (together, “Reviva Stock”) issued and outstanding immediately prior to the Effective Time (other than those properly exercising any applicable dissenters rights under Delaware law) converted into the right to receive shares of common stock of the Company (as defined below), par value $0.0001 per share (“Common Stock”); (ii) each issued and outstanding warrant to acquire shares of Reviva common stock were assumed by the Company and automatically converted into a warrant for Common Stock, with its price and number of shares equitably adjusted based on the terms of the Merger Agreement (each, an “Assumed Warrant”); and (iii) each outstanding option to acquire Reviva common stock (whether vested or unvested) were assumed by the Company and automatically converted into an option to acquire shares of Common Stock, with its price and number of shares equitably adjusted based on the terms of the Merger Agreement (each, an “Assumed Option”).
Reviva Pharmaceuticals Holdings, Inc., following the Business Combination (as defined below), together with its consolidated subsidiaries, is referred to herein as the “Company.” Certain terms used in this Current Report on Form 8-K, but not defined herein, have the same meaning as set forth in the final proxy statement/prospectus filed pursuant to Rule 424(b)(3) (File No. 333-245057) by Tenzing with the Securities and Exchange Commission (the “SEC”) on November 12, 2020 (as amended, the “Prospectus”).
Item 1.01. | Entry into Material Definitive Agreement. |
Underwriting Agreement Side Letter
Reference is made to that certain underwriting agreement, dated as of August 20, 2018 (the “Underwriting Agreement”), by and between Tenzing and Maxim Group LLC (“Maxim Group,” the underwriter of Tenzing’s initial public offering (the “IPO”)), pursuant to which Maxim Group was entitled to an aggregate cash payment of $2,213,750 (the “Deferred Underwriting Commission”) payable upon the Closing. In connection with the Closing, on December 14, 2020, Tenzing entered into a letter agreement (the “Side Letter”) with Maxim Group, which Side Letter provided that in lieu of the payment of $2,113,750 of the Deferred Underwriting Commission in cash, Tenzing shall, at the Closing, issue to Maxim Group’s affiliate, Maxim Partners, LLC (“Maxim Partners,” and together with Maxim Group, “Maxim”), an aggregate of 300,000 shares of Common Stock of the Company (the “Side Letter Shares”), with the remaining $100,000 of the Deferred Underwriting Commission being paid in cash upon the Closing. Maxim was also given certain registration rights in the Side Letter.
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The foregoing description of the Side Letter does not purport to be complete and is qualified in its entirety by reference to the full text of the Side Letter, a copy of which is filed herewith as Exhibit 10.21 to this Current Report on Form 8-K, and is incorporated herein by reference.
Registration Rights Agreement
As previously reported on a Current Report on Form 8-K filed on December 9, 2020 by Tenzing, in connection with Tenzing’s shareholder approval of the Merger Agreement on December 8, 2020, Tenzing entered into a Non-Redemption Agreement (the “Non-Redemption Agreement”) with the Sponsor and a certain single healthcare dedicated institutional investor shareholder of the Company (the “Shareholder”) in connection with the Business Combination. Pursuant to the Non-Redemption Agreement, and upon the effectiveness of the Closing, on December 14, 2020, the Company and the Shareholder entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Shareholder was given certain registration rights with respect to (a) fifty-five thousand fifty (55,050) shares (the “Shareholder Additional Shares”) of Common Stock to be issued to the Shareholder at the Closing pursuant to the Non-Redemption Agreement, (b) three hundred forty-three thousand (343,000) warrants to acquire shares of Common Stock of the Company that were acquired by Sponsor as part of the private placement units issued to Sponsor in connection with Tenzing’s initial public offering (the “Private Placement Warrants”), which Sponsor transferred to Shareholder on December 15, 2020 pursuant to the terms of the Non-Redemption Agreement, (c) the Working Capital Warrants (as defined below in Item 2.01 under the heading “Item 7 – Certain Relationships and Related Transactions, and Director Independence – Tenzing Related Person Transactions - Related Party Loans”) and, together with the Private Placement Warrants and the Shareholder Additional Shares, the “Additional Securities”), (d) all shares of Common Stock issuable upon exercise of the Private Placement Warrants, (e) all shares of Common Stock issuable upon exercise of the Working Capital Warrants, and (f) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing.
The Registration Rights Agreement provides for liquidated damages upon the occurrence of certain events, including failure by the Company to file the registration statement or cause it to become effective by the deadlines set forth in the Registration Rights Agreement, and on each monthly anniversary of each such occurrence until the applicable event is cured. The amount of the liquidated damages is equal to the product of (A) 2.0% multiplied by (B) with respect to the Additional Securities the quotient of (I) the number of Shareholder’s Additional Securities of such type that are not then covered by a registration statement that is then effective and available for use by Shareholder divided by the total number of Shareholder’s Additional Securities of such type multiplied by (C) the VWAP of such Additional Securities over the five (5) Trading Days ending at the close of business on the principal securities exchange or securities market on which such type of Additional Securities are then traded immediately prior to the date of determination. The Registration Rights Agreement provides that the maximum aggregate liquidated damages payable to Shareholder (including any interest thereon) shall be equal to $700,000. If the Company fails to pay any partial liquidated damages pursuant to the Registration Rights Agreement in full within seven days after the date payable, the Company will pay interest thereon at a rate of 12% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to Shareholder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The partial liquidated damages apply on a daily pro rata basis for any portion of a month prior to the cure of an event.
The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Registration Rights Agreement, a copy of which is filed herewith as Exhibit 10.12 to this Current Report on Form 8-K, and is incorporated herein by reference.
Escrow Agreement
On December 14, 2020, the Company entered into an escrow agreement (the "Escrow Agreement") with the Stockholder Representative, the Seller Representative, and Continental Stock Transfer & Trust Company, as escrow agent (the "Escrow Agent"). Pursuant to the Escrow Agreement and the Merger Agreement, at the Closing, 573,666 shares of Common Stock, representing ten percent (10%) of the Merger Consideration (the “Escrow Shares”) otherwise issuable to the Reviva Stockholders (allocated pro rata among the Reviva Stockholders based on the Merger Consideration otherwise issuable to them at the Closing (“Pro Rata Consideration”)) was deposited into a segregated escrow account with the Escrow Agent, as escrow agent, and such shares are held in escrow together with any dividends, distributions or other income on the Escrow Shares (the “Escrow Property”) in accordance with the Escrow Agreement. The Escrow Property will be held in the escrow account for a period of twelve (12) months after the Closing as the sole and exclusive source of payment for any post-Closing indemnification claims (other than fraud claims and Consent Claims). The Reviva Stockholders will have the right to vote the Escrow Shares while they are held in escrow.
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The foregoing description of the Escrow Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Escrow Agreement, a copy of which is filed herewith as Exhibit 10.24 to this Current Report on Form 8-K, and is incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
As previously reported, on December 8, 2020, Tenzing held an extraordinary general meeting of its shareholders (the “Shareholders Meeting”), at which the Tenzing shareholders considered and adopted, among other matters, a resolution to approve and adopt the Domestication, the Merger Agreement, and the transactions contemplated by the Merger Agreement (the “Business Combination”).
At the Shareholders Meeting, holders of 2,221,128 Tenzing ordinary shares, no par value (the “Ordinary Shares”), sold in its IPO (“Public Shares”), exercised their right to redeem those shares in accordance with Tenzing’s organizational documents, as amended, for cash at a price of approximately $10.88 per Ordinary Share (the “Redemption Price”), for an aggregate of approximately $24.2 million.
The material terms and conditions of the Merger Agreement are described in the Prospectus, in the section titled “PROPOSAL 2: THE BUSINESS COMBINATION PROPOSAL —The Merger Agreement,” which is incorporated herein by reference.
At the Closing:
(i) | Pursuant to the Domestication and the Merger Agreement, (a) an aggregate of 2,903,303 Ordinary Shares of Tenzing were exchanged for an equivalent number of shares of Common Stock, (b) warrants to acquire an aggregate of 6,325,000 Ordinary Shares of Tenzing were exchanged for warrants to acquire an equivalent number of shares of Common Stock, and (c) warrants to acquire an aggregate of 358,813 Ordinary Shares of Tenzing were exchanged for warrants to acquire an equivalent number of shares of Common Stock. The material terms and conditions of the Domestication are described in the Prospectus, in the section titled “PROPOSAL 1: THE DOMESTICATION PROPOSAL,” which is incorporated herein by reference. The material terms and conditions of the Merger Agreement are described in the Prospectus, in the section titled “PROPOSAL 2: THE BUSINESS COMBINATION PROPOSAL — The Merger Agreement,” which is incorporated herein by reference; |
(ii) | Pursuant to the Merger Agreement, (a) an aggregate of 5,734,621 shares of Common Stock (inclusive of the Escrow Shares) were issued as Merger Consideration in exchange for the shares of Reviva Stock outstanding as of immediately prior to the Effective Time, (b) Assumed Warrants to acquire shares of Reviva Stock were automatically converted into warrants to acquire an aggregate of 126,268 shares of Common Stock, and (c) Assumed Options to acquire shares of Reviva Stock were automatically converted into options to acquire an aggregate of 65,471 shares of Common Stock. The material terms and conditions of the Merger Agreement are described in the Prospectus, in the section titled “PROPOSAL 2: THE BUSINESS COMBINATION PROPOSAL — The Merger Agreement,” which is incorporated herein by reference; |
(iii) | the 300,000 Side Letter Shares were issued pursuant to the Side Letter; |
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(iv) | the 197,500 Working Capital Shares (as defined below) and the Working Capital Warrants (as defined below) to purchase 197,500 shares of Common Stock were issued pursuant to the conversion of the Working Capital Loans (as defined below); |
(v) | the 55,050 Shareholder Additional Shares were issued pursuant to the Non-Redemption Agreement; and |
(vi) | the 41,263 Additional Backstop Shares (as defined below) were issued to the Backstop Investors (as defined below); |
Immediately after giving effect to the above events that occurred at the Closing, there were an aggregate of 9,231,737 shares of Common Stock outstanding, warrants to acquire an aggregate of 7,007,581 shares of Common Stock outstanding, and 65,471 shares of Common Stock subject to equity awards outstanding under the 2006 Plan.
Prior to the Closing, Tenzing’s units, Ordinary Shares and warrants were traded on the Nasdaq Capital Market (the “Nasdaq”) under the symbols TZACU, TZAC and TZACW, respectively.
In connection with the Closing, on December 15, 2020, Tenzing’s units ceased trading on Nasdaq, and the Company’s Common Stock and warrants began trading on Nasdaq under the symbols “RVPH” and “RVPHW,” respectively, subject to ongoing review of the Company’s satisfaction of all listing criteria post-business combination.
As noted above, the per share Redemption Price of approximately $10.88 for holders of Public Shares electing redemption was paid out of Tenzing’s trust account, which after taking into account the redemption, had a balance immediately prior to the Closing of approximately $10.5 million.
FORM 10 INFORMATION
Item 2.01(f) of Form 8-K states that if the predecessor registrant was a shell company, as Tenzing was immediately before the Business Combination, then the registrant must disclose the information that would be required if the registrant were filing a general form for registration of securities on Form 10. Accordingly, the Company, as the successor issuer to Tenzing, is providing the information below that would be included in a Form 10 if the Company were to file a Form 10. Please note that the information provided with respect to the Company below relates to the combined company after Tenzing’s acquisition of Reviva in connection with the consummation of the Business Combination, unless otherwise specifically indicated or the context otherwise requires.
This current Report on Form 8-K contains forward-looking statements. Forward-looking statements include statements with respect to the Company’s beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond the Company’s control, and which may cause the Company’s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through the Company’s use of words such as “may,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future. There are a number of important risks that could cause the actual results to differ materially from those expressed in any forward-looking statement made by the Company. These factors include, but are not limited to:
· | the inability to maintain the listing of the Company’s Common Stock and Warrants on Nasdaq; |
· | the inability to grow and manage growth economically; |
· | the ability to retain key executives and medical and science personnel; |
· | the possibility that the Company’s products in development fail clinical trials or are not approved by the U.S. Food and Drug Administration or other applicable authorities; |
· | the possibility that the Company could be forced to delay, reduce or eliminate its planned clinical trials or development programs; |
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· | the ability to obtain approval from regulatory agents in different jurisdictions for the Company’s current or future product candidates; |
· | changes in applicable laws or regulations; |
· | changes to the Company’s relationships within the pharmaceutical ecosystem; |
· | the current and future capital requirements to support the Company’s development and commercialization efforts and its ability to satisfy its capital needs; |
· | the accuracy of the Company’s estimates regarding expenses and capital requirements. |
· | the Company’s limited operating history; |
· | the Company’s history of operating losses in each year since inception and expectation that it will continue to incur operating losses for the foreseeable future; |
· | changes in the markets that the Company targets; |
· | the ability to maintain or protect the validity of the Company’s patents and other intellectual property; |
· | the exposure to any liability, protracted and costly litigation or reputational damage relating to data security; |
· | the inability to develop and maintain effective internal controls; and |
· | the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors. |
The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that the Company is faced with that may cause its actual results to differ from those anticipated in such forward-looking statements.
All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. The Company has no obligation, and expressly disclaims any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. The Company has expressed its expectations, beliefs and projections in good faith and believes they have a reasonable basis. However, the Company cannot assure you that its expectations, beliefs or projections will result or be achieved or accomplished.
Item 1 – Business.
The business of the Company is described in the Prospectus in the section titled “INFORMATION ABOUT REVIVA PHARMACEUTICALS, INC.,” which is incorporated herein by reference.
Item 1A – Risk Factors.
The risks associated with the Company’s business are described in the Prospectus in the section titled “RISK FACTORS — Risks Related to Reviva’s Business and Industry,” which is incorporated herein by reference.
Risks Related to the Company’s Securities
An active trading market for the Company’s Common Stock or warrants may not be sustained.
An active trading market for the Company’s Common Stock or warrants may not develop or continue or, if developed, may not be sustained The lack of an active market for the Company’s Common Stock or warrants may impair investors’ ability to sell their Common Stock or warrants at the time they wish to sell them or at a price that they consider reasonable, may reduce the fair market value of their shares of Common Stock or warrants and may impair the Company’s ability to raise capital to continue to fund operations by selling securities and may impair the Company’s ability to acquire additional intellectual property assets by using its securities as consideration.
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A sale of a substantial number of shares of the Company’s Common Stock or warrants in the public market could cause the market price of its Common Stock or warrants to drop significantly, even if its business is doing well.
The price of the Company’s Common Stock or warrants could decline as a result of sales of a large number of shares of the Company’s Common Stock or warrants or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for the Company to sell equity securities in the future at a time and at a price that the Company deems appropriate.
In addition, in the future, the Company may issue additional shares of Common Stock, warrants or other equity or debt securities convertible into Common Stock in connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise. Any such issuance could result in substantial dilution to the Company’s existing stockholders and could cause the price of the Company’s common stock or warrants to decline.
If equity research analysts do not publish research or reports about the Company’s business or if they issue unfavorable commentary or downgrade the Company’s Common Stock or warrants, the price of the Company’s Common Stock or warrants could decline.
The trading market for the Company’s Common Stock and warrants relies in part on the research and reports that equity research analysts publish about the Company and its business. The Company does not control these analysts. The price of the Company’s Common Stock could decline if one or more equity analysts downgrade the Company’s Common Stock or warrants or if analysts issue other unfavorable commentary or cease publishing reports about the Company or its business.
The price of the Company’s Common Stock or warrants may be volatile, which could subject the Company to securities class action litigation and the Company’s stockholders could incur substantial losses.
The market price for the Company’s Common Stock or warrants may be volatile and subject to wide fluctuations in response to factors including the following:
· | actual or anticipated fluctuations in the Company’s quarterly or annual operating results; |
· | actual or anticipated changes in the Company’s growth rate relative to the Company’s competitors; |
· | failure to meet or exceed financial estimates and projections of the investment community or that the Company provides to the public; |
· | issuance of new or updated research or reports by securities analysts; |
· | share price and volume fluctuations attributable to inconsistent trading volume levels of the Company’s securities; additions or departures of key management or other personnel; |
· | disputes or other developments related to proprietary rights, including patents, litigation matters, and the Company’s ability to obtain patent protection for its products; |
· | announcement or expectation of additional debt or equity financing efforts; |
· | sales of the Company’s securities by the Company, its insiders or its other stockholders; and |
· | general economic, market or political conditions in the United States or elsewhere. |
In particular, the market prices of pharmaceutical companies like the Company’s have been highly volatile due to factors, including, but not limited to:
· | any delay or failure to conduct a clinical trial for a company’s product or to receive approval from the FDA and other regulatory agents; |
· | developments or disputes concerning the a company’s intellectual property rights; |
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· | technological innovations of such companies or their competitors; |
· | changes in market valuations of similar companies; |
· | announcements by such companies or their competitors of significant contracts, acquisitions, strategic partnerships, joint ventures, capital commitments, new technologies, or patents; |
· | failure to complete significant transactions or collaborate with vendors in manufacturing a product; and |
· | proposals for legislation that would place restrictions on the price of pharmaceutical products. |
These and other market and industry factors may cause the market price and demand for the Company’s Common Stock and warrants to fluctuate substantially, regardless of its actual operating performance, which may limit or prevent investors from readily selling their shares of Common Stock or warrants and may otherwise negatively affect the liquidity of the Company’s Common Stock or warrants. In addition, the stock market in general, and Nasdaq and emerging growth companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. In the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of the Company’s stockholders brought a lawsuit against the Company, the Company could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of the Company’s management.
The Company is an emerging growth company within the meaning of the Securities Act and has taken advantage of certain exemptions from disclosure requirements available to emerging growth companies; this could make the Company’s securities less attractive to investors and may make it more difficult to compare the Company’s performance with other public companies.
The Company is an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act and has taken advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in the Company’s periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on certain executive compensation matters. As a result, the Company’s shareholders may not have access to certain information they may deem important. The Company may be an emerging growth company for up to five years from the IPO of Tenzing, although circumstances could cause the loss of that status earlier, including if the market value of the common stock of the Company held by non-affiliates exceeds $700 million as of the last business day in any August before that time, in which case the Company would no longer be an emerging growth company as of the end of that fiscal year. The Company cannot predict whether investors will find its securities less attractive because the Company relies on these exemptions. If some investors find the securities less attractive as a result of reliance on these exemptions, the trading prices of the Company’s securities may be lower than they otherwise would be, there may be a less active trading market for the Company’s securities and the trading prices of the securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period. Accordingly, when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, will adopt the new or revised standard at the time private companies adopt the new or revised standard, unless early adoption is permitted by the standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
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The Company will incur significantly increased costs and devote substantial management time as a result of operating as a public company particularly after the Company is no longer an “emerging growth company.”
As a newly public company, the Company will incur significant legal, accounting and other expenses that it did not incur as a private company. For example, the Company is required to comply with certain of the requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended, as well as rules and regulations subsequently implemented by the SEC, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. The Company expects that compliance with these requirements will increase its legal and financial compliance costs and will make some activities more time consuming and costly. In addition, the Company expects that its management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, the Company expects to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. In addition, after the Company no longer qualifies as an “emerging growth company,” as defined under the JOBS ACT the Company expects to incur additional management time and cost to comply with the more stringent reporting requirements applicable to companies that are deemed accelerated filers or large accelerated filers, including complying with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. The Company has not yet completed the process of compiling the system and processing documentation needed to comply with such requirements. The Company may not be able to complete its evaluation, testing and any required remediation in a timely fashion. In that regard, the Company currently does not have an internal audit function, and the Company will need to hire or contract for additional accounting and financial staff with appropriate public company experience and technical accounting knowledge.
The Company cannot predict or estimate the amount of additional costs it may incur as a result of becoming a public company or the timing of such costs.
There may be limitations on the effectiveness of the Company’s internal controls, and a failure of the Company’s control systems to prevent error or fraud may materially harm the Company.
Proper systems of internal controls over financial accounting and disclosure controls and procedures are critical to the operation of a public company. The Company has a limited operating history and limited personnel in its finance and accounting functions, which may result in a lack of segregation of duties and the Company is at the very early stages of establishing, and the Company may be unable to effectively establish such systems, especially in light of the fact that the Company expects to operate as a publicly reporting company. This would leave the Company without the ability to reliably assimilate and compile financial information about the Company and significantly impair its ability to prevent error and detect fraud, all of which would have a negative impact on the Company from many perspectives.
Moreover, the Company does not expect that disclosure controls or internal control over financial reporting, even if established, will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Failure of the Company’s control systems to prevent error or fraud could materially adversely impact the Company.
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The Company does not currently intend to pay dividends on the Company’s Common Stock in the foreseeable future, and consequently, any gains from an investment in the Company’s Common Stock will likely depend on appreciation in the price of its Common Stock.
The Company has never declared or paid cash dividends on its Common Stock and does not anticipate paying any cash dividends to holders of its Common Stock in the foreseeable future. Consequently, investors must rely on sales of their Common Stock and warrants after price appreciation, which may never occur, as the only way to realize any future gains on their investments. There is no guarantee that shares of the Company’s Common Stock or warrants will appreciate in value or even maintain the price at which the stockholders have purchased their shares or warrants.
Upon dissolution of the Company, the stockholders may not recoup all or any portion of their investment.
In the event of a liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the proceeds and/or assets of remaining after giving effect to such transaction, and the payment of all debts and liabilities and distributions required to be made to holders of any outstanding preferred stock will then be distributed to the stockholders of Common Stock on a pro rata basis. There can be no assurance that the Company will have available assets to pay to the holders of its Common Stock, or any amounts, upon such a liquidation, dissolution or winding-up of the Company.
The amended and restated certificate of incorporation of the Company allows for the Company Board to create new series of preferred stock without further approval by the stockholders, which could adversely affect the rights of the holders of the Company’s Common Stock.
The Company Board has the authority to fix and determine the relative rights and preferences of preferred stock. The Company Board has the authority to issue up to 10 million shares of preferred stock without further stockholder approval. As a result, the Company Board could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to the Company’s assets upon liquidation and the right to receive dividend payments before dividends are distributed to the holders of the Company’s Common Stock. In addition, the Company Board could authorize the issuance of a series of preferred stock that has greater voting power than the Common Stock or that is convertible into the Company’s Common Stock, which could decrease the relative voting power of the Company’s Common Stock or result in dilution to existing stockholders.
Delaware law and the Amended and Restated Certificate of Incorporation and Bylaws will contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
The Amended and Restated Certificate of Incorporation and Bylaws, and the Delaware General Corporation Law, as amended (the “DGCL”), contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by the Company Board and therefore depress the trading price of the Company Common Stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of the Company Board or taking other corporate actions, including effecting changes in management. Among other things, the Amended and Restated Certificate of Incorporation and Bylaws include provisions regarding:
· | the ability of the Company Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; |
· | the limitation of the liability of, and the indemnification of, the Company’s directors and officers; |
· | the right of the Company Board to elect a director to fill a vacancy created by the expansion of the Company Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the Company Board; |
· | a prohibition on stockholder action by written consent (except as required for holders of future series of preferred stock), which forces stockholder action to be taken at an annual or special meeting of stockholders and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors; |
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· | the requirement that a special meeting of stockholders may be called only by the Company Board, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; |
· | controlling the procedures for the conduct and scheduling of the Company Board and stockholder meetings; |
· | the requirement for the affirmative vote of holders of at least a majority of the voting power of all of the voting power of the then outstanding shares of the voting stock, voting as a single class, to amend, alter, change or repeal any provision of the Company’s Bylaws and certain provisions in the Amended and Restated Certificate of Incorporation, respectively, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Company Board and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt; |
· | the ability of the Company Board to amend the Bylaws by an affirmative vote of a majority of the Company Board, which may allow the Company Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the Bylaws to facilitate an unsolicited takeover attempt; and |
· | advance notice procedures with which stockholders must comply to nominate candidates to the Company Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Company Board and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of Company. |
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the Company Board or management. In addition, as a Delaware corporation, the Company will generally be subject to provisions of Delaware law, including Section 203 of the DGCL.
Any provision of the Amended and Restated Certificate of Incorporation, Bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for stockholders to receive a premium for their shares of the Company’s capital stock and could also affect the price that some investors are willing to pay for the Company’s common stock.
The Certificate of Incorporation will designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between the Company and its stockholders, which could limit the Company’s stockholders’ ability to choose the judicial forum for disputes with the Company or its directors, officers, or employees.
The Amended and Restated Certificate of Incorporation provides that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware, or if such court does not have subject matter jurisdiction, any other court located in the State of Delaware with subject matter jurisdiction, will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim against the Company or its officers or directors arising pursuant to any provision of the Delaware General Corporate Law or the Amended and Restated Certificate of Incorporation or Bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim against the Company or any director or officer of the Company governed by the internal affairs doctrine of the law of the State of Delaware; provided, that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state court sitting in the State of Delaware. Additionally, the Amended and Restated Certificate of Incorporation provides that, unless the Company consents to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended; provided, however, that such provision will not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts have exclusive jurisdiction.
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Any person or entity purchasing or otherwise acquiring any interest in any of the securities of the Company will be deemed to have notice of and consented to these provisions. These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with the Company or its directors, officers, or other employees, which may discourage lawsuits against the Company and its directors, officers, and other employees. If a court were to find these exclusive-forum provisions to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm its results of operations.
Item 2 – Financial Information.
Reference is made to the disclosure set forth in Item 9.01 of this Current Report on Form 8-K concerning the financial information of Reviva, and certain unaudited pro forma financial information of Reviva and Tenzing combined, and is incorporated herein by reference.
Reference is further made to the disclosure contained in the Prospectus concerning management’s discussion and analysis of financial condition and results of operations for the three and six months ended August 31, 2020, prior to the consummation of the Business Combination, in the section titled “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF TENZING,” which is incorporated herein by reference.
Management’s discussion and analysis of financial condition and results of operations of Reviva for the three and nine months ended September 30, 2020 and 2019, prior to, and not reflecting the result of, the consummation of the Business Combination, is set forth below.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
You should read the following discussion and analysis of Reviva’s financial condition and results of operations together with its consolidated financial statements and the related notes. Some of the information contained in this discussion and analysis or set forth elsewhere, including information with respect to its plans and strategy for its business and related financing, includes forward-looking statements that involve risks, uncertainties and assumptions.
Company Overview
Reviva was incorporated in the state of Delaware on May 1, 2006 and its subsidiary, Reviva Pharmaceuticals India Pvt. Ltd., was incorporated on December 23, 2014, and has a limited operating history. Reviva is a clinical-stage biopharmaceutical company that discovers, develops and seeks to commercialize next-generation therapeutics for diseases representing significant unmet medical needs and burden to society, patients, and their families. Reviva’s current pipeline focuses on the central nervous system, respiratory, and metabolic diseases. Reviva is using chemical genomics driven technology platform and proprietary chemistry to develop new medicines. Reviva’s pipeline currently has two platform drugs, RP5063 (Brilaroxazine) and RP1208. Both are new chemical entities discovered in-house. Reviva has been granted composition of matter patents for both RP5063 (Brilaroxazine) and R1208 in the United States (U.S.), Europe, and several other countries.
Reviva’s lead drug candidate, RP5063 (Brilaroxazine), is ready for continued clinical development for multiple neuropsychiatric indications. These include schizophrenia, bipolar disorder (BD), major depressive disorder (MDD), behavioral and psychotic symptoms, dementia or Alzheimer’s disease (BPSD), Parkinson’s disease psychosis (PDP), and attention deficit hyperactivity disorder (ADHD). Furthermore, RP5063 (Brilaroxazine) is also ready for clinical development for two respiratory indications− pulmonary arterial hypertension (PAH) and idiopathic pulmonary fibrosis (IPF). The U.S. Food and Drug Administration (FDA) has granted Orphan Drug designation to RP5063 (Brilaroxazine) for the treatment of PAH in November 2016 and IPF in April 2018. RP1208 is also in preclinical development for depression and obesity.
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Following the closing of the Business Combination, Reviva’s primary focus is to complete the clinical development of RP5063 (Brilaroxazine) for the treatment of acute and maintenance schizophrenia.
Additionally, following the closing of the Business Combination, and subject to the receipt of additional financing, Reviva may also continue the clinical development of RP5063 (Brilaroxazine) for the treatment of BD, MDD, BPSD, PDP, ADHD, PAH and IPF. Moreover, following the closing of the Business Combination, and subject to the receipt of additional financing, Reviva may also advance the development of its second drug candidate, RP1208, for the treatment of depression and obesity.
Financial Overview
Reviva is a clinical-stage biopharmaceutical company and has not generated any revenues from the sale of products. Reviva has never been profitable, and Reviva’s accumulated deficit as of September 30, 2020 was $56.8 million. Reviva’s net loss for the nine months ended September 30, 2020 was $2.26 million. Reviva expects to incur significant expenses and increased operating losses for the next several years. Reviva expects its expenses to increase in connection with its ongoing activities to research, develop and commercialize its product candidates. Furthermore, Reviva expects to incur additional costs associated with operating as a public company. Reviva will need to generate significant revenues to achieve profitability, and Reviva may never do so.
Reviva expects its expenses will increase substantially in connection with its ongoing activities, as Reviva:
· | invests significantly to further research and develop, through clinical trials for RP5063 (Brilaroxazine) and pre- clinical research for RP1208, and seeks regulatory approval for, its product candidates, RP5063 (Brilaroxazine) and RP1208; |
· | identifies and develops additional product candidates; |
· | hires additional clinical, scientific and management personnel; |
· | seeks regulatory and marketing approvals for any product candidates that Reviva may develop; |
· | ultimately establishes a sales, marketing and distribution infrastructure to commercialize any drugs for which Reviva may obtain marketing approval; |
· | maintains, expands and protects its intellectual property portfolio; |
· | acquires or in-licenses other drugs and technologies; and |
· | adds operational, financial and management information systems and personnel, including personnel to support Reviva’s product candidate development, any future commercialization efforts and Reviva’s transition to a public company. |
Reviva has funded its operations to date primarily from the issuance and sale of its equity and convertible equity securities. As of September 30, 2020, Reviva had cash and cash equivalents of approximately $353,000. To fund Reviva’s current operating plans, Reviva will need to raise additional capital. The expected capital available upon completion of the Business Combination, together with Reviva’s existing cash and cash equivalents, will not be sufficient for Reviva to complete development of its product candidates and, if applicable, to prepare for commercializing any product candidate that may receive approval. Accordingly, Reviva will continue to require substantial additional capital beyond the expected capital available upon the completion of the Business Combination to continue its clinical development and potential commercialization activities; however, Reviva believes that the capital available upon completion of the Business Combination, together with its existing cash and cash equivalents, will be sufficient to fund its current operating plans through at least the first 12 months following the completion of the Business Combination. The amount and timing of Reviva’s future funding requirements will depend on many factors, including the pace and results of its clinical development efforts. Reviva will seek to fund its operations through public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to Reviva on acceptable terms, or at all. Reviva’s failure to raise capital as and when needed would have a negative impact on its financial condition and its ability to pursue its business strategy. Reviva cannot assure you that it will ever be profitable or generate positive cash flow from operating activities.
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Research and Development Expenses
Reviva focuses its resources on research and development activities, including the conduct of preclinical and clinical studies and product development and expenses such costs as they are incurred. Reviva has not historically tracked or recorded research and development expenses on a project-by-project basis, primarily because Reviva uses its employee and infrastructure resources across multiple research and development projects, and it is not practical for Reviva to allocate such costs on a project-by-project basis. Reviva’s research and development expenses primarily consist of employee-related expenses, including deferred salaries, salaries, benefits and taxes for personnel in research and development functions.
The largest recurring component of Reviva’s total operating expenses has historically been research and development activities. Reviva expects its research and development expenses will increase for the next several years as it advances its development programs, pursues regulatory approval of its product candidates in the U.S. and other jurisdictions and prepares for potential commercialization, which would require a significant investment in costs related to contract manufacturing, inventory buildup and sales and marketing activities.
Reviva’s primary product candidates and their current status is as follows:
Drug Candidate
|
Indication | Status |
RP5063 | Schizophrenia |
Phase 2 complete. Intending to initiate a pivotal Phase 3 study following the completion of the Business Combination.
|
RP5063 |
Bipolar Disorder
|
Phase 1 complete** |
RP5063 |
Depression-MDD
|
Phase 1 complete** |
RP5063 |
Alzheimer’s (AD-Psychosis/Behavior)
|
Phase 1 complete** |
RP5063 |
Parkinson’s
|
Phase 1 complete** |
RP5063 |
ADHD/ADD
|
Phase 1 complete** |
RP5063 |
PAH
|
Phase 1 complete** |
RP5063 | IPF |
Phase 1 complete**
|
RP1208 |
Depression
|
Completed pre-clinical development studies, including in vitro receptor binding studies, animal efficacy studies, and PK studies. Compound ready for IND enabling studies.
|
RP1208 |
Obesity
|
Completed pre-clinical development studies, including in vitro receptor binding studies and PK studies. Compound ready for animal efficacy studies.
|
** Reviva completed the phase 1 clinical study for RP5063 (Brilaroxazine) prior starting the phase 2 study in schizophrenia and schizoaffective disorder. Reviva collected safety data for RP5063 (Brilaroxazine) in over 200 patients, including healthy subjects and patients with stable schizophrenia, acute schizophrenia and schizoaffective disorder. Generally, no separate phase 1 study is required for conducting a phase 2 study for an additional indication, provided the treatment doses in the phase 2 study for an additional indication are within the range of doses tested in the previously completed phase 1 study.
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The successful development of Reviva’s platform and product candidates is highly uncertain, and Reviva may never succeed in achieving marketing approval for its product candidates RP5063 (Brilaroxazine), RP1208, or any future product candidates. At this time, Reviva cannot reasonably estimate the nature, timing, or costs of the efforts necessary to finish developing any of Reviva’s product candidates or the period in which material net cash, if any, from these product candidates may commence. This is due to the numerous risks and uncertainties associated with developing therapeutics, including the uncertainty of:
· | the scope, rate of progress, expense, and results of clinical trials; |
· | the scope, rate of progress, and expense of process development and manufacturing; |
· | preclinical and other research activities; and |
· | the timing of regulatory approvals. |
General Administrative Expenses
General and administrative expenses primarily consist of payroll and related costs for employees in executive, business development, finance, and administrative functions. Other significant general and administrative expenses include professional fees for accounting and legal services.
Reviva expects general and administrative expenses to increase as it expands infrastructure and continues the development of its clinical programs. Other increases could potentially include increased costs for director and officer liability insurance, costs related to the hiring of additional personnel, and increased fees for directors, outside consultants, lawyers, and accountants. The Company expects to incur significant costs to comply with corporate governance, internal controls, and similar requirements applicable to public companies.
Interest Expense
Interest expense consists primarily of interest associated with Reviva’s promissory notes.
Interest Income
Interest income consists of interest earned on Reviva’s cash & cash equivalents.
Critical Accounting Policies and Use of Estimates
Reviva’s unaudited condensed consolidated financial statements and the related notes included as Exhibit 99.2 to this Current Report on Form 8-K are prepared in accordance with U.S. GAAP.
This information should be read in conjunction with Reviva’s audited consolidated financial statements included as Exhibit 99.1 to this Current Report on Form 8-K. Reviva’s significant accounting policies are described in Note 2 to its audited consolidated financial statements included as Exhibit 99.1 to this Current Report on Form 8-K. There have been no significant changes to these policies during the nine months ended September 30, 2020.
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Results of Operations
Comparison of the three-month and nine-month periods ended September 30, 2020 and 2019:
The following table summarizes Reviva’s results of operation for the three and nine months ended September 30, 2020 and 2019:
Three-Months ended September 30 |
Nine-Months ended September 30 |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Operating expenses | ||||||||||||||||
Research and development | $ | 955 | $ | - | $ | 295,150 | $ | 53,377 | ||||||||
General and administrative | 511,336 | 36,804 | 1,612,803 | 281,769 | ||||||||||||
Loss from operations | (512,291 | ) | (36,804 | ) | (1,907,953 | ) | (335,146 | ) | ||||||||
Total other expense | (146,250 | ) | (147,397 | ) | (350,183 | ) | (436,701 | ) | ||||||||
Net loss | ($ | 659,088 | ) | ($ | 184,201 | ) | ($ | 2,259,483 | ) | ($ | 772,647 | ) |
Research & Development expenses
Reviva incurred approximately $1,000 and $0 in research and development expenses for three-months ended September 30, 2020 and 2019, respectively. Reviva incurred approximately $295,000 and $53,000 in research and development expenses for nine-months ended September 30, 2020 and 2019, respectively. The primary increase for both periods was due to higher salary expenditures. Reviva’s research and development expenses could increase for the foreseeable future as Reviva continues to advance its platform and product candidates.
General Administrative Expenses
For the three-months ended September 30, 2020 and 2019, Reviva incurred approximately $511,000 and $37,000 in general and administrative expenses. For the nine-months ended September 30, 2020 and 2019 Reviva incurred approximately $1,613,000 and $282,000 in general and administrative expenses. The increase in both periods were due to higher salary expenditure, 2020 warrant expense, higher professional service fees for legal, audit and accounting activities.
Interest Expense
Interest expense for the three-months ended September 30, 2020 and 2019 was approximately $146,000 and $147,000, respectively. Interest expense for the nine-months ended September 30, 2020 and 2019 was approximately $375,000 and $437,000, respectively. The reduction in interest expense for the nine-month period was due to the investor note reclassification in the fourth quarter of 2019 to accrued liability pursuant to a legal judgement.
Interest & Other Income
Interest income consists of interest earned on our cash & cash equivalents. Other income of $25,000 recognized in the nine-month periods ending on September 30, 2020, relates to a non-refundable transaction payment made by Tenzing Acquisition Corporation.
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Net Loss
Net loss for the three-months ended September 30, 2020 and 2019 were approximately $659,000 and $184,000, respectively. The primary driver of the increased net loss was higher general & administrative expenses due to higher salary expenditure, 2020 warrant expense and professional fees. The net loss for the nine-months ended September 30, 2020 and 2019 were approximately $2,260,000 and $773,000, respectively. The increased net loss for the nine-months ended September 30, 2020 was due to higher salary expenditure, 2020 warrants expense and higher professional fees.
Liquidity and Capital Resources
As of September 30, 2020, Reviva had cash and cash equivalents of approximately $353,000. Reviva expects to continue to incur significant expenses and operating losses for the foreseeable future as Reviva continues its research and preclinical and clinical development of its product candidates; expands the scope of its current studies for its product candidates; initiates additional preclinical, clinical or other studies for its product candidates; changes or adds additional manufacturers or suppliers; seeks regulatory and marketing approvals for any of its product candidates that successfully complete clinical studies; seeks to identify, evaluate and validate additional product candidates; acquires or in-licenses other product candidates and technologies; maintains, protects and expands its intellectual property portfolio; attracts and retains skilled personnel; and experiences any delays or encounters issues with any of the above.
Until such time as Reviva can generate substantial product revenue, if ever, Reviva expects to finance its cash needs through a combination of equity or debt financings and collaboration agreements. Reviva does not currently have any committed external sources of capital.
To the extent that Reviva raises additional capital through the future sale of equity or debt, the ownership interest of its stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of Reviva’s existing stockholders.
If Reviva raises additional funds through collaboration agreements in the future, it may have to relinquish valuable rights to its technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to Reviva.
If Reviva is unable to raise additional funds through equity or debt financings when needed, Reviva may be required to delay, limit, reduce or terminate its product development or future commercialization efforts or grant rights to develop and market product candidates that Reviva would otherwise prefer to develop and market ourselves.
The table below sets forth selected cash flow data for the periods presented:
Nine-Months Ended | ||||||||
September 30, 2020 | September 30, 2019 | |||||||
Net cash from: | ||||||||
Operating activities | $ | (1,131,035 | ) | $ | (214,103 | ) | ||
Investing activities | - | - | ||||||
Financing activities | $ | 1,484,100 | $ | 100,000 | ||||
Net increase (decrease) in cash and cash equivalents | $ | 353,065 | $ | (114,103 | ) |
Stock Options
Shares outstanding under the stock option plan are as follows as of September 30, 2020.
Options Outstanding | Weighted average remaining contractual life (years) | Shares Exercisable | Weighted Average Exercise Price Per Share | |||||||||||
320,000 | 2.10 | 320,000 | $ | 1.81 | ||||||||||
110,000 | 4.18 | 110,000 | $ | 4.77 | ||||||||||
430,000 | 2.68 | 430,000 | $ | 2.57 |
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Off-Balance Sheet Arrangements
Reviva did not have during the periods presented, and does not currently have, any off-balance sheet arrangements, as defined under SEC rules.
Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
Item 3 – Properties.
The Company’s principal offices are located at 19925 Stevens Creek Blvd., Suite 100, Cupertino, California 95014. The Company is subject to a one year lease, commencing February 2020. Basic rent is $1,196 per month. The facility is used for office space only, and the Company believes the facility is adequate for its foreseeable needs. The Company operates primarily as a virtual company.
Item 4 – Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information regarding the beneficial ownership of the Company, on December 14, 2020, upon the completion of the Business Combination, by:
· | each person known by the Company to be, or expected to be, the beneficial owner of more than 5% of shares of the Company’s Common Stock; and |
· | each of the Company’s executive officers and directors. |
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days.
The beneficial ownership of the Common Stock of the Company is based on 9,231,737 shares of Common Stock issued and outstanding as of the completion of the Business Combination and the transaction related thereto.
Name of Beneficial Owner |
Number of Shares Beneficially Owned |
Percentage of Shares Beneficially Owned |
||||||
Officers and Directors (1) | ||||||||
Laxminarayan Bhat (2) | 2,490,334 | 26.96 | % | |||||
Marc Cantillon | * | * | ||||||
Les Funtleyder | - | - | ||||||
Richard Margolin | - | - | ||||||
Purav Patel | * | * | ||||||
Narayan Prabhu | - | - | ||||||
Parag Saxena (3) (4) (5) | 2,662,250 | 27.24 | % | |||||
All Directors and Officers as a Group (seven persons) | 5,294,203 | 53.85 | % | |||||
Greater than Five Percent Holders: | ||||||||
Tenzing LLC (3) (4) (5) | 2,662,250 | 27.24 | % |
* Less than one percent.
(1) | The business address of each of the officers and directors is c/o Reviva Pharmaceuticals Holdings, Inc., 19925 Stevens Creek Blvd., Suite 100, Cupertino, CA 95014. |
(2) | Includes (a) 5,388 shares of Common Stock held by Dr. Bhat’s spouse and (b) 6,090 shares of Common Stock issuable upon the exercise of Assumed Options held by Dr. Bhat’s spouse, that are exercisable or will be exercisable within 60 days. |
(3) | Represents securities held by Tenzing LLC. The securities held by Tenzing LLC are beneficially owned by Rahul Nayar and Parag Saxena, the Company’s Chairman, and the managing members of Tenzing LLC, who jointly have sole voting and dispositive power over the shares held thereby. Each of Messrs. Nayar and Saxena disclaims beneficial ownership over any securities owned by Tenzing LLC in which he does not have any pecuniary interest. |
(4) | Includes 540,500 shares of Common Stock issuable upon the exercise of warrants, issued at the Closing, that are exercisable or will be exercisable within 60 days. |
(5) | The business address of Tenzing LLC is c/o Tenzing LLC, 250 West 55th Street, New York, New York 10019. |
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Item 5 – Directors and Executive Officers.
Reference is made to the disclosure set forth under Item 5.02 of this Current Report on Form 8-K, which is incorporated herein by reference.
Item 6 – Executive Compensation.
The executive compensation of the Company’s executive officers and directors is described in the Prospectus in the section titled “EXECUTIVE COMPENSATION OF REVIVA,” which is incorporated herein by reference.
Item 7 – Certain Relationships and Related Transactions, and Director Independence.
Tenzing Related Person Transactions
Founder Shares
In June 2018, Tenzing issued an aggregate of 1,437,500 Founder Shares to the Sponsor for an aggregate purchase price of $25,000 in cash. On August 20, 2018, Tenzing effectuated a 1.1-for-1 share dividend resulting in an aggregate of 1,581,250 Founder Shares outstanding. The Founder Shares included an aggregate of up to 206,250 shares subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the Sponsor would collectively own 20% of Tenzing’s issued and outstanding shares after the IPO. On August 30, 2018, as a result of the underwriters’ election to fully exercise their over-allotment option, 206,250 Founder Shares are no longer subject to forfeiture.
The Sponsor has agreed not to transfer, assign or sell any of the Founder Shares (except to certain permitted transferees) until the earlier of (i) one year after the date of the consummation of the Business Combination, or (ii) the date on which the closing price of Tenzing’s ordinary shares equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing 150 days after the Business Combination.
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Related Party Advances
Through August 23, 2018, Tenzing’s Chief Executive Officer advanced an aggregate of $363,436 to be used for the payment of costs related to the IPO. The advances were non-interest bearing, unsecured and due on demand. The advances were repaid upon the consummation of the IPO on August 23, 2018.
Related Party Loans
In order to finance transaction costs in connection with a business combination, the Sponsor or an affiliate of the Sponsor, or Tenzing’s officers and directors were permitted, but were not obligated to, making working capital loans. Such working capital loans were evidenced by promissory notes. The notes were to be repaid upon consummation of a business combination, without interest, or, at the lender’s discretion, up to $2,000,000 of notes were permitted to be converted upon consummation of a business combination into additional Private Placement Units (as defined in the Prospectus) at a price of $10.00 per Unit.
On February 10, 2020, Tenzing entered into a convertible promissory note with the Sponsor, pursuant to which Tenzing borrowed an aggregate amount of $750,000 (the “February Working Capital Loan”). Of such amount, $567,182 was used to fund an extension loan into the Trust Account and the balance was used to finance transaction costs in connection with a business combination. The February Working Capital Loan was non-interest bearing and became due to be paid upon the consummation of the Business Combination. The February Working Capital Loan was converted into units at a purchase price of $10.00 per unit. The units were identical to the Private Placement Units.
On May 21, 2020, Tenzing entered into a convertible promissory note with the Sponsor, pursuant to which Tenzing borrowed an aggregate amount of $375,000 (the “May Working Capital Loan”). Of such amount, $210,836 was used to fund the extension loan into the Trust Account and the balance was used to finance transaction costs in connection with a business combination. The May Working Capital Loan was non-interest bearing and became due to be paid upon the consummation of the Business Combination. The May Working Capital Loan was converted into units at a purchase price of $10.00 per unit. The units were identical to the Private Placement Units.
On July 24, 2020, Tenzing entered into a convertible promissory note with the Sponsor, pursuant to which Tenzing borrowed an aggregate amount of $175,000 (the “July Working Capital Loan”). Of such amount, $105,418.17 was used to fund the extension loan into the Trust Account. The July Working Capital Loan was non-interest bearing and became due to be paid upon the consummation of the Business Combination. The July Working Capital Loan was converted into units at a purchase price of $10.00 per unit. The units were identical to the Private Placement Units.
On August 18, 2020, Tenzing entered into a convertible promissory note with the Sponsor, pursuant to which Tenzing borrowed an aggregate amount of $125,000 (the “August Working Capital Loan”). Of such amount, $105,418.17 was used to fund the extension loan into the Trust Account and the balance was used to finance transaction costs in connection with a business combination. The August Working Capital Loan was non-interest bearing and became due to be paid upon the consummation of the Business Combination. The August Working Capital Loan was converted into units at a purchase price of $10.00 per unit. The units were identical to the Private Placement Units.
On September 24, 2020, Tenzing entered into a convertible promissory note with the Sponsor, pursuant to which Tenzing borrowed an aggregate amount of $350,000 (the “September Working Capital Loan”). Of such amount, $105,084.14 was used to fund the extension loan into the Trust Account and the balance was used to finance transaction costs in connection with a business combination and to fund additional contributions in connection with the extension. The September Working Capital Loan was non-interest bearing and became due to be paid upon the consummation of the Business Combination. The September Working Capital Loan was converted into units at a purchase price of $10.00 per unit, provided that conversion greater than $75,000 of the unpaid balance of the note was subject to the approval of Tenzing shareholders, which approval was obtained at the Shareholders Meeting. The units were identical to the Private Placement Units.
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On November 12, 2020, Tenzing entered into a convertible promissory note with the Sponsor, pursuant to which Tenzing borrowed an aggregate amount of $200,000 (the “November Working Capital Loan”, together with the February Working Capital Loan, the May Working Capital Loan, the July Working Capital Loan, the August Working Capital Loan and the September Working Capital Loan, the “Working Capital Loans”). Of such amount, $105,084.14 was used to fund the extension loan into the Trust Account and the balance was used to finance transaction costs in connection with a business combination and to fund additional contributions in connection with the extension. The November Working Capital Loan was non-interest bearing and became due to be paid upon the consummation of the Business Combination. The November Working Capital Loan was converted into units at a purchase price of $10.00 per unit, provided that conversion of the unpaid balance of the note was subject to the approval of Tenzing shareholders, which approval was obtained at the Shareholders Meeting. The units were identical to the Private Placement Units.
On December 14, 2020, in connection with the consummation of the Business Combination, the Sponsor elected to have the Working Capital Loans converted, pursuant to the terms of the Working Capital Loans, into Private Placement Units, resulting in the issuance of an aggregate of 197,500 shares of the Company’s Common Stock (the “Working Capital Shares”) and warrants to purchase 197,500 shares of the Company’s Common Stock (the “Working Capital Warrants,” together with the Working Capital Shares, the “Conversion Securities”). Upon issuance of the Conversion Securities all of the existing obligations of the Company under the Working Capital Loans were satisfied in full and irrevocably discharged, terminated and released, and the Sponsor retained no rights with respect to such Working Capital Loans, other than the registration rights provided pursuant to such Working Capital Loans.
Reviva Related Person Transactions
Other than compensation arrangements with the named executive officers and directors of Reviva, the disclosures below describe each transaction or series of similar transactions, since January 1, 2018, to which Reviva was a party or will be a party, in which:
· | the amounts involved exceeded or will exceed the lesser of (i) $120,000 or (ii) 1% of the average total assets of Reviva at year end for the last two completed fiscal years; and |
· | any of Reviva’s directors, executive officers, promoters or holders of more than 5% of its capital stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest. |
Compensation arrangements for Reviva’s named executive officers and directors are described in the Prospectus in the section titled “EXECUTIVE COMPENSATION OF REVIVA.”
Promissory Notes:
On July 11, 2016, Reviva issued a note to Purav Patel, one of Reviva’s directors, in the name of PENSCO Trust Company, Custodian, FBO Purav Patel IRA, pursuant to which Reviva borrowed an aggregate principal amount of $50,000.00. The entire balance of the note was used to help finance Reviva’s operations. The note initially accrued interest at a rate of 8% per annum with a maturity date of July 11, 2017. The convertible promissory note had been in default since the maturity date, and was accruing interest at a default rate of 12% per annum. Pursuant to an amendment to the note, on December 14, 2020, immediately prior to the consummation of the Business Combination, the note converted into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal and accrued but unpaid interest on a date that was no more than five (5) days prior to the consummation of the Business Combination (which interest balance was approximately $24,499) by (B) a conversion price equal to $1.329698. Upon issuance of such shares of Reviva common stock all of the existing obligations of Reviva under the note were satisfied in full and irrevocably discharged, terminated and released, and Mr. Patel retained no rights with respect to such note.
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On July 11, 2016, Reviva issued a note to Purav Patel, one of Reviva’s directors, pursuant to which Reviva borrowed an aggregate principal amount of $50,000. The entire balance of the note was used to help finance Reviva’s operations. The note initially accrued interest at a rate of 8% per annum with a maturity date of July 11, 2017. The convertible promissory note had been in default since the maturity date, and was accruing interest at a default rate of 12% per annum. Pursuant to an amendment to the note, on December 14, 2020, immediately prior to the consummation of the Business Combination, the note converted into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal and accrued but unpaid interest on a date that was no more than five (5) days prior to the consummation of the Business Combination (which interest balance was approximately $24,499) by (B) a conversion price equal to $1.329698. Upon issuance of such shares of Reviva common stock all of the existing obligations of Reviva under the note were satisfied in full and irrevocably discharged, terminated and released and Mr. Patel retained no rights with respect to such note.
On November 13, 2018, Reviva issued a note to Purav Patel, one of Reviva’s directors, pursuant to which Reviva borrowed an aggregate principal amount of $50,000. The entire balance of the note was used to help finance Reviva’s operations. The note accrued interest at a rate of 8% per annum with a maturity date of May 13, 2019. Pursuant to an amendment to the note, on December 14, 2020, immediately prior to the consummation of the Business Combination, the note converted into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal and accrued but unpaid interest on a date that was no more than five (5) days prior to the consummation of the Business Combination (which interest balance was approximately $8,296) by (B) a conversion price equal to $0.831018. Upon issuance of such shares of Reviva common stock all of the existing obligations of Reviva under the note were satisfied in full and irrevocably discharged, terminated and released and Mr. Patel retained no rights with respect to such note.
On December 13, 2018, Reviva issued a note to Buena Vista Fund II, LLC of which Purav Patel, one of Reviva’s directors, is Managing Member, in the principal amount of $25,000. The entire balance of the note was used to help finance Reviva’s operations. The note accrued interest at a rate of 8% per annum with a maturity date of June 13, 2019. Pursuant to an amendment to the note, on December 14, 2020, immediately prior to the consummation of the Business Combination, the note converted into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal and accrued but unpaid interest on a date that was no more than five (5) days prior to the consummation of the Business Combination (which interest balance was approximately $3,984) by (B) a conversion price equal to $1.330045. Upon issuance of such shares of Reviva common stock all of the existing obligations of Reviva under the note were satisfied in full and irrevocably discharged, terminated and released and Buena Vista Fund II, LLC retained no rights with respect to such note.
On October 14, 2016, Reviva issued a note to The Firdos Sheikh Family Trust of which Firdos Sheikh, a holder of greater than 5% of Reviva’s preferred stock, is Trustee, in the principal amount of $100,000. The entire balance of the note was used to help finance Reviva’s operations. The note initially accrued interest at a rate of 8% per annum with a maturity date of October 14, 2017. The note had been in default since the maturity date, and was accruing interest at a default rate of 12% per annum. Pursuant to an amendment to the note, on December 14, 2020, immediately prior to the consummation of the Business Combination, the note converted into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal and accrued but unpaid interest on a date that was no more than five (5) days prior to the consummation of the Business Combination (which interest balance was approximately $45,874) by (B) a conversion price equal to $1.329698. Upon issuance of such shares of Reviva common stock all of the existing obligations of Reviva under the note were satisfied in full and irrevocably discharged, terminated and released and The Firdos Sheikh Family Trust retained no rights with respect to such note.
On April 2, 2020, Reviva issued a note to The Firdos Sheikh Family Trust of which Firdos Sheikh, a holder of greater than 5% of Reviva’s preferred stock, is Trustee, in the principal amount of $100,000. The entire balance of the note was used to help finance Reviva’s operations. The note accrued interest at a rate of 8% per annum with a maturity date of October 2, 2020. Pursuant to an amendment to the note, on December 14, 2020, immediately prior to the consummation of the Business Combination, the note converted into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal and accrued but unpaid interest on a date that was no more than five (5) days prior to the consummation of the Business Combination (which interest balance was approximately $5,523) by (B) a conversion price equal to $1.329770. Upon issuance of such shares of Reviva common stock all of the existing obligations of Reviva under the note were satisfied in full and irrevocably discharged, terminated and released and The Firdos Sheikh Family Trust retained no rights with respect to such note.
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On September 9, 2016, Reviva issued a note to the Thaker Family Limited Partnership, of which Pankaj Thaker, a holder of greater than 5% of Reviva’s preferred stock, is the General Partner, in the principal amount of $25,000. The entire balance of the note was used to help finance Reviva’s operations. The note initially accrued interest at a rate of 8% per annum with a maturity date of September 9, 2017. The note had been in default since the maturity date, and was accruing interest at a default rate of 12% per annum. Pursuant to an amendment to the note, on December 14, 2020, immediately prior to the consummation of the Business Combination, the note converted into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal and accrued but unpaid interest on a date that was no more than five (5) days prior to the consummation of the Business Combination (which interest balance was approximately $11,756) by (B) a conversion price equal to $1.329698. Upon issuance of such shares of Reviva common stock all of the existing obligations of Reviva under the note were satisfied in full and irrevocably discharged, terminated and released and Thaker Family Limited Partnership retained no rights with respect to such note.
On September 9, 2016, Reviva issued a note to the 2012 Satyen P. Thaker Revocable Trust, of which Satyen Thaker, a holder of greater than 5% of Reviva’s preferred stock, is the Trustee, in the principal amount of $25,000. The entire balance of the note was used to help finance Reviva’s operations. The note initially accrued interest at a rate of 8% per annum with a maturity date of September 9, 2017. The 2016 Note had been in default since the maturity date, and was accruing interest at a default rate of 12% per annum. Pursuant to an amendment to the note, on December 14, 2020, immediately prior to the consummation of the Business Combination, the note converted into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal and accrued but unpaid interest on a date that was no more than five (5) days prior to the consummation of the Business Combination (which interest balance was approximately $11,756) by (B) a conversion price equal to $1.329698. Upon issuance of such shares of Reviva common stock all of the existing obligations of Reviva under the note were satisfied in full and irrevocably discharged, terminated and released and 2012 Satyen P. Thaker Revocable Trust retained no rights with respect to such note.
Related Party Payable
Reviva had related party payables due to Laxminarayan Bhat, Reviva’s Chief Executive Officer, for expenses that were incurred on Reviva’s behalf by Dr. Bhat totaling $75,707 as of December 4, 2020, which amount was reimbursed to Dr. Bhat on December 7, 2020.
Indian Subsidiary
Mr. Krishnamurthy Bhat, an Indian resident and the brother of Dr. Bhat, Reviva’s Chief Executive Officer’s, holds a 1% ownership stake and is a director of the Company’s subsidiary, Reviva Pharmaceuticals India Private Limited. The Indian government regulates ownership of Indian companies by non-residents. Foreign investment in Indian securities is generally regulated by the Consolidated Policy on Foreign Direct Investment issued by the Government and the Foreign Exchange Management Act, 1999, which prevents 100% ownership by a foreign parent company of its Indian subsidiary.
Employment
Reviva employs Seema R. Bhat, the spouse of Laxminarayan Bhat, Reviva’s Chief Executive Officer, as its Vice President for Program & Portfolio Management, pursuant to an Offer Letter dated March 1, 2011. In October 2015, Ms. Bhat entered into a letter agreement with Reviva pursuant to which Ms. Bhat agreed to a reduction in her base annual salary to $30,000.00 for an indefinite period of time. Effective since October 2018, Ms. Bhat had agreed to defer her entire salary, without interest. Effective as of September 24, 2020, 35,385 shares of Reviva common stock were issued to Ms. Bhat in full satisfaction of the entire deferred salary balance owed to Ms. Bhat, pursuant to a Stock Issuance Agreement and Release.
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Effective since October 2018, Dr. Cantillon had agreed to defer his entire salary, without interest. Effective as of September 25, 2020, 35,385 shares of Reviva common stock were issued to Dr. Cantillon in full satisfaction of the entire deferred salary balance owed to Dr. Cantillon, pursuant to a Stock Issuance Agreement and Release.
Effective since April 2019, Dr. Bhat had agreed to the deferral of his past salary as necessary, without interest. Effective as of September 24, 2020, 132,506 shares of Reviva common stock were issued to Dr. Bhat in full satisfaction of the entire deferred salary balance owed to Dr. Bhat, pursuant to a Stock Issuance Agreement and Release.
Indemnification Agreements
The Company has entered into indemnification agreements with each of its directors and named executive officers. These agreements require the Company to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to the Company, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. The Company also intends to enter into indemnification agreements with its future directors and executive officers. For a more fulsome description of the indemnification agreements refer to the disclosure in Item 5.02 of this Current Report on Form 8-K under the heading “Indemnification Agreements.”
Policies and Procedures for Related Party Transactions:
The board of directors of the Company (the “Company Board”) has adopted a policy that its executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of its Common Stock, any members of the immediate family of any of the foregoing persons and any firms, corporations or other entities in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest (collectively “related parties”), are not permitted to enter into a transaction with the Company without the prior consent of the Company Board acting through the Audit Committee or, in certain circumstances, the chairman of the Audit Committee. Any request for the Company to enter into a transaction with a related party, in which the amount involved exceeds $100,000 and such related party would have a direct or indirect interest must first be presented to the Audit Committee, or in certain circumstances the chairman of the Audit Committee, for review, consideration and approval. In approving or rejecting any such proposal, the Audit Committee, or the chairman of the Audit Committee, is to consider the material facts of the transaction, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the benefits to us, the availability of other sources of comparable products or services and the extent of the related party’s interest in the transaction.
Director Independence
The Company Board undertook a review of its composition, the composition of its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, the Company Board has determined that Mr. Saxena, Mr. Funtleyder, Dr. Margolin, and Mr. Patel do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the Rules of the Nasdaq Market and the SEC.
Item 8 – Legal Proceedings.
In December 2016 and July 2018, New Silk Route Advisors LP (or NSR Advisors), a registered investment advisor of which Parag Saxena (the Chairman of the Company Board) is Chief Executive Officer and founding general partner, consented (without admitting or denying any findings) to two U.S. Securities and Exchange Commission (or SEC) orders settling separate civil investigations by the SEC related to certain of its practices that the SEC found violated the Investment Advisers Act of 1940, as amended. In the first matter, NSR Advisors failed to secure required advisory board consents for certain co-investments and was fined $275,000 and censured. In the second matter, NSR Advisors failed to timely distribute required annual audited financial statements to investors and was fined $75,000 and censured. Mr. Saxena was not named individually in either of these matters.
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On January 2, 2020, there was a judgement issued by the District Court of Harris County, Texas, pursuant to an agreement reached between Reviva and the holder of a note issued by Reviva in April 2017. Under the terms of the judgement, Reviva was obligated to repay the holder of the note the principal investment of $1,200,000, accrued interest of $242,000, and legal fees of $5,000 (the “Judgment”). The obligatory payment was accruing interest at 5.5% per annum. On December 16, 2020, pursuant to the terms of a Settlement and Release Agreement entered into on December 2, 2020 (the “Settlement Agreement”), Reviva made a payment to the holder of the note in the amount of $1,514,619.70 in full satisfaction and settlement of all claims, matters, disputes and causes of action between the holder of the note and Reviva. Pursuant to the terms of the Settlement Agreement, the holder of the note subsequently filed a release of judgment in the District Court of Harris County, Texas, releasing Reviva from the Judgment.
Item 9 – Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.
Prior to the Closing, Tenzing’s units, Ordinary Shares and warrants were traded on Nasdaq under the symbols TZACU, TZAC and TZACW, respectively. Tenzing’s units commenced public trading on August 21, 2018, and its ordinary shares and warrants commenced public trading on October 18, 2018.
In connection with the Closing, on December 15, 2020, the Company’s Common Stock and warrants began trading on Nasdaq under the symbols “RVPH” and “RVPHW,” respectively, subject to ongoing review of the Company’s satisfaction of all listing criteria post-business combination.
Holders of The Company’s Common Equity
As of December 14, 2020, immediately after the Closing, there were approximately 14 holders of record of the Company’s Common Stock and approximately 4 holders of record of the Company’s warrants.
Item 10 – Recent Sales of Unregistered Securities.
Reference is made to the disclosure set forth under Item 3.02 of this Current Report on Form 8-K concerning the issuance and sale of certain unregistered securities, which is incorporated herein by reference.
Item 11 – Description of Registrant’s Securities to be Registered.
The Company’s securities are described in the Prospectus in the section titled “DESCRIPTION OF REVIVA’S, TENZING’S, AND THE COMPANY’S SECURITIES - Capital Stock of the Company after the Business Combination,” which is incorporated herein by reference.
Item 12 – Indemnification of Directors and Officers.
The indemnification arrangements with the Company’s directors and officers are described in Item 5.02 of this Current Report on Form 8-K under the heading “Indemnification Agreements,” which is incorporated herein by reference.
Item 13 – Financial Statements and Supplementary Data.
Reference is made to the disclosure set forth in Item 9.01 of this Current Report on Form 8-K concerning the financial information of Reviva, and certain unaudited pro forma financial information of Reviva and Tenzing combined, and is incorporated herein by reference.
Item 14 – Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Reference is made to the disclosure set forth in Item 4.01 of this Current Report on Form 8-K concerning the auditors of the Company, and is incorporated herein by reference.
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Item 15 – Financial Statements and Exhibits.
Reference is made to the disclosure set forth in Item 9.01 of this Current Report on Form 8-K concerning the financial information of Reviva, and certain unaudited pro forma financial information of Reviva and Tenzing combined, and is incorporated herein by reference.
Item 3.02. Unregistered Sales of Equity Securities.
Reference is made to the disclosure set forth in Item 1.01 and 2.01 of this Current Report on Form 8-K concerning the issuance of the Side Letter Shares pursuant to the Side Letter, which disclosures are incorporated herein by reference.
Reference is made to the disclosure set forth in Item 1.01 and 2.01 of this Current Report on Form 8-K concerning the issuance of the Additional Shares pursuant to the Non-Redemption Agreement, which disclosures are incorporated herein by reference.
Reference is made to the disclosure set forth in Item 1.01 and 2.01 of this Current Report on Form 8-K concerning the issuance of the Conversion Securities pursuant to conversion of the Working Capital Loans, which disclosures are incorporated herein by reference.
Reference is made to the disclosure set forth in the Prospectus concerning entry into the Backstop Agreements and the Additional Backstop Agreement, in the section titled, “QUESTIONS AND ANSWERS - Will Tenzing enter into any financing arrangements in connection with the Business Combination?,” which disclosures are incorporated herein by reference. As of November 13, 2020, the Backstop Investors had purchased a number of Tenzing’s ordinary shares in open market or private transactions entitling such Backstop Investors to the issuance of 41,263 shares of Common Stock (the “Backstop Additional Shares”) pursuant to the terms of the Backstop Agreements and the Additional Backstop Agreement. At the Closing, the Company issued the Additional Backstop Shares.
Reference is made to the disclosure set forth in the Prospectus concerning entry into the Reviva Interim Period Notes and the Reviva Contingent Interim Period Notes, in the sections titled, “DESCRIPTION OF REVIVA’S, TENZING’S, AND THE COMPANY’S SECURITIES - The Reviva Interim Period Notes” and ““DESCRIPTION OF REVIVA’S, TENZING’S, AND THE COMPANY’S SECURITIES - The Reviva Contingent Interim Period Notes,” which disclosures are incorporated herein by reference. On December 14, 2020, pursuant to their terms, the Reviva Interim Period Notes automatically converted into shares of Reviva common stock immediately prior to Closing, which shares were exchanged for 91,602 shares of Common Stock as part of the Merger Consideration. On December 14, 2020, pursuant to their terms, the Reviva Contingent Interim Period Notes automatically converted into shares of Reviva common stock immediately prior to Closing, which shares were exchanged for 261,626 shares of Common Stock as part of the Merger Consideration.
Securities Act Exemptions
The Company deemed the offers, sales and issuances of the securities described above to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 3(a)(9) or Section 4(a)(2) of the Securities Act, including Regulation D and Rule 506 promulgated thereunder, relative to transactions by an issuer not involving a public offering, as applicable.
All certificates representing the securities issued in the transactions described above included appropriate legends setting forth that the securities had not been offered or sold pursuant to a registration statement and describing the applicable restrictions on transfer of the securities.
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Item 3.03. Material Modification to Rights of Security Holders.
On December 14, 2020, in connection with the Closing, and pursuant to the terms of the Merger Agreement, the Company filed and adopted an amended and restated certificate of incorporation (the “Amended and Restated Certificate of Incorporation”). Reference is made to the disclosure described in the Prospectus in the sections titled “PROPOSAL 4: THE CHARTER AMENDMENT PROPOSALS,” and “DESCRIPTION OF REVIVA’S, TENZING’S, AND THE COMPANY’S SECURITIES,” which are incorporated herein by reference.
The foregoing description of the Amended and Restated Certificate of Incorporation does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended and Restated Certificate of Incorporation, a copy of which is filed herewith as Exhibit 3.3 to this Current Report on Form 8-K, and is incorporated herein by reference.
In accordance with Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is the successor issuer to Tenzing and has succeeded to the attributes of Tenzing as the registrant. In addition, the shares of Common Stock of the Company, as the successor to Tenzing, are deemed to be registered under Section 12(b) of the Exchange Act. Holders of Tenzing’s shares who have filed reports under the Exchange Act with respect to those shares should indicate in their next filing, or any amendment to a prior filing, filed on or after the Closing Date that the Company is the successor to Tenzing.
Item 4.01 Change in Registrant’s Certifying Accountant
Prior to the Business Combination, Tenzing’s consolidated financial statements were audited by Marcum LLP (“Marcum”). For accounting purposes, the Business Combination is treated as a reverse acquisition and, as such, the historical financial statements of the accounting acquirer, Reviva, which have been audited by Armanino LLP (“Armanino”), will become the historical consolidated financial statements of the Company. In a reverse acquisition, a change of accountants is presumed to have occurred unless the same accountant audited the pre-transaction financial statements of both the legal acquirer and the accounting acquirer, and such change is generally presumed to occur on the date the reverse acquisition is completed.
On December 17, 2020, the Audit Committee of the Company Board elected to continue to engage Marcum, an independent registered accounting firm, as the Company’s independent registered public accounting firm to review the Company’s consolidated financial statements for the three month period ended November 30, 2020. The Company's formal engagement of Marcum remains subject to the completion of Marcum’s standard client acceptance processes. Following Marcum’s review of the consolidated financial statements for the three month period ended November 30, 2020, the Company intends to terminate Marcum’s engagement and appoint and continue the engagement of Armanino as the independent registered public accounting firm to review the Company’s consolidated financial statements.
Item 5.01. Changes in Control of Registrant.
Reference is made to the disclosure in the Prospectus in the section titled “PROPOSAL 2: THE BUSINESS COMBINATION PROPOSAL — The Merger Agreement,” which is incorporated herein by reference. Further reference is made to the information contained in Item 2.01 to this Current Report on Form 8-K, which is incorporated herein by reference.
In accordance with the Merger Agreement, on December 14, 2020, at the Effective Time, each of the directors of Tenzing resigned, except for Parag Saxena, who remains on the Company Board as the Chairman of the Company Board, and effective as of the Effective Time, the following individuals were appointed to the Company Board: Laxminarayan Bhat, Les Funtleyder, Richard Margolin, and Purav Patel, each of whose terms expire at the Company’s next annual meeting of stockholders.
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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
In accordance with the Merger Agreement, on December 14, 2020, at the Effective Time, (i) Rahul Nayar resigned as Chief Executive Officer, Gonzalo Cordova resigned as Chief Financial Officer, and Atanuu Agarrwal resigned as Vice President, and (ii) Rahul Nayar, William Campbell, Nina Shapiro and Vikas Thapar resigned from the Company Board and any respective committee of the Company 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
In accordance with the Merger Agreement, on December 14, 2020, the Company Board appointed the following officers of the Company, effective at the Effective Time: Laxminarayan Bhat, as Chief Executive Officer and President, Marc Cantillon, MD, as Chief Medical Officer, and Narayan Prabhu, as Chief Financial Officer.
Laxminarayan Bhat (55) - see description below under the heading “Appointment of Directors.”
Marc Cantillon (62) has served as Chief Medical Officer of Reviva since 2013, and previously served as Consulting Medical Director of Reviva from 2008 to 2013. Dr. Cantillon became the Company’s Chief Medical Officer in December 2020. From 1995 to 1997, Dr. Cantillon served as Sr. Director at AnstraZeneca plc, (NYSE: AZN), a public company engaged in the biopharmaceuticals business. From 1997 to 1999, he served as US Lead at Sanofi- Aventis S.A. (Nasdaq: SNY), also a publicly-traded biopharmaceuticals company. From 2000 to 2002, he served as Global CNS Lead Medical Affairs at Wyeth/Pfizer (NYSE: PFE), another publicly-traded biopharmaceuticals company, and, from 2006 to 2010, served as AVP at Schering-Plough/Merck Sharp & Dohme Corp., now Merck & Co., Inc. (NYSE: MRK), another public company engaged in the biopharmaceuticals business. Dr. Cantillon has over 25 years of experience in translational Proof-of-Mechanism (POM), Proof-of-Concept (POC) and Phases 1 through IV trials and development in multiple therapeutics areas. Dr. Cantillon earned his MD from the Karolinska Institute of Medicine. He is board certified by the American Board of Neurology and Psychiatry.
Narayan Prabhu (49) joined the Company as Chief Financial Officer in December 2020. Since May 2019, Mr. Prabhu served as an independent consultant providing Interim Chief Financial Officer and Controller services. Mr. Prabhu previously served as the Chief Financial Officer of Sony Biotechnology Inc., a biotechnology company focused on reagents, flow cytometry and spectral imaging from November 2014 to April 2019. From September 2009 to October 2014, Mr. Prabhu served as the M&A Controller at Cisco Systems, Inc. (Nasdaq: CSCO). Mr. Prabhu is a CPA and received his B.S. in Accounting & Finance from Indiana University at Bloomington — Kelley School of Business and MBA from the University of California at Berkeley — Haas School of Business.
Appointment of Directors
In accordance with the Merger Agreement, on December 14, 2020, effective at the Effective Time of the Merger, the following individuals were appointed to the Company Board as directors:
Laxminarayan Bhat (55) has served as the Founder, President, Chief Executive Officer and as a Director of Reviva Pharmaceuticals, Inc. since 2006. Dr. Bhat became the Company’s Chief Executive Officer, President, and a Director in December 2020. From 2000 to 2004, Dr. Bhat served as research scientist at XenoPort, Inc., now a part of Arbor Pharmaceuticals, LLC (NYSE: ABR), a public company engaged in the pharmaceuticals business. Dr. Bhat also served as a research scientist, from 2004 to 2006, at ARYx Therapeutics Inc, (previously trading under OTCM: ARYX), a former public company that focused on the development of pharmaceutical products. From 1997 to 2000, Dr. Bhat served as a post-doctoral researcher in the Drug Discovery Program at the Higuchi Biosciences Center, a biomedical research center at the University of Kansas. He has over twenty years of experience in drug discovery and development. Dr. Bhat received his Ph.D. in synthetic organic chemistry from Central University (NEHU), in India, and has received post-doctoral training at the University of Kansas, the Georg-August-Universität, in Göttingen, Germany and the Université du Maine, in France. In 1995, he was selected for the Alexander von Humboldt Fellowship to pursue advanced research in Germany.
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The Company believes Dr. Bhat’s history as the founder of Reviva and his experience in drug discovery and development qualifies him to serve on the Company Board.
Les Funtleyder (51) became a director of the Company in December 2020. Mr. Funtleyder has served as a member of the board of directors of Applied Therapeutics Inc. (Nasdaq: APLT), a clinical-stage biopharmaceutical company, since June 2016 and served as its interim Chief Financial Officer from December 2018 to April 2019. Mr. Funtleyder has also served as a healthcare portfolio manager at E Squared Capital Management, LLC since January 2014, a senior external advisor with McKinsey and Co. since June 2017, and a consulting partner at Bluecloud Health, a private equity healthcare fund, since December 2013. Mr. Funtleyder previously served as the director of strategic investments and communications of OPKO Health Inc. (Nasdaq: OPK), a publicly traded healthcare company, from April 2014 to June 2016. Mr. Funtleyder currently serves on the board of directors of several private healthcare companies and foundations. Mr. Funtleyder is also an adjunct professor at Columbia University Medical Center. Mr. Funtleyder received his B.A. from Tulane University and MPH from Columbia University Mailman School of Public Health.
The Company believes Mr. Funtleyder’s extensive experience managing and investing in the healthcare industry and his experience serving as the CFO of another publicly-traded pharmaceutical company qualifies him to serve on the Company Board.
Richard Margolin (69) became a director of the Company in December 2020. Since February 2020, Dr. Margolin has served as Senior Vice President, Translational Sciences and Clinical Development at TauC3 Biologics Ltd., a privately held British biopharmaceutical company. Dr. Margolin also currently serves as the Chief Medical Officer of Eikonizo Therapeutics, Inc., a biotechnology company since January 2020, and he is the Founder and Principal Consultant of CNS Research Solutions LLC, a consulting firm supporting the development of novel therapeutics for CNS disorders since May 2018. From December 2016 to April 2018, Dr. Margolin served as Executive Director, Internal Medicine Research Unit at Pfizer, Inc. (NYSE: PFE), a publicly-traded pharmaceutical company. From November 2013 to December 2016, Dr. Margolin served as the Vice President, Clinical Development at CereSpir, Inc., a biotechnology company. Previously, he held positions in two major pharmaceutical companies, and earlier in his career he held leadership positions in psychiatry departments of two major U.S. medical schools. Dr. Margolin earned his AB from Harvard College and his MD from the University of California, Irvine and received research training at the National Institutes of Health.
The Company believes Dr. Margolin’s 30 years of experience in pharmaceutical research and development qualifies him to serve on the Company Board.
Purav Patel (38) has served as a director of Reviva since 2017. Mr. Patel became a director of the Company in December 2020.Since January 2014, Mr. Patel has also been Founder and Managing Partner of Buena Vista Fund I, a company engaged in the business of startup investments. Mr. Patel has over 14 years of experience in business operations and scaling startups. Mr. Patel serves on the Board of Pratham, a charitable organization with the mission to vastly improve the quality of education for underprivileged children and youth across India. Mr. Patel holds a Bachelor’s Degree in Biology and Business from the University of Texas. Mr. Patel is skilled at financial analysis, business operations and fundraising.
The Company believes Mr. Patel’s 12 years of knowledge of Reviva’s history, team, investors and product candidates qualifies him to serve on the Company Board.
Parag Saxena (65) has served as Chairman of the Company Board since 2018. Mr. Saxena has extensive investment experience in the U.S. and in the Indian subcontinent. Mr. Saxena co-founded Vedanta Management LP (or Vedanta) and NSR Advisors in 2006, private equity investment management firms, which currently collectively manage over $1 billion in assets. He is the Managing Partner and Chief Executive Officer of both firms. Previously, he was Chief Executive Officer of INVESCO Private Capital (and its predecessor firms), a venture capital firm in the U.S. During his 23-year tenure, over 300 investments were made, including Amgen, Costco, PictureTel, Polycom, Staples and Starbucks. Mr. Saxena led more than 90 investments for INVESCO Private Capital (and its predecessor firms), a third of which went on to become public companies. These investments include Alkermes, Celgene, Genomic Health, Indigo, Masimo, Transgenomic, Xenon Pharmaceuticals, Amber Networks, ARM Holdings, MetroPCS, and Volterra. Mr. Saxena has served on committees advising the Prime Minister of India on foreign direct investments, and the Planning Commission of India on venture capital. He was also a Director of the Indian Institute of Technology, Bombay’s Heritage Fund as well as a Trustee of the Bharatiya Vidya Bhavan. He is on the Advisory Board of the Center for Advanced Studies on India at the University of Pennsylvania and is on the Indian Advisory Council of Brown University. Mr. Saxena was the President of TiE Tri-State (NY, CT, NJ) from 2003 to 2010. He was also on Mayor Bloomberg’s Applied Sciences NYC Advisory Committee. Mr. Saxena received an M.B.A. from the Wharton School of the University of Pennsylvania. He earned a B.Tech. from the Indian Institute of Technology, Bombay and an M.S. in Chemical Engineering from the West Virginia College of Graduate Studies.
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The Company believes Mr. Saxena’s deep financial, entrepreneurial and business expertise and extensive experience as a member of the boards and board committees of other public companies qualifies him to serve on the Company Board.
Board Committees
Effective as of the Effective Time, the Company’s audit committee was comprised of Les Funtleyder (chair), Purav Patel, and Richard Margolin, the Company’s compensation committee was comprised of Purav Patel (chair), Richard Margolin and Parag Saxena, and the Company’s nominating committee was comprised of Parag Saxena (chair), Les Funtleyder and Purav Patel.
Non-Employee Director Compensation
The Company Board intends to consider and adopt a director compensation policy for its non-employee directors. The Company Board anticipates that such policy will include equity grants determined by the compensation committee and reimbursement for reasonable expenses incurred in connection with attending board and committee meetings.
Agreements with Certain Executive Officers
As a result of the Closing, effective as of the Effective Time, the Company entered into agreements with Laxminarayan Bhat as President and Chief Executive Officer (the “Bhat Employment Agreement”), and Narayan Prabhu as Chief Financial Officer (the “Prabhu Offer Letter”). Dr. Bhat is also party to a Non-Competition Agreement with the Company, dated as of July 20, 2020, which became effective as of the Effective Time (the “Non-Competition Agreement”).
Descriptions of the Bhat Employment Agreement and the Prabhu Offer Letter are included in the Prospectus under the section titled “EXECUTIVE COMPENSATION OF REVIVA - Offer Letters with Reviva’s Named Executive Officers,” and the text of the agreements are filed as Exhibits 10.1 and 10.5 hereto. A description of the Non-Competition Agreement is included in the Prospectus under the section titled “PROPOSAL 2: THE BUSINESS COMBINATION PROPOSAL - Related Agreements – Non-Competition Agreement,” and the text of the agreement is filed as Exhibit 10.4 hereto. Such descriptions and the text of such agreements are incorporated herein by reference into this Current Report on Form 8-K.
Reviva entered into an Offer Letter on December 12, 2012 with Marc Cantillon as its Chief Medical Officer (the “2012 Offer Letter”). In October 2015, Dr. Cantillon entered into a letter agreement with Reviva pursuant to which Dr. Cantillon agreed to a reduction in his base annual salary to $100,000.00 for an indefinite period of time (the “2015 Reduction Letter”). In March 2016, Dr. Cantillon entered into a letter agreement with Reviva pursuant to which Dr. Cantillon agreed to a reduction in his base annual salary to $30,000.00 for an indefinite period of time (the “2016 Reduction Letter,” together with the 2012 Offer Letter and the 2015 Reduction Letter, the “Cantillon Offer Letter”). The Cantillon Offer Letter was assumed by the Company at the Effective Time, and constitutes an at-will employment agreement. Dr. Cantillon will also be eligible to receive, from time to time, equity awards under the Company’s 2020 Equity Incentive Plan, or any other equity incentive plan the Company may adopt in the future, and the terms and conditions of such awards, if any, will be determined by the Company Board, or a committee thereof, in their discretion.
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The foregoing descriptions of the Cantillon Offer Letter does not purport to be complete and is qualified in its entirety by reference to the complete text of the Cantillon Offer Letter, which is incorporated herein by reference into this Current Report on Form 8-K as Exhibits 10.6, 10.7 and 10.8 hereto.
Indemnification Agreements
On December 14, 2020, the Company Board adopted and entered into (a) a form of indemnification agreement (the “Indemnification Agreement”) between the Company and each of its directors and executive officers, except for Parag Saxena, and (b) a form of indemnification agreement (the “Saxena Indemnification Agreement”) with Parag Saxena.
The Indemnification Agreement requires the Company to indemnify each director and officer to the fullest extent permitted by applicable law, for certain expenses, including attorneys’ fees, judgments, penalties, fines and settlement amounts actually and reasonably incurred in any threatened, pending or completed action, suit, claim, investigation, inquiry, administrative hearing, arbitration or other proceeding to which the director or officer was, or is threatened to be made, a party by reason of the fact that such director or officer is or was a director, officer, employee or agent of the Company. Subject to certain limitations, the Indemnification Agreement provides for the advancement of expenses incurred by the indemnitee, and the repayment to the Company of the amounts advanced to the extent that it is ultimately determined that the indemnitee is not entitled to be indemnified by the Company. The Indemnification Agreement also creates certain rights in favor of the Company, including the right to assume the defense of claims and to consent to settlements. The Indemnification Agreement does not exclude any other rights to indemnification or advancement of expenses to which the indemnitee may be entitled under applicable law, the certificate of incorporation or bylaws of the Company, any agreement, a vote of stockholders or disinterested directors, or otherwise.
The Saxena Indemnification Agreement is on substantially the same form as the Indemnification Agreement, except that it includes a provision specifying that the Company will act as the indemnitor of first resort and that the Company will not assert that Mr. Saxena, as indemnitee under the Saxena Indemnification Agreement, must seek expense advancement or reimbursement, or indemnification, from any stockholder of the Company and/or certain of any such stockholder’s affiliates who Mr. Saxena may have rights to indemnification, advancement of expenses and/or insurance from, before the Company must perform its expense advancement and reimbursement, and indemnification obligations, under the Saxena Indemnification Agreement.
The foregoing summary and description of the provisions of the Indemnification Agreement and the Saxena Indemnification Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Indemnification Agreement and the Saxena Indemnification Agreement, copies of which are incorporated herein by reference into this Current Report on Form 8-K as Exhibits 10.9 and 10.10 hereto, respectively.
Equity Incentive Plans
2020 Equity Incentive Plan
On December 14, 2020, the Reviva Pharmaceuticals Holdings, Inc. 2020 Equity Incentive Plan (the “2020 Equity Incentive Plan”) became effective. The Company’s stockholders approved the 2020 Equity Incentive Plan at the Special Meeting, and reserved a total of 461,587 shares of Common Stock for issuance thereunder. The general purpose of the 2020 Equity Incentive Plan is to provide a means whereby employees, officers, directors, consultants, advisors or other individual service providers of the Company or any of its subsidiaries may develop a sense of proprietorship and personal involvement in the Company’s development and financial success, and to encourage them to devote their best efforts to the Company, thereby advancing the Company’s interests and the interests of stockholders of the Company. The 2020 Equity Incentive Plan provides for a broad array of equity incentives and performance cash incentives. Employees, officers, directors, consultants, advisors and other individual service providers of the Company and its subsidiaries who, in the opinion of the Company’s compensation committee, are in a position to contribute to the Company’s success, or any person who is determined by the Company’s composition committee to be a prospective employee, officer, director, consultant, advisor or other individual service provider of the Company or any subsidiary will be eligible for grants under the 2020 Equity Incentive Plan.
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The terms and conditions of the 2020 Equity Incentive Plan are described in the Prospectus in the section entitled “PROPOSAL 3: THE 2020 EQUITY INCENTIVE PLAN PROPOSAL.” The foregoing description of the 2020 Equity Incentive Plan and the information incorporated by reference in the preceding sentence do not purport to be complete and are qualified in their entirety by the terms and conditions of the 2020 Equity Incentive Plan, which is incorporated by reference to this Current Report on Form 8-K as Exhibit 10.13.
Certain 2020 Equity Incentive Plan Information
New Grants under the 2020 Equity Incentive Plan. The following table sets forth awards intended to be granted to each of the following under the 2020 Equity Incentive Plan, subject to approval by the Compensation Committee:
Group |
Number of Options Granted Under Plan |
|||
All Executive Officers as a Group | ​50,000 (1) | |||
All Non-Employee Directors, as a Group | 15,226 (2) | |||
All employees other than executive officers as a Group | - |
(1) | The Prabhu Offer Letter became effective at the consummation of the Business Combination. Pursuant to the Prabhu Offer Letter, the compensation committee of the Company will determine the number of shares of Company Common Stock for which Mr. Prabhu will be granted an option to purchase shares, which number is anticipated to be approximately 50,000 shares, and the terms of such option grant under the 2020 Equity Incentive Plan. |
(2) | On November 5, 2018, in connection with his appointment to, and service on, the board of directors of Reviva, the board of directors of Reviva proposed approving the grant of options to purchase up to 100,000 shares of common stock of Reviva to Purav Patel (the “Promised Options”). The compensation committee of the Company will determine the number of shares of Company Common Stock for which Mr. Patel will be granted an option to purchase shares, which number is anticipated to be approximately 15,226 shares, and the terms of such option grant under the 2020 Equity Incentive Plan, in satisfaction of the obligation to issue the Promised Options. |
Because future awards under the 2020 Equity Incentive Plan (including the grants described in the table above) will be granted in the discretion of the Compensation Committee, the type, number, recipients, and other terms of such awards cannot be determined at this time.
2006 Equity Incentive Plan
Reviva’s board of directors adopted, and Reviva’s stockholders approved, the Reviva Pharmaceuticals, Inc. 2006 Equity Incentive Plan, effective as of August 2006. The Reviva Pharmaceuticals, Inc. 2006 Equity Incentive Plan provided for the grant of incentive stock options, or ISOs, within the meaning of Section 422 of the Code, to Reviva’s employees, and for the grant of nonstatutory stock options, or NSOs, and restricted stock awards to Reviva’s employees, officers, directors and consultants; provided such consultants render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. As of 2016, no new grants of awards are permitted under the Reviva Pharmaceuticals, Inc. 2006 Equity Incentive Plan.
As of the Effective Time, the Reviva Pharmaceuticals, Inc. 2006 Equity Incentive Plan was amended to change its name to the Reviva Pharmaceuticals Holdings, Inc. 2006 Equity Incentive Plan (the “2006 Equity Incentive Plan”), and each outstanding option to acquire Reviva common stock (whether vested or unvested) under the 2006 Equity Incentive Plan was assumed by the Company and automatically converted into an option to acquire shares of Company Common Stock, with its price and number of shares equitably adjusted based on the conversion of the shares of common stock of Reviva into shares of the Company Common Stock pursuant to the Merger Agreement. Pursuant to such assumption and automatic conversion, as of the Effective Time there are outstanding options under the 2006 Equity Incentive Plan exercisable for an aggregate of 65,471 shares of Company Common Stock, and no new grants of awards are permitted under the 2006 Equity Incentive Plan.
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The foregoing description of the 2006 Equity Incentive Plan does not purport to be complete and is qualified in its entirety by the terms and conditions of the 2006 Equity Incentive Plan, which is incorporated by reference to this Current Report on Form 8-K as Exhibit 10.16.
Related-Party Transactions
Reference is made to the information contained in Item 2.01 to this Current Report on Form 8-K, under the heading “Item 6. Executive Compensation,” which is incorporated herein by reference.
Reference is made to the information contained in Item 2.01 to this Current Report on Form 8-K, under the heading “Item 7. Certain Relationships and Related Transactions, and Director Independence,” which is incorporated herein by reference.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
Reference is made to the disclosure set forth in Item 3.03 of this Current Report on Form 8-K, and is incorporated herein by reference.
Item 5.05 Amendments to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics.
In connection with the Business Combination, on December 14, 2020, the Board approved a new Code of Business Conduct and Ethics (the "Code"), which applies to all directors, officers and employees of the Company and its subsidiaries.
The Code is available in the Investor Relations section of the Company's website, located at http://revivapharma.com/ under the link for "Investor Relations and Leadership” – “Governance & Leadership” – “Documents and Charters.” The contents of the Company's website are not incorporated by reference in this Current Report on Form 8-K or made a part hereof for any purpose.
Item 5.06. Change in Shell Company Status.
As a result of the Business Combination, the Company ceased to be a shell company upon the Closing. The material terms and conditions of the Business Combination are described in the Prospectus, in the section titled “PROPOSAL 2: THE BUSINESS COMBINATION PROPOSAL,” which is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
Reviva’s audited financial statements for the years ended December 31, 2019 and 2018, and the notes related thereto, are filed herewith and attached hereto as Exhibit 99.1, and are incorporated herein by reference.
Reviva’s unaudited interim financial statements for the three and nine months ended September 30, 2020, and the notes related thereto, are filed herewith and attached hereto as Exhibit 99.2, and are incorporated herein by reference.
(b) Pro Forma Financial Information
Certain unaudited pro forma combined financial information of the Company, and the notes related thereto, are filed herewith and attached hereto as Exhibit 99.3, and are incorporated herein by reference.
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(d) Exhibits
* Filed herewith.
+ The exhibits and schedules to this Exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant hereby agrees to furnish a copy of any omitted schedules to the Commission upon request.
++ Certain information in this exhibit has been omitted pursuant to Item 601(a)(6) of Regulation S-K.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
REVIVA PHARMACEUTICALS HOLDINGS, INC. | ||
By: | /s/ Laxminarayan Bhat | |
Name: Laxminarayan Bhat | ||
Title: Chief Executive Officer | ||
Dated: December 18, 2020 |
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Exhibit 3.1
Delaware
The First State
Page 1 |
I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF DOMESTICATION OF “TENZING ACQUISITION CORP.”, FILED IN THIS OFFICE THE ELEVENTH DAY OF DECEMBER, A.D. 2020, AT 12:55 O’CLOCK P.M.
/s/ Jeffrey W. Bullock | |
Jeffrey W. Bullock, Secretary of State |
4421443 8100D | Authentication: 204299498 | |
SR# 20208626711 | Date: 12-11-20 |
You may verify this certificate online at corp.delaware.gov/authver.shtml
CERTIFICATE OF CORPORATE DOMESTICATION
OF
TENZING ACQUISITION CORP.
The undersigned, presently a corporation organized and existing under the laws of the British Virgin Islands, for the purposes of domesticating a corporation under Section 388 of the General Corporation Law of the State of Delaware, does certify that:
1. | Tenzing Acquisition Corp, (the “Corporation”) was first formed, incorporated, or otherwise came into being on March 20, 2018, in the jurisdiction of the British Virgin Islands. |
2. | The name of the Corporation immediately prior to the filing of this certificate of corporate domestication pursuant to the provisions of Section 388 of the General Corporation Law of the State of Delaware was: |
TENZING ACQUISITION CORP.
3. | The name of the Corporation as set forth in its certificate of incorporation to be filed in accordance with Section 388(b) of the General Corporation Law of the State of Delaware is: |
REVIVA PHARMACEUTICALS HOLDINGS, INC.
4. | The jurisdiction that constituted the seat, siege social, or principal place of business or central administration of the Corporation, or other equivalent thereto under applicable law immediately prior to the filing of this certificate of corporate domestication pursuant to the provisions of Section 388 of the General Corporation Law of the State of Delaware is the British Virgin Islands. |
5. | The domestication has been approved in the manner provided for by the document, instrument, agreement or other writing, as the case may be, governing the internal affairs of the Corporation and the conduct of its business or by applicable non-Delaware law, as appropriate. |
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its duly authorized officer on this 11th day of December, 2020.
TENZING ACQUISITION CORP. |
By: | /s/ Rahul Nayar | |
Name: Rahul Nayar | ||
Title: Chief Executive Officer |
State of Delaware | |
Secretary of State | |
Division of Corporations | |
Delivered 12:55 PM 12/11/2020 | |
FILED 12:55 PM 12/11/2020 | |
SR 20208626711 - File Number 4421443 |
Exhibit 3.3
Delaware The First State Page 1 I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF “REVIVA PHARMACEUTICALS HOLDINGS, INC.”, FILED IN THIS OFFICE ON THE FOURTEENTH DAY OF DECEMBER, A.D. 2020, AT 9:24 O`CLOCK A.M. 4421443 8100Authentication: 204310431 SR# 20208637000Date: 12-14-20 You may verify this certificate online at corp.delaware.gov/authver.shtml |
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF REVIVA PHARMACEUTICALS HOLDINGS, INC. State of Delaware Secretary of State Division of Corporations Delivered 09:24AM 12/14/2020 FILED 09:24 AM 12/14/2020 SR 20208637000 - File Nu mber 4421443 Reviva Pharmaceuticals Holdings, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the "DGCL"), DOES HEREBY CERTIFY: FIRST: That the name of this corporation is Reviva Pharmaceuticals Holdings, Inc. and that this corporation was originally incorporated pursuant to the DGCL on December 11, 2020, under the name Reviva Pharmaceuticals Holdings, Inc. SECOND: That the Board of Directors duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of this corporation, as amended, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefore, which resolution setting fort the proposed amendment and restatement is as follows: RESOLVED, that the Certificate of Incorporation of this corporation, as amended, be amended and restated in its entirety as follows: ARTICLE I The name of the Corporation is Reviva Pharmaceuticals Holdings, Inc. ARTICLE II The address of the Corporation 's registered office in the State ofDelaware is 251 Little Falls Drive, in the City of Wilmington, County of New Castle, State ofDelaware, 19808; and the name of the registered agent of the Corporation in the State of Delaware at such address is Corporation Service Company. The Corporation shall have the authority to designate other registered offices and registered agents both in the State of Delaware and in other jurisdictions. ARTICLE III The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL. ARTICLE IV A. CAPITAL STOCK The total number of shares of capital stock which the Corporation shall have authority to issue is One Hundred Twenty Five Million (125,000,000), of which (i) One Hundred Fifteen Million (I 15,000,000) shares shall be a class designated as common stock, par value $0.0001 per share (the "Common Stock"), and (ii) Ten Million (10,000,000) shares shall be a class designated as preferred stock, par value $0.0001 per share (the "Preferred Stock"). The number of authorized shares of Common Stock or Preferred Stock may from time to time be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority in voting power ofthe outstanding shares of stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the DGCL (or any successor provision thereto), and no vote ofthe holders of any of the Common Stock or the Preferred Stock voting separately as a class shall be required therefor, unless a vote of any such holder is required pursuant to this Certificate (including pursuant to any certificate of designation of any series of Preferred Stock). The powers, preferences and rights of, and the qualifications, limitations and restrictions upon, each class or series of stock shall be determined in accordance with, or as set forth below in, this Article IV. |
B. COMMON STOCK 1. Voting. Each holder of record of Common Stock, as such, shall have one vote for each share of Common Stock which is outstanding in his, her or its name on the books of the Corporation on all matters on which stockholders are entitled to vote generally. Except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate (including any certificate of designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Certificate (including any certificate of designation relating to any series of Preferred Stock) or pursuant to the DGCL. 2. Dividends. Subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred Stock or any class or series of stock having a preference over or the right to participate with the Common Stock with respect to the payment of dividends, dividends may be declared and paid or set apart for payment upon the Common Stock out of any assets or funds of the Corporation legally available for the payment of dividends, but only when and as declared by the Board of Directors or any authorized committee thereof. 3. Liquidation. Upon the dissolution, liquidation or winding up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and subject to the rights, if any, of the holders of any outstanding series of Preferred Stock or any class or series of stock having a preference over or the right to participate with the Common Stock with respect to the distribution of assets of the Corporation upon such dissolution, liquidation or winding up of the Corporation, the holders of Common Stock shall be entitled to receive the remaining assets of the Corporation available for distribution to its stockholders ratably in proportion to the number of shares held by them. C. PR EFERRED STOCK The Board of Directors is hereby expressly authorized, by resolution or resolutions, to provide, out of the authorized, unissued shares of Preferred Stock, for one or more series of Preferred Stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, and the powers (including voting powers, if any), preferences and relative, participating, optional and other special rights, if any, and any qualifications, limitations or restrictions thereof, of the shares of such series of Preferred Stock. The powers, preferences and relative, participating, optional and other special rights of, and the qualifications, limitations or restrictions thereof, of each series of Preferred Stock, if any, may differ from those of any and all other series at any time outstanding. Except as otherwise required by law, holders of any series of Preferred Stock shall be entitled to only such voting rights, if any, as shall expressly be granted thereto by this Certificate (including any certificate of designation relating to such series of Preferred Stock). ARTICLE V STOCKHOLDER ACTION 1. Written Consent of Stockholders in Lieu of Meeting. Subject to the rights, if any, of the holders of any series ofPreferred Stock, no action that is required or permitted to be taken by the stockholders of the Corporation at any annual or special meeting of stockholders may be effected by written consent of stockholders in lieu of a meeting of stockholders. 2. Special Meetings. Except as otherwise required by statute and subject to the rights, if any, of the holders of any series of Preferred Stock, special meetings of the stockholders of the Corporation may be called only by the Board of Directors acting pursuant to a resolution approved by the affirmative vote of a majority of the Board of Directors to be held at such date, time and place either within or without the State of Delaware as may be stated in the notice of the meeting. |
ARTICLE VI DIRECTORS 1. General. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors except as otherwise provided herein or required by law. 2. Election of Directors. Election ofDirectors need not be by written ballot unless the Bylaws of the Corporation (the "Bylaws") shall so provide. 3. Number of Directors; Term of Office. Except as otherwise provided for or fixed pursuant to the provisions of Article IV of this Certificate (including any certificate of designation of any series of Preferred Stock) and this Article VI relating to the rights of the holders of any series of Preferred Stock to elect additional directors, the number ofDirectors of the Corporation shall be fixed solely and exclusively by resolution duly adopted from time to time by the Board of Directors. The Directors, other than those who may be elected by the holders of any series of Preferred Stock, shall be elected at each annual meeting of stockholders for a term of one year. Each Director shall serve until his successor is duly elected and qualified or until his death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent Director. During any period when the holders of any series of Preferred Stock have the right to elect additional Directors, then upon commencement and for the duration of the period during which such right continues: (i) the then otherwise total authorized number of Directors shall automatically be increased by such specified number of Directors, and the holders of such Preferred Stock shall be entitled to elect the additional Directors so provided for or fixed pursuant to said provisions, and (ii) each such additional Director shall serve until such Director's successor shall have been duly elected and qualified, or until such Director's right to hold such office terminates pursuant to said provisions, whichever occurs earlier, subject to his or her earlier death, resignation, retirement, disqualification or removal. Except as otherwise provided by the Board of Directors in the resolution or resolutions establishing such series, whenever the holders of any series of Preferred Stock having such right to elect additional Directors are divested of such right pursuant to the provisions of such stock, the terms of office of all such additional Directors elected by the holders of such stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional Directors, shall forthwith terminate and the total authorized number of directors of the Corporation shall be reduced accordingly. 4. Vacancies. Subject to the rights, if any, of the holders of any series of Preferred Stock to elect Directors and to fill vacancies in the Board of Directors relating thereto, any and all vacancies in the Board of Directors, however occurring, including, without limitation, by reason of an increase in size of the Board of Directors, or the death, resignation, disqualification or removal of a Director, shall be filled solely and exclusively by the affirmative vote of a majority of the remaining Directors then in office, even if less than a quorum of the Board of Directors, and not by the stockholders. Any Director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the Director for which the vacancy was created or occurred and until such Director's successor shall have been duly elected and qualified or until his or her earlier resignation, death or removal. 5. Removal. Subject to the rights, if any, of any series of Preferred Stock to elect Directors and to remove any Director whom the holders of any such stock have the right to elect, any Director (including persons elected by Directors to fill vacancies in the Board of Directors) may be removed from office (i) with cause or without cause and (ii) only by the affirmative vote of the holders of at least a majority in voting power of the shares then entitled to vote at an election of Directors. ARTICLE VII LIMITATION OF LIABILITY |
A Director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except for liability (i) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which the Director derived an improper personal benefit. If the DGCL is amended after the effective date of this Certificate to authorize corporate action further eliminating or limiting the personal liability of Directors, then the liability of a Director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Any repeal or modification of this Article VII, shall not adversely affect any right or protection existing at the time of such repeal or modification with respect to any acts or omissions occurring before such repeal or modification of a person serving as a Director at the time of such repeal or modification. ARTICLE VIII AMENDMENT OF BYLAWS 1. Amendment by Directors. Except as otherwise provided by law, the Bylaws of the Corporation may be amended or repealed by the Board of Directors by the affirmative vote of a majority of the Board. 2. Amendment by Stockholders. The Bylaws of the Corporation may be amended or repealed by the stockholders at any annual meeting of stockholders, or special meeting of stockholders called for such purpose as provided in the Bylaws, by the affirmative vote of the holders of at least a majority in voting power of the outstanding shares entitled to vote on such amendment or repeal, voting together as a single class. ARTICLE IX AM ENDMENT OF CERTIFICATE OF INCORPORATION The Corporation reserves the right to amend or repeal this Certificate in the manner now or hereafter prescribed by statute and this Certificate, and all rights conferred upon stockholders herein are granted subject to this reservation. In addition to any other vote required by law or this Certificate, the affirmative vote of the holders of at least a majority in voting power of the outstanding shares entitled to vote on such amendment or repeal, shall be required to amend or repeal any provision of Article V, Article VI, Article VII, Article VIII or Article IX of this Certificate. ARTICLE X EXCLUSIVE JURISDICTION Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation; (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation's stockholders, creditors or other constituents; (iii) any action asserting a claim against the Corporation or any Director or officer of the Corporation arising pursuant to, or a claim against the Corporation or any Director or officer of the Corporation with respect to the interpretation or application of any provision of, the DGCL, this Certificate or the Bylaws of the Corporation; or (iv) any action asserting a claim governed by the internal affairs doctrine in each such case subject to said court having personal jurisdiction over the indispensable parties named as defendants therein; provided, that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state court sitting in the State of Delaware. Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. The provisions of this Article X will not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts have exclusive jurisdiction. |
To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article X. TIDRD: The foregoing amendment and restatement was approved by the holders of the requisite number of shares of said corporation in accordance with Section 228 of the DGCL. FOURTH: That said Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation's Certificate oflncorporation, as amended, has been duly adopted in accordance with Sections 242 and 245 of the DGCL. IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 14111 day of December, 2020. REVIVA PHARMACEUTICALS HOLDINGS, INC. By: /s/Rahul Nayar Name: Rahul Nayar Title: ChiefExecutive Officer |
Exhibit 4.1
Warrant Certificate No. W-__
NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS AND THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
Effective Date: ______________ | Void After: _____________ |
REVIVA PHARMACEUTICALS, INC.
WARRANT TO PURCHASE COMMON STOCK
Reviva Pharmaceuticals, Inc., a Delaware corporation (the “Company”), effective April 28, 2017 (the “Effective Date”), hereby issues ________________, (the “Holder” or “Warrant Holder”) this Warrant (the “Warrant”) to purchase ______ shares (each such share as from time to time adjusted as hereinafter provided being a “Warrant Share” and all such shares being the “Warrant Shares”) of the Company’s Common Stock (as defined below), at the Exercise Price (as defined below), as adjusted from time to time as provided herein, on or before ___________ (the “Expiration Date”), all subject to the following terms and conditions. This Warrant is being issued pursuant to _____________________________.
As used in this Warrant, (i) “Business Day” means any day other than Saturday, Sunday or any other day on which commercial banks in the City of New York, New York, are authorized or required by law or executive order to close; (ii) “Common Stock” means the common stock of the Company, par value $0.0001 per share, including any securities issued or issuable with respect thereto or into which or for which such shares may be exchanged for, or converted into, pursuant to any stock dividend, stock split, stock combination, recapitalization, reclassification, reorganization or other similar event; (iii) “Exercise Price” means $____ per share of Common Stock, subject to adjustment as provided herein; (iv) “Trading Day” means any day on which the Common Stock is traded (or available for trading) on its principal trading market; (v) “Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the trading platforms of OTC Markets Inc., or any successors to any of the foregoing; and (vi) “Affiliate” means any person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, a person, as such terms are used and construed in Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities Act”).
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1. DURATION AND EXERCISE OF WARRANTS
(a) Exercise Period. The Holder may exercise this Warrant, in whole or in part, on any Business Day on or before 5:00 P.M., Eastern Time, on the Expiration Date, at which time this Warrant shall become void and of no value.
(b) Exercise Procedures.
(i) While this Warrant remains outstanding and exercisable in accordance with Section 1(a), the Holder may exercise this Warrant in whole or in part at any time and from time to time by:
(A) delivery to the Company of a duly executed copy of the Notice of Exercise (the “Notice of Exercise”) attached as Exhibit A;
(B) surrender of this Warrant to the Secretary of the Company at its principal offices or at such other office or agency as the Company may specify in writing to the Holder; and
(C) payment of the then-applicable Exercise Price per share multiplied by the number of Warrant Shares being purchased upon exercise of the Warrant (such amount, the “Aggregate Exercise Price”) made in the form of cash, or by certified check, bank draft or money order payable in lawful money of the United States of America.
(ii) Upon the exercise of this Warrant in compliance with the provisions of this Section 1(b), the Company shall promptly issue and cause to be delivered to the Holder a certificate for the Warrant Shares purchased by the Holder. Each exercise of this Warrant shall be effective immediately prior to the close of business on the date (the “Date of Exercise”) that the conditions set forth in Section 1(b) have been satisfied. On the first Business Day following the date on which the Company has received each of the Notice of Exercise and the Aggregate Exercise Price (the “Exercise Delivery Documents”), the Company shall transmit an acknowledgment of receipt of the Exercise Delivery Documents to the Company’s transfer agent (the “Transfer Agent”). On or before the third Business Day following the date on which the Company has received all of the Exercise Delivery Documents (the “Share Delivery Date”), the Company shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by overnight courier to the address as specified in the Notice of Exercise, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares.
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(c) Partial Exercise. This Warrant shall be exercisable, either in its entirety or, from time to time, for part only of the number of Warrant Shares referenced by this Warrant. If this Warrant is submitted in connection with any exercise pursuant to Section 1 and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the actual number of Warrant Shares being acquired upon such an exercise, then the Company shall as soon as practicable and in no event later than five (5) Business Days after any exercise and at its own expense, issue a new Warrant of like tenor representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.
(d) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 17.
2. | ISSUANCE OF WARRANT SHARES |
(a) The Company covenants that all Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be (i) duly authorized, fully paid and non-assessable, and (ii) free from all liens, charges and security interests, with the exception of claims arising through the acts or omissions of any Holder and except as arising from applicable Federal and state securities laws.
(b) The Company shall register this Warrant upon records to be maintained by the Company for that purpose in the name of the record holder of such Warrant from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner thereof for the purpose of any exercise thereof, any distribution to the Holder thereof and for all other purposes.
(c) The Company will not, by amendment of its certificate of incorporation, by-laws or through any reorganization, transfer of assets, consolidation, merger, 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 to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all action necessary or appropriate in order to protect the rights of the Holder to exercise this Warrant, or against impairment of such rights.
3. ADJUSTMENTS OF EXERCISE PRICE, NUMBER AND TYPE OF WARRANT SHARES
(a) The Exercise Price and the number of shares purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events described in this Section 3; provided, that notwithstanding the provisions of this Section 3, the Company shall not be required to make any adjustment if and to the extent that such adjustment would require the Company to issue a number of shares of Common Stock in excess of its authorized but unissued shares of Common Stock, less all amounts of Common Stock that have been reserved for issue upon the conversion of all outstanding securities convertible into shares of Common Stock and the exercise of all outstanding options, warrants and other rights exercisable for shares of Common Stock. If the Company does not have the requisite number of authorized but unissued shares of Common Stock to make any adjustment, the Company shall use its commercially reasonable efforts to obtain the necessary stockholder consent to increase the authorized number of shares of Common Stock to make such an adjustment pursuant to this Section 3.
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(i) Subdivision or Combination of Stock. In case the Company shall at any time subdivide (whether by way of stock dividend, stock split or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of Warrant Shares shall be proportionately increased, and conversely, in case the outstanding shares of Common Stock of the Company shall be combined (whether by way of stock combination, reverse stock split or otherwise) into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares shall be proportionately decreased. The Exercise Price and the Warrant Shares, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described in this Section 3(a)(i).
(ii) Dividends in Stock, Property, Reclassification. If at any time, or from time to time, all of the holders of Common Stock (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received or become entitled to receive, without payment therefore:
(A) any shares of stock or other securities that are at any time directly or indirectly convertible into or exchangeable for Common Stock, or any rights or options to subscribe for, purchase or otherwise acquire any of the foregoing by way of dividend or other distribution, or
(B) additional stock or other securities or property (including cash) by way of spin-off, split-up, reclassification, combination of shares or similar corporate rearrangement (other than shares of Common Stock issued as a stock split or adjustments in respect of which shall be covered by the terms of Section 3(a)(i) above), then and in each such case, the Exercise Price and the number of Warrant Shares to be obtained upon exercise of this Warrant shall be adjusted proportionately, and the Holder hereof shall, upon the exercise of this Warrant, be entitled to receive, in addition to the number of shares of Common Stock receivable thereupon, and without payment of any additional consideration therefor, the amount of stock and other securities and property (including cash in the cases referred to above) that such Holder would hold on the date of such exercise had such Holder been the holder of record of such Common Stock as of the date on which holders of Common Stock received or became entitled to receive such shares or all other additional stock and other securities and property. The Exercise Price and the Warrant Shares, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described in this Section 3(a)(ii).
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(iii) Reorganization, Reclassification, Consolidation, Merger or Sale. If any recapitalization, reclassification or reorganization of the capital stock of the Company, or any consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets or other transaction shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, or other assets or property (an “Organic Change”), then, as a condition of such Organic Change, lawful and adequate provisions shall be made by the Company whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the shares of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented by this Warrant) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such stock immediately theretofore purchasable and receivable assuming the full exercise of the rights represented by this Warrant. In the event of any Organic Change, appropriate provision shall be made by the Company with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the number of shares purchasable and receivable upon the exercise of this Warrant and registration rights) shall thereafter be applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. The Company will not affect any such consolidation, merger or sale unless, prior to the consummation thereof, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written instrument the obligation to deliver to such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. If there is an Organic Change, then the Company shall cause to be mailed to the Holder at its last address as it shall appear on the books and records of the Company, at least 10 calendar days before the effective date of the Organic Change, a notice stating the date on which such Organic Change is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares for securities, cash, or other property delivered upon such Organic Change; provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this Warrant during the 10-day period commencing on the date of such notice to the effective date of the event triggering such notice. In any event, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall be deemed to assume such obligation to deliver to such Holder such shares of stock, securities or assets even in the absence of a written instrument assuming such obligation to the extent such assumption occurs by operation of law.
(b) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment pursuant to this Section 3, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall promptly furnish or cause to be furnished to such Holder a like certificate setting forth: (i) such adjustments and readjustments; and (ii) the number of shares and the amount, if any, of other property which at the time would be received upon the exercise of the Warrant.
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(c) Certain Events. If any event occurs as to which the other provisions of this Section 3 are not strictly applicable but the lack of any adjustment would not fairly protect the purchase rights of the Holder under this Warrant in accordance with the basic intent and principles of such provisions, or if strictly applicable would not fairly protect the purchase rights of the Holder under this Warrant in accordance with the basic intent and principles of such provisions, then the Company’s Board of Directors will, in good faith, make an appropriate adjustment to protect the rights of the Holder; provided, that no such adjustment pursuant to this Section 3(c) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 3.
4. INTENTIONALLY OMITTED.
5. | TRANSFERS AND EXCHANGES OF WARRANT AND WARRANT SHARES |
(a) Registration of Transfers and Exchanges. Subject to Section 5(c), upon the Holder’s surrender of this Warrant, with a duly executed copy of the Form of Assignment attached as Exhibit B, to the Secretary of the Company at its principal offices or at such other office or agency as the Company may specify in writing to the Holder, the Company shall register the transfer of all or any portion of this Warrant. Upon such registration of transfer, the Company shall issue a new Warrant, in substantially the form of this Warrant, evidencing the acquisition rights transferred to the transferee and a new Warrant, in similar form, evidencing the remaining acquisition rights not transferred, to the Holder requesting the transfer.
(b) Warrant Exchangeable for Different Denominations. The Holder may exchange this Warrant for a new Warrant or Warrants, in substantially the form of this Warrant, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder, each of such new Warrants to be dated the date of such exchange and to represent the right to purchase such number of Warrant Shares as shall be designated by the Holder. The Holder shall surrender this Warrant with duly executed instructions regarding such re-certification of this Warrant to the Secretary of the Company at its principal offices or at such other office or agency as the Company may specify in writing to the Holder.
(c) Restrictions on Transfers. This Warrant may not be transferred at any time without (i) registration under the Securities Act or (ii) an exemption from such registration and a written opinion of legal counsel addressed to the Company that the proposed transfer of the Warrant may be effected without registration under the Securities Act, which opinion will be in form and from counsel reasonably satisfactory to the Company.
(d) Permitted Transfers and Assignments. Notwithstanding any provision to the contrary in this Section 5, the Holder may transfer, with or without consideration, this Warrant or any of the Warrant Shares (or a portion thereof) to the Holder’s Affiliates (as such term is defined under Rule 144 of the Securities Act) without obtaining the opinion from counsel that may be required by Section 5(c)(ii), provided, that the Holder delivers to the Company and its counsel certification, documentation, and other assurances reasonably required by the Company’s counsel to enable the Company’s counsel to render an opinion to the Company’s Transfer Agent that such transfer does not violate applicable securities laws.
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6. MUTILATED OR MISSING WARRANT CERTIFICATE
If this Warrant is mutilated, lost, stolen or destroyed, upon request by the Holder, the Company will, at its expense, issue, in exchange for and upon cancellation of the mutilated Warrant, or in substitution for the lost, stolen or destroyed Warrant, a new Warrant, in substantially the form of this Warrant, representing the right to acquire the equivalent number of Warrant Shares; provided, that, as a prerequisite to the issuance of a substitute Warrant, the Company may require satisfactory evidence of loss, theft or destruction as well as an indemnity from the Holder of a lost, stolen or destroyed Warrant.
7. PAYMENT OF TAXES
The Company will pay all transfer and stock issuance taxes attributable to the preparation, issuance and delivery of this Warrant and the Warrant Shares (and replacement Warrants) including, without limitation, all documentary and stamp taxes; provided, however, that the Company shall not be required to pay any tax in respect of the transfer of this Warrant, or the issuance or delivery of certificates for Warrant Shares or other securities in respect of the Warrant Shares to any person or entity other than to the Holder.
8. FRACTIONAL WARRANT SHARES
No fractional Warrant Shares shall be issued upon exercise of this Warrant. The Company, in lieu of issuing any fractional Warrant Share, shall round up the number of Warrant Shares issuable to nearest whole share.
9. NO STOCK RIGHTS AND LEGEND
No holder of this Warrant, as such, shall be entitled to vote or be deemed the holder of any other securities of the Company that may at any time be issuable on the exercise hereof, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, the rights of a stockholder of the Company or the right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or give or withhold consent to any corporate action or to receive notice of meetings or other actions affecting stockholders (except as provided herein), or to receive dividends or subscription rights or otherwise (except as provide herein).
Each certificate for Warrant Shares initially issued upon the exercise of this Warrant, and each certificate for Warrant Shares issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with a legend in substantially the following form:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS AND THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.”
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10. INTENTIONALLY OMITTED.
11. NOTICES
All notices, consents, waivers, and other communications under this Warrant must be in writing and will be deemed given to a party when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, if to the registered Holder hereof; or (d) seven days after the placement of the notice into the mails (first class postage prepaid), to the Holder at the address, facsimile number, or e-mail address furnished by the registered Holder to the Company from time to time, or if to the Company, to it at 19925 Stevens Creek Blvd., Suite 100, Attn: Laxminarayan Bhat, Reviva Pharmaceuticals, Inc. (or to such other address, facsimile number, or e-mail address as the Holder or the Company as a party may designate by notice the other party).
12. SEVERABILITY
If a court of competent jurisdiction holds any provision of this Warrant invalid or unenforceable, the other provisions of this Warrant will remain in full force and effect. Any provision of this Warrant held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.
13. BINDING EFFECT
This Warrant shall be binding upon and inure to the sole and exclusive benefit of the Company, its successors and assigns, the registered Holder or Holders from time to time of this Warrant and the Warrant Shares.
14. SURVIVAL OF RIGHTS AND DUTIES
This Warrant shall terminate and be of no further force and effect on the earlier of 5:00 P.M., Eastern Time, on the Expiration Date or the date on which this Warrant has been exercised in full.
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15. GOVERNING LAW
This Warrant will be governed by and construed under the laws of the State of New York without regard to conflicts of laws principles that would require the application of any other law.
16. RELEASE
Holder, on behalf of Holder and Holder’s legal representatives, heirs, beneficiaries, successors and assigns, does hereby knowingly, unconditionally, completely and voluntarily forever release and discharge the Company, its officers, directors, stockholders, independent contractors, agents, employees, representatives, trustees, administrators, successors and assigns and any of their past, present and future affiliates, subsidiaries, members, managers, officers, directors, employees, agents, attorneys, controlling persons and representatives and the successors and assigns of all of the foregoing (each, a “Releasee” and collectively, the “Releasees”), jointly and severally, from any and all manner of action and actions, cause and causes of actions, rights, liens, agreements, contracts, covenants, obligations, suits, claims, debts, dues, sums of monies, costs, expenses, attorneys’ fees, judgments, orders and liabilities, accounts, covenants, controversies, promises, damages (collectively, “Claims”), of whatever kind and nature, in law or equity or otherwise, whether now known or unknown, arising out of or related in any way to the __________________, the initial Exercise Price and form of this Warrant, or any other equity or convertible security interests of the Company promised to Holder pursuant _____________________ (the “Bases”). This release (the “Release”) encompasses all Claims against the Releasees, including those of which Holder is not aware and those not mentioned herein. This Release shall be irrevocable and may not be changed orally. Holder hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Releasee that Holder will never, directly or indirectly, commence, aid in any way, prosecute or cause to be commenced or prosecuted any action, suit or other legal or administrative proceeding (at law, in equity, in any regulatory proceeding or otherwise) against any Releasee arising out of or relating, directly or indirectly, to the Bases or involving any Claim covered by this Release.
17. DISPUTE RESOLUTION
In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within two Business Days of receipt of the Notice of Exercise giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two Business Days, submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.
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18. NOTICES OF RECORD DATE
Upon (a) any establishment by the Company of a record date of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or right or option to acquire securities of the Company, or any other right, or (b) any capital reorganization, reclassification, recapitalization, merger or consolidation of the Company with or into any other corporation, any transfer of all or substantially all the assets of the Company, or any voluntary or involuntary dissolution, liquidation or winding up of the Company, or the sale, in a single transaction, of a majority of the Company’s voting stock (whether newly issued, or from treasury, or previously issued and then outstanding, or any combination thereof), the Company shall mail to the Holder at least ten (10) Business Days, or such longer period as may be required by law, prior to the record date specified therein, a notice specifying (i) the date established as the record date for the purpose of such dividend, distribution, option or right and a description of such dividend, option or right, (ii) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up, or sale is expected to become effective and (iii) the date, if any, fixed as to when the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, transfer, consolation, merger, dissolution, liquidation or winding up.
19. RESERVATION OF SHARES
The Company shall reserve and keep available out of its authorized but unissued shares of Common Stock for issuance upon the exercise of this Warrant, free from pre-emptive rights, such number of shares of Common Stock for which this Warrant shall from time to time be exercisable. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation. Without limiting the generality of the foregoing, the Company covenants that it will use commercially reasonable efforts to take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and use commercially reasonable efforts to obtain all such authorizations, exemptions or consents, including but not limited to consents from the Company’s stockholders or Board of Directors or any public regulatory body, as may be necessary to enable the Company to perform its obligations under this Warrant.
20. NO THIRD PARTY RIGHTS
This Warrant is not intended, and will not be construed, to create any rights in any parties other than the Company and the Holder, and no person or entity may assert any rights as third-party beneficiary hereunder.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company and the Holder have executed this Warrant effective as of the date first written above.
REVIVA PHARMACEUTICALS, INC. | ||
By: | ||
Name: | Laxminarayan Bhat, Ph.D. | |
Title: | President and Chief Executive Officer | |
HOLDER | ||
By: | ||
Name: | ||
Title: |
[Signature Page to Warrant]
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EXHIBIT A
NOTICE OF EXERCISE
(To be executed by the Holder of Warrant if such Holder desires to exercise Warrant)
To Reviva Pharmaceuticals, Inc.:
The undersigned hereby irrevocably elects to exercise this Warrant and to purchase thereunder, ___________________ full shares of Reviva Pharmaceuticals, Inc. common stock issuable upon exercise of the Warrant and delivery of:
$_________ (in cash as provided for in the foregoing Warrant) and any applicable taxes payable by the undersigned pursuant to such Warrant.
The undersigned requests that certificates for such shares be issued in the name of:
_______________________
(Please print name, address and social
security or federal employer
identification number (if applicable))
_______________________
_______________________
The undersigned hereby affirms that the undersigned is an accredited investor as defined under Rule 501 of Regulation D of the Securities Act of 1933. If the Holder cannot make the foregoing affirmation because it is factually incorrect, it shall be a condition to the exercise of the Warrant that the Company receive such other representations as the Company considers necessary, acting reasonably, to assure the Company that the issuance of securities upon exercise of this Warrant shall not violate any United States or other applicable securities laws.
If the shares issuable upon this exercise of the Warrant are not all of the Warrant Shares which the Holder is entitled to acquire upon the exercise of the Warrant, the undersigned requests that a new Warrant evidencing the rights not so exercised be issued in the name of and delivered to:
________________________
(Please print name, address and social security or federal employer
identification number (if applicable))
_______________________
_______________________
Name of Holder (print): |
(Signature): |
(By:) |
(Title:) |
Dated: |
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EXHIBIT B
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, ___________________________________ hereby sells, assigns and transfers to each assignee set forth below all of the rights of the undersigned under the Warrant (as defined in and evidenced by the attached Warrant) to acquire the number of Warrant Shares set opposite the name of such assignee below and in and to the foregoing Warrant with respect to said acquisition rights and the shares issuable upon exercise of the Warrant:
Name of Assignee | Address | Number of Shares |
If the total of the Warrant Shares are not all of the Warrant Shares evidenced by the foregoing Warrant, the undersigned requests that a new Warrant evidencing the right to acquire the Warrant Shares not so assigned be issued in the name of and delivered to the undersigned.
Name of Holder (print): |
(Signature): |
(By:) |
(Title:) |
Dated: |
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Exhibit 10.1
Employment Agreement
This Employment Agreement (the “Agreement”) is made and entered into as of December 14, 2020, by and between Laxminarayan Bhat, Ph.D. (the “Executive”) and Reviva Pharmaceuticals Holdings, Inc. (the “Company”).
WHEREAS, the Company desires to employ the Executive on the terms and conditions set forth herein; and
WHEREAS, the Executive desires to be employed by the Company on such terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations set forth herein, the parties agree as follows:
1. Term of Employment. The Executive’s employment hereunder shall be effective as of July 20, 2020 (the “Effective Date”) and shall continue thereafter unless terminated earlier pursuant to this Agreement. The period during which the Executive is employed by the Company hereunder is hereinafter referred to as the “Employment Term.”
2. Position and Duties.
2.1 Position. During the Employment Term, the Executive shall serve as the Chief Executive Officer of the Company and shall report to the Board of Directors (the “Board”). In such position, the Executive shall have such duties, authority, and responsibility as are consistent with the Executive’s position.
2.2 Duties. During the Employment Term, the Executive shall devote substantially all of his business time and attention to the performance of the Executive's duties hereunder and will not engage in any other business, profession, or occupation for compensation or otherwise which would conflict or interfere with the performance of such services either directly or indirectly without the prior written consent of the Board. Notwithstanding the foregoing, the Executive will be permitted to serve on up to an aggregate of two (2) corporate boards or advisory boards, provided that such activities do not, individually or in the aggregate, conflict with the performance of the Executive’s duties under this Agreement and do not cause the Executive to violate the commitment above to devote substantially all of his business time and attention to his duties hereunder. Nothing herein shall prohibit Executive from purchasing or owning less than five percent (5%) of the publicly traded securities of any corporation; provided that, such ownership represents a passive investment and that the Executive is not a controlling person of, or a member of a group that controls, such corporation; provided further that, the activities described do not interfere with the performance of the Executive's duties and responsibilities to the Company as provided hereunder, including, but not limited to, the obligations set forth in Section 2 hereof.
3. Place of Performance. The principal place of Executive's employment shall be the Company’s principal executive office which will be located in Cupertino, California; provided that, the Executive may be required to travel on Company business during the Employment Term.
4. Compensation.
4.1 Base Salary. The Company shall pay the Executive an annual rate of base salary of $400,000 (Four Hundred Thousand Dollars) in periodic installments in accordance with the Company's customary payroll practices and applicable wage payment laws, but no less frequently than monthly. The Executive’s base salary may not be decreased during the Employment Term other than as part of an across-the-board salary reduction that applies in the same manner to all senior executives. The Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as “Base Salary.”
4.2 Annual Bonus. The Executive will be eligible for an incentive bonus for each fiscal year of the Company, based on objective or subjective criteria established and approved by the Compensation Committee of the Board (the “Committee”). The Executive will have an opportunity to provide input to the Board and/or Committee with regard to the selection of such criteria, which will be established within a reasonable time period following the first day of the applicable bonus period. The Executive’s target bonus (“Target Bonus”) will be equal to up to fifty percent (50%) of Base Salary as in effect during each fiscal year assuming all milestones set by the Committee are met as determined where subjective in the sole discretion of the Board. Any consent, approval, determination or decision of the Board required in this Agreement shall be a majority of the Board (excluding the Executive where the matter involves the Executive.)
4.3 Equity Awards. During the Employment Term, the Executive shall be eligible to participate in the Company’s equity incentive plan(s) or any successor plan, subject to the terms of the plan(s), as determined by the Board.
a. | The Company Stock Option Program will provide for stock options subject to vesting in an amount equal to 5% (five percent) of the outstanding common stock of the Company to be divided among the participants in the program. |
b. | In its sole discretion, the Company will determine in its sole discretion the number of shares of Company stock on which Executive will be granted an option to purchase shares and the terms of such option grant. |
c. | Any option the Company chooses to grant will vest at the rate of one-twelfth (1/12th) every three months after the option is awards over a three-year period and will be subject to an option plan to be adopted by the Company and to the terms of an award agreement. The Company shall have complete discretion to set the terms of any option plan and any option award agreement. |
4.4 Fringe Benefits and Perquisites. During the Employment Term, the Executive shall be entitled to fringe benefits and perquisites consistent with the practices of the Company, and to the extent the Company provides similar benefits or perquisites (or both) to similarly situated executives of the Company.
4.5 Employee Benefits. During the Employment Term, the Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, “Employee Benefit Plans”), on a basis which is no less favorable than is provided to other senior executives of the Company consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plan and applicable law.
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4.6 Vacation; Paid Time-Off. During the Employment Term, the Executive shall be entitled to twenty (20) paid vacation days per calendar year (prorated for partial years) in accordance with the Company's vacation policies, as in effect from time to time. The Executive shall receive other paid time-off for holidays and sick leave in accordance with the Company's policies for executive officers as such policies may exist from time to time.
4.7 Business Expenses. The Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment, and travel expenses incurred by the Executive in connection with the performance of the Executive's duties hereunder in accordance with the Company's expense reimbursement policies and procedures.
4.8 Indemnification.
(a) In the event that the Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), other than any Proceeding initiated by the Executive or the Company related to any contest or dispute between the Executive and the Company or any of its affiliates with respect to this Agreement or the Executive’s employment hereunder, by reason of the fact that the Executive is or was a director or officer of the Company, or any affiliate of the Company, or is or was serving at the request of the Company as a director, officer, member, employee, or agent of another corporation or a partnership, joint venture, trust, or other enterprise, the Executive shall be indemnified and held harmless by the Company to the maximum extent permitted under applicable law and the Company’s bylaws from and against any liabilities, costs, claims, and expenses, including all costs and expenses incurred in defense of any Proceeding (including attorneys' fees) other than the Executive’s willful misconduct. Costs and expenses incurred by the Executive in defense of such Proceeding (including attorneys’ fees) shall be paid by the Company in advance of the final disposition of such litigation upon receipt by the Company of: (i) a written request for payment; (ii) appropriate documentation evidencing the incurrence, amount, and nature of the costs and expenses for which payment is being sought; and (iii) an undertaking adequate under applicable law made by or on behalf of the Executive to repay the amounts so paid if it shall ultimately be determined that the Executive is not entitled to be indemnified by the Company under this Agreement.
(b) During the Employment Term and for a period of six (6) years thereafter, the Company or any successor to the Company shall purchase and maintain, at its own expense, directors' and officers' liability insurance providing coverage to the Executive on terms that are no less favorable than the coverage provided to other directors and similarly situated executives of the Company.
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5. Termination of Employment. Upon termination of the Executive’s employment during the Employment Term, the Executive shall be entitled to the compensation and benefits described in this Section 5 and shall have no further rights to any compensation or any other benefits from the Company or any of its affiliates.
5.1 For Cause or Without Good Reason.
(a) The Executive’s employment hereunder may be terminated by the Company for Cause, or by the Executive without Good Reason. If the Executive's employment is terminated by the Company for Cause or by the Executive without Good Reason, the Executive shall be entitled to receive:
(i) any accrued but unpaid Base Salary and accrued but unused vacation which shall be paid on the Termination Date (as defined below);
(ii) reimbursement for unreimbursed business expenses properly incurred by the Executive, which shall be subject to and paid in accordance with the Company's expense reimbursement policy; and
(iii) such employee benefits (including equity compensation if vested), if any, to which the Executive may be entitled under the Company’s employee benefit plans as of the Termination Date; provided that, in no event shall the Executive be entitled to any payments in the nature of severance or termination payments except as specifically provided herein.
Items 5.1(a)(i) through 5.1(a)(iii) are referred to herein collectively as the “Accrued Amounts.”
(b) For purposes of this Agreement, “Cause” shall mean, as determined by the Board in good faith:
(i) the Executive’s willful failure to perform his duties (other than any such failure resulting from incapacity due to physical or mental illness);
(ii) the Executive’s willful failure to comply with any valid and legal directive of the Board;
(iii) the Executive’s willful engagement in dishonesty, illegal conduct, or gross misconduct, which is, in each case, materially injurious to the Company or its affiliates;
(iv) the Executive’s conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes embezzlement, misappropriation, or fraud, or a misdemeanor involving moral turpitude;
(v) the Executive’s violation of a material policy of the Company;
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(vi) the Executive’s willful unauthorized disclosure of Confidential Information (as defined below);
(vii) the Executive’s material breach of any material obligation under this Agreement.
(c) For purposes of this provision, no act or failure to act on the part of the Executive shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company.
(d) Except for a failure, breach, or refusal which, by its nature, cannot reasonably be expected to be cured, the Executive shall have fourteen (14) calendar days from the delivery of written notice by the Company within which to cure any acts constituting Cause; provided however, that, if the Company reasonably expects irreparable injury from a delay of fourteen (14) calendar days, the Company may give the Executive notice of such shorter period within which to cure as is reasonable under the circumstances, which may include the termination of the Executive's employment without notice and with immediate effect. The Company may place the Executive on paid leave for up to thirty (30) days while it is determining whether there is a basis to terminate the Executive’s employment for Cause. Any such action by the Company will not constitute Good Reason.
(e) For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following, in each case during the Employment Term without the Executive's written consent:
(i) a material reduction in the Executive’s Base Salary or Target Bonus opportunity, provided it is not Good Reason as to the Target Bonus opportunity to the extent the Committee annually or otherwise revises the milestones needed to be met for a Target Bonus opportunity, so long as such revisions do not apply to a Target Bonus opportunity for the current fiscal year;
(ii) a relocation of the Executive’s principal place of employment by more than thirty (30) miles;
(iii) any material breach by the Company of any material provision of this Agreement;
(iv) the Company’s failure to obtain an agreement from any successor to the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no succession had taken place, except where such assumption occurs by operation of law;
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(v) the Company’s failure to nominate the Executive for election to the Board and to use its best efforts to have him elected and re-elected as a director;
(vi) a material, adverse change in the Executive's title, authority, duties, or responsibilities (other than temporarily while the Executive is physically or mentally incapacitated or as required by applicable law; and
(vii) a “Change in Control” as defined below herein.
(f) The Executive cannot terminate his employment for Good Reason unless he has provided written notice to the Company of the existence of the circumstances providing grounds for termination for Good Reason within thirty (30) days of the initial existence of such grounds and the Company has had at least thirty (30) days from the date on which such notice is provided to cure such circumstances. If the Executive does not terminate his employment for Good Reason within ninety (90) days after the first occurrence of the applicable grounds, then the Executive will be deemed to have waived his right to terminate for Good Reason with respect to such grounds; provided, however, that such period shall be extended to six (6) months after the first occurrence of applicable grounds for Good Reason following a “Change in Control.”
5.2 Without Cause or for Good Reason. The Employment Term and the Executive’s employment hereunder may be terminated by the Executive for Good Reason or by the Company without Cause. In the event of such termination, the Executive shall be entitled to receive the Accrued Amounts and subject to the Executive’s execution of a release of claims in favor of the Company, its affiliates and their respective officers and directors in a form provided by the Company and currently expected to be substantially in the form annexed hereto as Exhibit “A” (the “Release”) and such Release becoming effective within thirty (30) days following the Termination Date (such 30-day period, the “Release Execution Period”), the Executive shall be entitled to receive the following:
(a) Eighteen (18) months of the Executive’s Base Salary plus one and one-half times annual Target Bonus payable in equal installment in accordance with the Company's normal payroll practices, but no less frequently than monthly, which shall begin within 14 days after the end of the Release Execution Period; provided that, the first installment payment shall include all amounts that would otherwise have been paid to the Executive during the period beginning on the Termination Date and ending on the first payment date if no delay had been imposed;
(b) Executive shall receive twelve (12) months of service credit under all outstanding unvested equity incentive awards and cash incentive payments granted to the Executive during the Employment Term based on actual performance; provided that, any delays in the settlement or payment of such awards that are set forth in the applicable award agreement and that are required under Section 409A of the Code (“Section 409A”) shall remain in effect; and
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(c) If the Executive timely and properly elects health continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), the Company shall reimburse the Executive for the monthly COBRA premium paid by the Executive for himself and his dependents. The Executive shall be eligible to receive such reimbursement until the earliest of: (i) the eighteen-month anniversary of the Termination Date; (ii) the date the Executive is no longer eligible to receive COBRA continuation coverage; and (iii) the date on which the Executive receives/becomes eligible to receive substantially similar coverage from another employer or other source.
(d) In the event Executive’s employment is terminated without Cause or Executive resigns for good reason after the third anniversary of the Effective Date: (i) Executive’s payments under Section 5.2(a) shall be six (6) months of base salary and one-half of Executive’s annual Target Bonus amount; and (ii) under Section 5.2(b), Executive shall receive six (6) months of service credit under all outstanding equity incentive awards and cash payments referred to in Section 5.2(b).
5.3 Death or Disability.
(a) The Executive's employment hereunder shall terminate automatically upon the Executive's death during the Employment Term, and the Company may terminate the Executive's employment on account of the Executive's Disability.
(b) If the Executive's employment is terminated during the Employment Term on account of the Executive’s death or Disability, the Executive (or the Executive's estate and/or beneficiaries, as the case may be) shall be entitled to receive the following:
(i) the Accrued Amounts; and
(ii) a lump sum payment equal to eighteen (18) months’ Base Salary and Target Bonus.
(c) Notwithstanding any other provision contained herein, all payments made in connection with the Executive’s Disability shall be provided in a manner which is consistent with federal and state law.
(d) For purposes of this Agreement, “Disability” shall mean the Executive's inability, due to physical or mental incapacity, to perform the essential functions of his job, with or without reasonable accommodation, for one hundred eighty (180) days out of any three hundred sixty-five (365) day period; provided however, in the event that the Company temporarily replaces the Executive, or transfers the Executive's duties or responsibilities to another individual on account of the Executive's inability to perform such duties due to a mental or physical incapacity which is, or is reasonably expected to become, a Disability, then the Executive's employment shall not be deemed terminated by the Company and the Executive shall not be able to resign with Good Reason as a result thereof. Any question as to the existence of the Executive's Disability as to which the Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to the Executive and the Company. If the Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and the Executive shall be final and conclusive for all purposes of this Agreement. Any period for vesting shall be tolled and not included during a Disability period.
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5.4 Change in Control Termination.
(a) Notwithstanding any other provision contained herein, in the event of a change in control, if the Executive's employment hereunder is terminated by the Executive for Good Reason, or by the Company without Cause (other than on account of the Executive's death or Disability), in each case within twelve (12) months following a Change in Control, the Executive shall be entitled to receive the Accrued Amounts and subject to the Executive’s execution of a Release as described in Section 5.2 of this Agreement, the Executive shall be entitled to receive the following:
(i) a lump sum payment equal to 1.5 times the Executive’s Base Salary and Target Bonus for the year in which the Termination Date occurs; and
(b) Notwithstanding the terms of any equity or cash incentive plans or any applicable award agreements:
(i) all outstanding unvested equity incentive awards and cash incentive payments granted to the Executive during the Employment Term shall become fully vested and exercisable for the remainder of their full term and the restrictions thereon shall lapse and become payable at the greater of actual performance or target; provided that, any delays in the settlement or payment of such awards that are set forth in the applicable award agreement and that are required under Section 409A shall remain in effect; and
(c) the COBRA payments provided for in Section 5.2(b) of this Agreement;
(d) For purposes of this Agreement, “Change in Control” shall mean the occurrence of any of the following after the Effective Date:
(i) one person (or more than one person acting as a group) acquires ownership of stock of the Company that, together with the stock held by such person or group, constitutes more than fifty percent (50%) of the t total voting power of the stock of such corporation; provided that, a Change in Control shall not occur if any person (or more than one person acting as a group) owns more than fifty percent (50%) of the total voting power of the Company's stock and acquires additional stock;
(ii) one person (or more than one person acting as a group) acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition) ownership of the Company’s stock possessing over thirty percent (30%) of the total voting power of the stock of such corporation;
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(iii) a majority of the members of the Board are replaced during any twelve-month period by directors whose appointment or election is not endorsed by a majority of the Board before the date of appointment or election; or
(iv) the sale of all or substantially all of the Company's assets.
(v) Notwithstanding the foregoing, a Change in Control shall not occur unless such transaction constitutes a change in the ownership of the Company, a change in the effective control of the Company, or a change in the ownership of a substantial portion of the Company's assets under Section 409A.
5.5 Notice of Termination. Any termination of the Executive’s employment hereunder by the Company or by the Executive during the Employment Term (other than termination pursuant to Section 5.3(a) on account of the Executive’s death) shall be communicated by written notice of termination (“Notice of Termination”) to the other party hereto in accordance with notice provisions of this Agreement. The Notice of Termination shall specify:
(a) The termination provision of this Agreement relied upon;
(b) To the extent applicable, the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated; and
(c) The applicable Termination Date.
5.6 Termination Date. The Executive’s “Termination Date” shall be:
(a) If the Executive’s employment hereunder terminates on account of the Executive's death, the date of the Executive's death;
(b) If the Executive’s employment hereunder is terminated on account of the Executive's Disability, the date that it is determined that the Executive has a Disability;
(c) If the Company terminates the Executive’s employment hereunder for Cause, the date the Notice of Termination is delivered to the Executive;
(d) If the Company terminates the Executive’s employment hereunder without Cause, the date specified in the Notice of Termination.
(e) If the Executive terminates his/her employment hereunder with or without Good Reason, the date specified in the Executive's Notice of Termination; and
(f) Notwithstanding anything contained herein, the Termination Date shall not occur until the date on which the Executive incurs a “separation from service” within the meaning of Section 409A.
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5.7 Mitigation. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and except as provided in Section 5.2(b), any amounts payable pursuant to this Section 5 shall not be reduced by compensation the Executive earns on account of employment with another employer.
5.8 Resignation of All Other Positions. Upon termination of the Executive’s employment hereunder for any reason, the Executive agrees to resign, effective on the Termination Date/shall be deemed to have resigned from all positions that the Executive holds as an officer or member of the Board (or a committee thereof) of the Company or any of its affiliates.
6. Cooperation. The parties agree that certain matters in which the Executive will be involved during the Employment Term may necessitate the Executive's cooperation in the future. Accordingly, following the termination of the Executive's employment for any reason, to the extent reasonably requested by the Board, the Executive shall cooperate with the Company in connection with matters arising out of the Executive's service to the Company; provided that, the Company shall make reasonable efforts to minimize disruption of the Executive's other activities. The Company shall reimburse the Executive for reasonable expenses incurred in connection with such cooperation and, to the extent that the Executive is required to spend substantial time on such matters, the Company shall compensate the Executive at an hourly rate based on the Executive's Base Salary on the Termination Date, with a four (4)-hour minimum daily amount.
7. Confidential Information. The Executive understands and acknowledges that during the Employment Term, he will have access to and learn about Confidential Information, as defined below.
7.1 Confidential Information Defined.
(a) Definition. For purposes of this Agreement, “Confidential Information” includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or indirectly to: business processes, practices, methods, policies, plans, publications, documents, research, operations, services, strategies, techniques, agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade secrets, computer programs, computer software, applications, operating systems, software design, web design, work-in-process, databases, manuals, records, articles, systems, material, sources of material, supplier information, vendor information, financial information, results, accounting information, accounting records, legal information, marketing information, advertising information, pricing information, credit information, design information, payroll information, staffing information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, graphics, drawings, sketches, market studies, sales information, revenue, costs, formulae, notes, communications, algorithms, product plans, designs, styles, models, ideas, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, customer lists, client information, client lists, manufacturing information, factory lists, distributor lists, and buyer lists of the Company Group or its businesses or any existing or prospective customer, supplier, investor or other associated third party, or of any other person or entity that has entrusted information to the Company Group in confidence. The term “Company Group” shall mean, for purposes of this Agreement, the Company and its parent companies, affiliates, subsidiaries, partners, and limited partners.
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i) | The Executive understands that the above list is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used. |
ii) | The Executive understands and agrees that Confidential Information includes information developed by him/her in the course of his/her employment by the Company as if the Company furnished the same Confidential Information to the Executive in the first instance. Confidential Information shall not include information that is generally available to and known by the public at the time of disclosure to the Executive; provided that, such knowledge of the public is through no direct or indirect fault of the Executive or person(s) acting on the Executive's behalf. |
(b) Company Creation and Use of Confidential Information.
The Executive understands and acknowledges that the Company has invested, and continues to invest, substantial time, money, and specialized knowledge into developing its resources, creating a customer base, generating customer and potential customer lists, training its employees, and improving its offerings in the field of real estate investment management. The Executive understands and acknowledges that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential Information provides the Company with a competitive advantage over others in the marketplace.
(c) Disclosure and Use Restrictions.
The Executive agrees and covenants: (i) to treat all Confidential Information as strictly confidential; (ii) not to directly or indirectly disclose, publish, communicate, or make available Confidential Information, or allow it to be disclosed, published, communicated, or made available, in whole or part, to any entity or person whatsoever (including other employees of the Company Group) not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company Group and, in any event, not to anyone outside of the direct employ of the Company Group except as required in the performance of the Executive's authorized employment duties to the Company or with the prior consent of a majority of the Board in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent); and (iii) not to access or use any Confidential Information, and not to copy any documents, records, files, media, or other resources containing any Confidential Information, or remove any such documents, records, files, media, or other resources from the premises or control of the Company Group, except as required in the performance of the Executive's authorized employment duties to the Company or with the prior consent of the Board. in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent). Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency, provided that the disclosure does not exceed the extent of disclosure required by such law, regulation, or order, provided that the Executive uses reasonable efforts to give the Company notice of its disclosure so that the Company at its own expense can seek to avoid or narrow the disclosure required.
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(d) Notice of Immunity Under the Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act of 2016 ("DTSA"). Notwithstanding any other provision of this Agreement:
(i) The Executive will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that:
(A) is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or
(B) is made in a complaint or other document filed under seal in a lawsuit or other proceeding.
(ii) If the Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Executive may disclose the Company's trade secrets to the Executive's attorney and use the trade secret information in the court proceeding if the Executive:
(A) files any document containing trade secrets under seal; and
(B) does not disclose trade secrets, except pursuant to court order.
8. Remedies. In the event of a breach or threatened breach by the Executive of Section 7, of this Agreement, the Executive hereby consents and agrees that the Company shall be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages, or other available forms of relief.
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9. Arbitration.
9.1 Any dispute, controversy or claim arising out of or relating to this Agreement, its enforcement, arbitrability or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of its provisions/Employee's employment with Employer, including any alleged violation of statute, common law or public policy shall be submitted to final and binding arbitration before The American Arbitration Association (“AAA”) to be held in Santa Clara County, California before a single arbitrator, in accordance with the then-current AAA Employment Arbitration Rules. By initialing below, Employee agrees to waive all rights to a jury trial. The arbitrator shall be selected by mutual agreement of the parties or, if the parties cannot agree, then by striking from a list of arbitrators supplied by AAA. The arbitrator shall issue a written opinion stating the essential findings and conclusions on which the arbitrator's award is based. Employer will pay the arbitrator's fees and arbitration expenses and any other costs unique to the arbitration hearing (recognizing that each side bears its own deposition, witness, expert and attorney's fees and other expenses to the same extent as if the matter were being heard in court). If, however, any party prevails on a statutory claim that affords the prevailing party attorneys’ fees and costs, then the arbitrator may award reasonable attorneys' fees and costs to the prevailing party. Any dispute as to who is a prevailing party and/or the reasonableness of any fee or costs shall be resolved by the arbitrator.
9.2 This Agreement to arbitrate is freely negotiated between Employee and Employer and is mutually entered into between the parties. Each party fully understands and agrees that they are giving up certain rights otherwise afforded to them by civil court actions, including but not limited to the right to a jury trial.
/s/ LB By initialing here, Executive acknowledges he has read this paragraph and agrees with the arbitration provision herein.
10. Proprietary Rights.
10.1 Work Product. The Executive acknowledges and agrees that all right, title, and interest in and to all writings, works of authorship, technology, inventions, discoveries, processes, techniques, methods, ideas, concepts, research, proposals, materials, and all other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived, or reduced to practice by the Executive individually or jointly with others during the period of his/her employment by the Company and relate in any way to the business or contemplated business, products, activities, research, or development of the Company or result from any work performed by the Executive for the Company (in each case, regardless of when or where prepared or whose equipment or other resources is used in preparing the same), all rights and claims related to the foregoing, and all printed, physical and electronic copies, and other tangible embodiments thereof (collectively, “Work Product”), as well as any and all rights in and to US and foreign (a) patents, patent disclosures and inventions (whether patentable or not), (b) trademarks, service marks, trade dress, trade names, logos, corporate names, and domain names, and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing, (c) copyrights and copyrightable works (including computer programs), mask works, and rights in data and databases, (d) trade secrets, know-how, and other confidential information, and (e) all other intellectual property rights, in each case whether registered or unregistered and including all registrations and applications for, and renewals and extensions of, such rights, all improvements thereto and all similar or equivalent rights or forms of protection in any part of the world (collectively, “Intellectual Property Rights”), shall be the sole and exclusive property of the Company. The assignment provisions in this Section 10 shall apply only to “Employer Inventions” as defined herein and shall not apply to any invention covered by Section 2870 of the California Labor Code, a copy of which is annexed hereto as Exhibit “B.” Employer Inventions shall mean any Invention that meets any one of the following criteria:
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(i) Relates, at the time of conception or reduction to practice of the Invention to: (A) the Employer's business, project or products, or to the manufacture or utilization thereof; or (B) the actual or demonstrably anticipated research or development of the Employer.
(ii) Results from any work performed directly or indirectly by the Employee for the Employer.
(iii) (Results, at least in part, from the Employee's use of the Employer's time, equipment, supplies, facilities or trade secret information.
(iv) Provided, however, that an Employer Invention shall not include any Invention which is developed entirely on the Employee's own time without using the Employer's equipment, supplies, facilities or trade secret information, and which is not related to the Employer's business (either actual or demonstrably anticipated), and which does not result from work performed for the Employer.
10.2 For purposes of this Agreement, Work Product includes, but is not limited to, Company information, including plans, publications, research, strategies, techniques, agreements, documents, contracts, terms of agreements, negotiations, know-how, computer programs, computer applications, software design, web design, work in process, databases, manuals, results, developments, reports, graphics, drawings, sketches, market studies, formulae, notes, communications, algorithms, product plans, product designs, styles, models, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, client information, customer lists, client lists, manufacturing information, marketing information, advertising information, and sales information.
10.3 Work Made for Hire; Assignment. The Executive acknowledges that, by reason of being employed by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is "work made for hire" as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, the Executive hereby irrevocably assigns to the Company, for no additional consideration, the Executive's entire right, title, and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim, and recover for all past, present, and future infringement, misappropriation, or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company's rights, title, or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company would have had in the absence of this Agreement.
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10.4 Further Assurances; Power of Attorney. During and after his/her employment, the Executive agrees to reasonably cooperate with the Company to (a) apply for, obtain, perfect, and transfer to the Company the Work Product as well as any and all Intellectual Property Rights in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, giving testimony and executing and delivering to the Company any and all applications, oaths, declarations, affidavits, waivers, assignments, and other documents and instruments as shall be requested by the Company. The Executive hereby irrevocably grants the Company power of attorney to execute and deliver any such documents on the Executive's behalf in his/her name and to do all other lawfully permitted acts to transfer the Work Product to the Company and further the transfer, prosecution, issuance, and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if the Executive does not promptly cooperate with the Company's request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be affected by the Executive's subsequent incapacity.
10.5 No License. The Executive understands that this Agreement does not, and shall not be construed to, grant the Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software, or other tools made available to him/her by the Company.
11. Security.
11.1 Security and Access. The Executive agrees and covenants (a) to comply with all Company security policies and procedures as in force from time to time including without limitation those regarding computer equipment, telephone systems, voicemail systems, facilities access, monitoring, key cards, access codes, Company Group intranet, internet, social media and instant messaging systems, computer systems, e-mail systems, computer networks, document storage systems, software, data security, encryption, firewalls, passwords and any and all other Company Group facilities, IT resources and communication technologies (“Facilities and Information Technology Resources”); (b) not to access or use any Facilities and Information Technology Resources except as authorized by the Company; and (iii) not to access or use any Facilities and Information Technology Resources in any manner after the termination of the Executive's employment by the Company, whether termination is voluntary or involuntary. The Executive agrees to notify the Company promptly in the event he/she learns of any violation of the foregoing by others, or of any other misappropriation or unauthorized access, use, reproduction, or reverse engineering of, or tampering with any Facilities and Information Technology Resources or other Company Group property or materials by others.
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11.2 Exit Obligations. Upon (a) voluntary or involuntary termination of the Executive's employment or (b) the Company's request at any time during the Executive's employment, the Executive shall (i) provide or return to the Company any and all Company Group property, including keys, key cards, access cards, identification cards, security devices, employer credit cards, network access devices, computers, cell phones, smartphones, PDAs, pagers, fax machines, equipment, speakers, webcams, manuals, reports, files, books, compilations, work product, e-mail messages, recordings, tapes, disks, thumb drives or other removable information storage devices, hard drives, negatives and data and all Company Group documents and materials belonging to the Company and stored in any fashion, including but not limited to those that constitute or contain any Confidential Information or Work Product, that are in the possession or control of the Executive, whether they were provided to the Executive by the Company Group or any of its business associates or created by the Executive in connection with his/her employment by the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in the Executive's possession or control, including those stored on any non-Company Group devices, networks, storage locations, and media in the Executive's possession or control.
12. Publicity. The Executive hereby irrevocably consents to any and all uses and displays, by the Company and its agents, representatives and licensees, of the Executive’s name, voice, likeness, image, appearance, and biographical information in, on or in connection with any pictures, photographs, audio and video recordings, digital images, websites, television programs and advertising, other advertising and publicity, sales and marketing brochures, books, magazines, other publications, CDs, DVDs, tapes, and all other printed and electronic forms and media throughout the world, at any time during the Employment Term for all legitimate commercial and business purposes of the Company (“Permitted Uses”) without further consent from or royalty, payment, or other compensation to the Executive during Executive’s Employment Term and for a period of five (5) years after Executive’s employment ends, for any reason. The Executive hereby forever waives and releases the Company and its directors, officers, employees, and agents from any and all claims, actions, damages, losses, costs, expenses, and liability of any kind, arising under any legal or equitable theory whatsoever at any time during, and the five-year period following, the Employment Term, arising directly or indirectly from the Company’s and its agents’, representatives’, and licensees’ exercise of their rights in connection with any Permitted Uses. Following the the fifth anniversary of the end of the Employment Term, any Permitted Uses will require the Executive’s prior approval, which may be given or withheld in the Executive’s sole discretion.
13. Governing Law. This Agreement, for all purposes, shall be construed in accordance with the laws of the State of California without regard to conflicts of law principles, except for the arbitration provisions which shall be governed solely by the Federal Arbitration Act, 9 U.S.C. §§ 1-4.
14. Entire Agreement. Unless specifically provided herein, this Agreement contains all of the understandings and representations between the Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter. The parties mutually agree that the Agreement can be specifically enforced in court and can be cited as evidence in legal proceedings alleging breach of the Agreement.
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15. Modification and Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by the Executive and by a majority of the Board of the Company or its designee. No waiver by either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the other party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either of the parties in exercising any right, power, or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege.
16. Severability.
16.1 Should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified, or if any portion of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth in this Agreement.
16.2 The parties further agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement, or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law.
16.3 The parties expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions had not been set forth herein.
17. Captions. Captions and headings of the sections and paragraphs of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any section or paragraph.
18. Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
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19. Section 409A.
19.1 General Compliance. This Agreement is intended to comply with Section 409A or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest, or other expenses that may be incurred by the Executive on account of noncompliance with Section 409A.
19.2 Specified Employees. Notwithstanding any other provision of this Agreement, if any payment or benefit provided to the Executive in connection with his/her termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and the Executive is determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the Termination Date or, if earlier, on the Executive's death (the “Specified Employee Payment Date”). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date and interest on such amounts calculated based on the applicable federal rate published by the Internal Revenue Service for the month in which the Executive’s separation from service occurs shall be paid to the Executive in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.
19.3 Reimbursements. To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following:
(a) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;
(b) any reimbursement of an eligible expense shall be paid to the Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and
(c) any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.
20. Successors and Assigns. This Agreement is personal to the Executive and shall not be assigned by the Executive. Any purported assignment by the Executive shall be null and void from the initial date of the purported assignment. The Company may assign this Agreement to any successor or assign (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company. This Agreement shall inure to the benefit of the Company and permitted successors and assigns.
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21. Notice. Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight carrier to the parties at the addresses set forth below (or such other addresses as specified by the parties by like notice):
If to the Company:
19925 Stevens Creek Blvd., Suite 100
Cupertino, CA 95014
Attn: Board of Directors
If to the Executive:
Address on the most recent Form W-4
On file with the Company
22. Representations of the Executive. The Executive represents and warrants to the Company that:
23.1 The Executive’s acceptance of employment with the Company and the performance of his/her duties hereunder will not conflict with or result in a violation of, a breach of, or a default under any contract, agreement, or understanding to which he/she is a party or is otherwise bound.
23.2 The Executive’s acceptance of employment with the Company and the performance of his/her duties hereunder will not violate any non-solicitation, non-competition, or other similar covenant or agreement of a prior employer.
23. Withholding. The Company shall have the right to withhold from any amount payable hereunder any Federal, state, and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.
24. Survival. Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.
25. Acknowledgement of Full Understanding. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE/SHE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF HIS/HER CHOICE BEFORE SIGNING THIS AGREEMENT.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
Reviva Pharmaceuticals Holdings, Inc. | |||
By | /s/ Narayan Prabhu | ||
Name: | Narayan Prabhu | ||
Title: | Chief Financial Officer | ||
/s/ Laxminarayan Bhat | |||
Laxminarayan Bhat, Ph.D., Executive |
[Signature Page to L. Bhat Employment Agreement]
EXHIBIT A
General Release and Covenant Not to Sue
TO ALL WHOM THESE PRESENTS SHALL COME OR MAY CONCERN, KNOW THAT:
1. Laxminarayan Bhat, Ph.D., (“Executive”), on Executive’s own behalf and on behalf of Executive’s descendants, dependents, heirs, executors and administrators and permitted assigns, past and present, in consideration for the amounts payable and benefits to be provided to Executive under that employment agreement dated as of July 20, 2020, and effective as of December 14, 2020 (the “Employment Agreement”) by and between Executive and Reviva Pharmaceuticals Holdings, Inc. (“Company”), does hereby covenant not to sue or pursue any litigation or arbitration against, and waives, releases and discharges the Company, its assigns, affiliates, subsidiaries, parents, predecessors and successors, and the past and present employees, officers, directors, representatives and agents of any of them, including but not limited to the Company (collectively, the “Releasees”), from any and all claims, demands, rights, judgments, defenses, actions, charges or causes of action whatsoever, of any and every kind and description, whether known or unknown, accrued or not accrued, that Executive ever had, now has or shall or may have or assert as of the date of this General Release and Covenant Not to Sue against the Releasees relating to his employment with the Company or the termination thereof or her service as an officer or director of any subsidiary or affiliate of the Company or the termination of such service, including, without limiting the generality of the foregoing, any claims, demands, rights, judgments, defenses, actions, charges or causes of action related to employment or termination of employment or that arise out of or relate in any way to the Age Discrimination in Employment Act of 1967 (“ADEA,” a law that prohibits discrimination on the basis of age), the National Labor Relations Act, the Civil Rights Act of 1991, the Americans With Disabilities Act of 1990, Title VII of the Civil Rights Act of 1964, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act, the Sarbanes-Oxley Act of 2002, all as amended, and other Federal, state and local laws relating to discrimination on the basis of age, sex or other protected class, all claims under Federal, state or local laws for express or implied breach of contract, wrongful discharge, defamation, intentional infliction of emotional distress, and any related claims for attorneys’ fees and costs; provided, however, that nothing herein shall release the Company from any of its obligations to Executive under the Employment Agreement (including, without limitation, its obligation to pay the amounts and provide the benefits upon which this General Release and Covenant Not to Sue is conditioned) or any rights Executive may have to indemnification under any charter or by-laws (or similar documents) of any member of the Releasees or any insurance coverage under any directors and officers insurance or similar policies.
2. Executive further agrees that her General Release and Covenant Not to Sue may be pleaded as a full defense to any action, suit or other proceeding covered by the terms hereof that is or may be initiated, prosecuted or maintained by Executive or Executive’s heirs or assigns. Executive understands and confirms that Executive is executing this General Release and Covenant Not to Sue voluntarily and knowingly, but that this General Release and Covenant Not to Sue does not affect Executive’s right to claim otherwise under ADEA. In addition, Executive shall not be precluded by this General Release and Covenant Not to Sue from filing a charge with any relevant Federal, state or local administrative agency, but Executive agrees to waive Executive’s rights with respect to any monetary or other financial relief arising from any such administrative proceeding.
3. In furtherance of the agreements set forth above, Executive hereby expressly waives and relinquishes any and all rights under any applicable statute, doctrine or principle of law restricting the right of any person to release claims that such person does not know or suspect to exist at the time of executing a release, which claims, if known, may have materially affected such person’s decision to give such a release. In connection with such waiver and relinquishment, Executive acknowledges that Executive is aware that Executive may hereafter discover claims presently unknown or unsuspected, or facts in addition to or different from those that Executive now knows or believes to be true, with respect to the matters released herein. Nevertheless, it is the intention of Executive to release all such matters fully, finally and forever, and all claims relating thereto, that now exist, may exist or theretofore have existed, as specifically provided herein. The parties hereto acknowledge and agree that this waiver shall be an essential and material term of the release contained above. Nothing in this paragraph is intended to expand the scope of the release as specified herein.
4. Executive agrees that at any time following the date hereof he will not make, endorse or solicit and shall use all reasonable endeavors to prevent the making, endorsing or soliciting of any disparaging or derogatory statements whether or not the statements are true, whether in writing or otherwise concerning the Company or its past or current directors or officers and the Company undertakes that at any time following the date hereof its senior executives will not make, endorse or solicit and shall use all reasonable endeavors to prevent the making, endorsing or soliciting of any disparaging or derogatory statements whether or not the statement is true, whether in writing or otherwise concerning the Executive or Executive’s work on behalf of the Company, excluding in all events any statements required to be made by law, regulation or under the public disclosure requirements of any jurisdiction. Nothing herein shall prevent Executive from making a report, or bringing a claim, to any governmental agency, including the U.S. Equal Employment Opportunity Commission, the National Labor Relations Board, the U.S. Department of Justice, or the Attorney General of the State where the Executive resides, provided, however, that Executive may not personally win any damages or other relief as a result of any such reports or claims. Nothing herein shall restrict the Company, its affiliates or any of their employees, officers, directors, agents or representatives from providing truthful testimony or information in response to a subpoena or investigation by a Governmental Authority or in connection with any legal action by the Company or any of their affiliates
5. This General Release and Covenant Not to Sue shall be governed by and construed in accordance with the laws of the State of California applicable to agreements made and to be performed entirely within such State without regard to principles of conflicts of laws.
6. Waiver of California Civil Code Section 1542. This Agreement is intended to be effective as a general release of and bar to all claims as stated in this Agreement. Accordingly, Executive expressly waive all rights under Section 1542 of the California Civil Code, which states, “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.” The Executive acknowledges that the Executive may later discover claims or facts in addition to or different from those which the Executive now knows or believes to exist with regards to the subject matter of this Agreement, and which, if known or suspected at the time of executing this Agreement, may have materially affected its terms. Nevertheless, Executive waives any and all Claims that might arise as a result of such different or additional claims or facts.
7. To the extent that Executive is forty (40) years of age or older, this paragraph shall apply. Executive acknowledges that Executive has been offered a period of time of at least twenty-one (21) days to consider whether to sign this General Release and Covenant Not to Sue, which Executive has waived, and the Company agrees that Executive may cancel this General Release and Covenant Not to Sue at any time during the seven (7) days following the date on which this General Release and Covenant Not to Sue has been signed by all parties to this General Release and Covenant Not to Sue. To cancel or revoke this General Release and Covenant Not to Sue, Executive must deliver to the Company written notice stating that Executive is canceling or revoking this General Release and Covenant Not to Sue. If this General Release and Covenant Not to Sue is timely cancelled or revoked, none of the provisions of this General Release and Covenant Not to Sue shall be effective or enforceable and the Company shall not be obligated to make the payments to Executive or to provide Executive with the other benefits described in the Employment Agreement and known as Severance, and all contracts and provisions modified, relinquished or rescinded hereunder shall be reinstated to the extent in effect immediately prior hereto. Executive is hereby advised to seek legal counsel prior to signing this General Release and Covenant Not to Sue.
8. Executive acknowledges and agrees that Executive has entered this General Release and Covenant Not to Sue knowingly and willingly and has had ample opportunity to consider the terms and provisions of this General Release and Covenant Not to Sue.
IN WITNESS WHEREOF, the undersigned has caused this General Release and Covenant Not to Sue to be executed on this 14th day of December 2020.
/s/ Laxminarayan Bhat | |
Laxminarayan Bhat, Ph.D. |
[Signature Page to General Release and Covenant Not to Sue]
Exhibit B
West's Ann.Cal.Labor Code § 2870
§ 2870. Employment agreements; assignment of rights
(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or his rights in an invention to his or his employer shall not apply to an invention that the employee developed entirely on his or his own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either:
(1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.
Credits
(Added by Stats.1979, c. 1001, p. 3401, § 1. Amended by Stats.1986, c. 346, § 1; Stats.1991, c. 647 (S.B.879), § 5.)
Exhibit 10.6
December 12, 2012
Marc Cantillon, MD
134 Walnut Street
Livingston, NJ 07039
Re: Offer of Employment by Reviva Pharmaceuticals, Inc.
Dear Marc:
I am very pleased to confirm our offer to you of employment with Reviva Pharmaceuticals, Inc. (the “Company”). You will initially report to the Chief Executive Officer in the position of Chief Medical Officer. You will begin your employment with the Company between January 21, 2013 and February 28, 2013 as mutually agreed between you and the Company. The terms of our offer and the benefits currently provided by the Company are as follows:
1. Starting Salary. Your salary will initially be Two Hundred Thousand dollars ($200,000) per year until the Company initiates its phase 3 study for PR5063 at which time your salary will be raised to Three Hundred Thousand dollars ($350,000) per year. Your salary will be subject to periodic review.
2. Benefits. In addition, you will be eligible to participate in regular health insurance, bonus and other employee benefit plans established by the Company for its employees from time to time.
The Company reserves the right to change or otherwise modify, in its sole discretion, the preceding terms of employment.
3. Confidentiality. As an employee of the Company, you will have access to certain confidential information of the Company and you may, during the course of your employment, develop certain information or inventions that will be the property of the Company. To protect the interests of the Company, you will need to sign the Company’s standard “Employee Invention Assignment and Confidentiality Agreement” as a condition of your employment. We wish to impress upon you that we do not want you to, and we hereby direct you not to, bring with you any confidential or proprietary material of any former employer or to violate any other obligations you may have to any former employer. During the period that you render services to the Company, you agree to not engage in any employment, business or activity that is in any way competitive with the business or proposed business of the Company. You will disclose to the Company in writing any other gainful employment, business or activity that you are currently associated with or participate in that competes with the Company. You will not assist any other person or organization in competing with the Company or in preparing to engage in competition with the business or proposed business of the Company. You represent that your signing of this offer letter, agreement(s) concerning stock options granted to you, if any, under the Plan (as defined below) and the Company’s Employee Invention Assignment and Confidentiality Agreement and your commencement of employment with the Company will not violate any agreement currently in place between yourself and current or past employers.
5941 Optical Court | San Jose | CA 95138 | USA
(408) 960.2209 (Phone) | (408) 904.6270 (fax)
www.revivapharma.com
Employment Offer
Page 2
4. Options. We will recommend to the Board of Directors of the Company that you be granted the opportunity to purchase up to Two Hundred Thousand (200,000) shares of Common Stock of the Company under our 2006 Equity Incentive Plan (the “Plan”) at the fair market value of the Company’s Common Stock, as determined by the Board of Directors on the date the Board approves such grant. The shares you will be given the opportunity to purchase will vest at the rate of twelve and one half percent (12.5%) at the end of your six month anniversary with the Company, and an additional 2.0833% per month thereafter, so long as you remain employed by the Company. However, the grant of such options by the Company is subject to the Board’s approval and this promise to recommend such approval is not a promise of compensation and is not intended to create any obligation on the part of the Company. Further details on the Plan and any specific option grant to you will be provided upon approval of such grant by the Company’s Board of Directors.
5. At Will Employment. While we look forward to a long and profitable relationship, should you decide to accept our offer, you will be an at-will employee of the Company, which means the employment relationship can be terminated by either of us for any reason, at any time, with or without prior notice and with or without cause. Any statements or representations to the contrary (and, indeed, any statements contradicting any provision in this letter) should be regarded by you as ineffective. Further, your participation in any stock option or benefit program is not to be regarded as assuring you of continuing employment for any particular period of time. Any modification or change in your at will employment status may only occur by way of a written employment agreement signed by you and the Chief Executive Officer of the Company.
6. Authorization to Work. Please note that because of employer regulations adopted in the Immigration Reform and Control Act of 1986, within three (3) business days of starting your new position you will need to present documentation demonstrating that you have authorization to work in the United States. If you have questions about this requirement, which applies to U.S. citizens and non-U.S. citizens alike, you may contact our personnel office.
7. Arbitration. You and the Company agree to submit to mandatory binding arbitration any and all claims arising out of or related to your employment with the Company and the termination thereof, including, but not limited to, claims for unpaid wages, wrongful termination, torts, stock or stock options or other ownership interest in the Company, and/or discrimination (including harassment) based upon any federal, state or local ordinance, statute, regulation or constitutional provision except that each party may, at its, his or her option, seek injunctive relief in court related to the improper use, disclosure or misappropriation of a party’s proprietary, confidential or trade secret information. All arbitration hearings shall be conducted in San Francisco County, California. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO SUCH CLAIMS. This Agreement does not restrict your right to file administrative claims you may bring before any government agency where, as a matter of law, the parties may not restrict the employee’s ability to file such claims (including, but not limited to, the National Labor Relations Board, the Equal Employment Opportunity Commission and the Department of Labor). However, the parties agree that, to the fullest extent permitted by law, arbitration shall be the exclusive remedy for the subject matter of such administrative claims. The arbitration shall be conducted through JAMS before a single neutral arbitrator, in accordance with the JAMS employment arbitration rules then in effect. The arbitrator shall issue a written decision that contains the essential findings and conclusions on which the decision is based.
5941 Optical Court, Suite 215, San Jose CA 95138, USA
(408) 960.2209 (Phone) | (408) .904.6270 (fax)
www.revivapharma.com
Employment Offer
Page 3
8. Background Check. This offer is contingent upon a satisfactory verification of criminal, education, driving and/or employment background. This offer can be rescinded based upon data received in the verification.
9. Entire Agreement. This offer, once accepted, constitutes the entire agreement between you and the Company with respect to the subject matter hereof and supersedes all prior offers, negotiations and agreements, if any, whether written or oral, relating to such subject matter. You acknowledge that neither the Company nor its agents have made any promise, representation or warranty whatsoever, either express or implied, written or oral, which is not contained in this agreement for the purpose of inducing you to execute the agreement, and you acknowledge that you have executed this agreement in reliance only upon such promises, representations and warranties as are contained herein.
10. Acceptance. This offer will remain open until December 21, 2012. If you decide to accept our offer, and I hope you will, please sign the enclosed copy of this letter in the space indicated and return it to me. Your signature will acknowledge that you have read and understood and agreed to the terms and conditions of this offer letter and the attached documents, if any. Should you have anything else that you wish to discuss, please do not hesitate to call me.
We look forward to the opportunity to welcome you to the Company.
Very truly yours, | |
/s/ Laxminarayan Bhat, CEO | |
Laxminarayan Bhat, CEO |
I have read and understood this offer letter and hereby acknowledge, accept and agree to the terms as set forth above and further acknowledge that no other commitments were made to me as part of my employment offer except as specifically set forth herein.
/s/ Marc Cantillon | Date signed: | 12.14.2012 | |
Marc Cantillon |
5941 Optical Court, Suite 215, San Jose, CA 95138, USA
(408) 960.2209 (Phone) | (408) .904.6270 (fax)
www.revivapharma.com
EMPLOYEE INVENTION ASSIGNMENT AND
CONFIDENTIALITY AGREEMENT
In consideration of, and as a condition of my employment with Reviva Pharmaceuticals, Inc., a Delaware corporation with its principal offices in the State of California (the “Company”), I, as the “Employee” signing this Employee Invention Assignment and Confidentiality Agreement (this “Agreement”), hereby represent to the Company, and the Company and I hereby agree as follows:
1. Purpose of Agreement. I understand that the Company is engaged in a continuous program of research, development, production and/or marketing in connection with its current and projected business and that it is critical for the Company to preserve and protect its proprietary information, its rights in certain inventions and works and in related intellectual property rights. Accordingly, I am entering into this Agreement, whether or not I am expected to create inventions or other works of value for the Company. As used in this Agreement, “Inventions” means inventions, improvements, designs, original works of authorship, formulas, processes, compositions of matter, computer software programs, databases, mask works, confidential information and trade secrets.
2. Disclosure of Inventions. I will promptly disclose in confidence to the Company, or to any person designated by it, all Inventions that I make, create, conceive or first reduce to practice, either alone or jointly with others, during the period of my employment, whether or not in the course of my employment, and whether or not patentable, copyrightable or protectable as trade secrets.
3. Work for Hire; Assigned Inventions. I acknowledge and agree that any copyrightable works prepared by me within the scope of my employment will be “works made for hire” under the Copyright Act and that the Company will be considered the author and owner of such copyrightable works. I agree that all Inventions that I make, create, conceive or first reduce to practice during the period of my employment, whether or not in the course of my employment, and whether or not patentable, copyrightable or protectable as trade secrets, and that (i) are developed using equipment, supplies, facilities or trade secrets of the Company; (ii) result from work performed by me for the Company; or (iii) relate to the Company’s business or actual or demonstrably anticipated research or development (the “Assigned Inventions”), will be the sole and exclusive property of the Company.
4. Excluded Inventions and Other Inventions. Attached hereto as Exhibit A is a list describing all existing Inventions, if any, that may relate to the Company’s business or actual or demonstrably anticipated research or development and that were made by me or acquired by me prior to the Effective Date (as defined in Section 25, below), and which are not to be assigned to the Company (“Excluded Inventions”). If no such list is attached, I represent and agree that it is because I have no rights in any existing Inventions that may relate to the Company’s business or actual or demonstrably anticipated research or development. For purposes of this Agreement, “Other Inventions” means Inventions in which I have or may have an interest, as of the Effective Date or thereafter, other than Assigned Inventions and Excluded Inventions. I acknowledge and agree that if, in the scope of my employment, I use any Excluded Inventions or any Other Inventions, or if I include any Excluded Inventions or Other Inventions in any product or service of the Company or if my rights in any Excluded Inventions or Other Inventions may block or interfere with, or may otherwise be required for, the exercise by the Company of any rights assigned to the Company under this Agreement, I will immediately so notify the Company in writing. Unless the Company and I agree otherwise in writing as to particular Excluded Inventions or Other Inventions, I hereby grant to the Company, in such circumstances (whether or not I give the Company notice as required above), a perpetual, irrevocable, nonexclusive, transferable, world-wide, royalty-free license to use, disclose, make, sell, offer for sale, import, copy, distribute, modify and create works based on, perform, and display such Excluded Inventions and Other Inventions, and to sublicense third parties in one or more tiers of sublicensees with the same rights.
5. Exception to Assignment. I understand that the Assigned Inventions will not include, and the provisions of this Agreement requiring assignment of inventions to the Company do not apply to, any invention that qualifies fully for exclusion under the provisions of Section 2870 of the California Labor Code, which are attached hereto as Exhibit B.
6. Assignment of Rights. I agree to assign, and do hereby irrevocably transfer and assign, to the Company: (i) all of my rights, title and interests in and with respect to any Assigned Inventions; (ii) all patents, patent applications, copyrights, mask works, rights in databases, trade secrets, and other intellectual property rights, worldwide, in any Assigned Inventions, along with any registrations of or applications to register such rights; and (iii) to the extent assignable, any and all Moral Rights (as defined below) that I may have in or with respect to any Assigned Inventions. I also hereby forever waive and agree never to assert any Moral Rights I may have in or with respect to any Assigned Inventions and any Excluded Inventions or Other Inventions licensed to the Company under Section 4, even after termination of my employment with the Company. “Moral Rights” means any rights to claim authorship of a work, to object to or prevent the modification or destruction of a work, to withdraw from circulation or control the publication or distribution of a work, and any similar right, regardless of whether or not such right is denominated or generally referred to as a “moral right.”
7. Assistance. I will assist the Company in every proper way to obtain and enforce for the Company all patents, copyrights, mask work rights, trade secret rights and other legal protections for the Assigned Inventions, worldwide. I will execute and deliver any documents that the Company may reasonably request from me in connection with providing such assistance. My obligations under this section will continue beyond the termination of my employment with the Company; provided that the Company agrees to compensate me at a reasonable rate after such termination for time and expenses actually spent by me at the Company’s request in providing such assistance. I hereby appoint the Secretary of the Company as my attorney-in-fact to execute documents on my behalf for this purpose. I agree that this appointment is coupled with an interest and will not be revocable.
8. Proprietary Information. I understand that my employment by the Company creates a relationship of confidence and trust with respect to any information or materials of a confidential or secret nature that may be made, created or discovered by me or that may be disclosed to me by the Company or a third party in relation to the business of the Company or to the business of any parent, subsidiary, affiliate, customer or supplier of the Company, or any other party with whom the Company agrees to hold such information or materials in confidence (the “Proprietary Information”). Without limitation as to the forms that Proprietary Information may take, I acknowledge that Proprietary Information may be contained in tangible material such as writings, drawings, samples, electronic media, or computer programs, or may be in the nature of unwritten knowledge or know-how. Proprietary Information includes, but is not limited to, Assigned Inventions, marketing plans, product plans, designs, data, prototypes, specimens, test protocols, laboratory notebooks, business strategies, financial information, forecasts, personnel information, contract information, customer and supplier lists, and the non-public names and addresses of the Company’s customers and suppliers, their buying and selling habits and special needs.
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9. Confidentiality. At all times, both during my employment and after its termination, I will keep and hold all Proprietary Information in strict confidence and trust. I will not use or disclose any Proprietary Information without the prior written consent of the Company in each instance, except as may be necessary to perform my duties as an employee of the Company for the benefit of the Company. Upon termination of my employment with the Company, I will promptly deliver to the Company all documents and materials of any nature pertaining to my work with the Company, and I will not take with me or retain in any form any documents or materials or copies containing any Proprietary Information.
10. Physical Property. All documents, supplies, equipment and other physical property furnished to me by the Company or produced by me or others in connection with my employment will be and remain the sole property of the Company. I will return to the Company all such items when requested by the Company, excepting only my personal copies of records relating to my employment or compensation and any personal property I bring with me to the Company and designate as such. Even if the Company does not so request, I will upon termination of my employment return to the Company all Company property, and I will not take with me or retain any such items.
11. No Breach of Prior Agreements. I represent that my performance of all the terms of this Agreement and my duties as an employee of the Company will not breach any invention assignment, proprietary information, confidentiality, non-competition, or other agreement with any former employer or other party. I represent that I will not bring with me to the Company or use in the performance of my duties for the Company any documents or materials or intangibles of my own or of a former employer or third party that are not generally available for use by the public or have not been legally transferred to the Company.
12. “At Will” Employment. I understand that this Agreement does not constitute a contract of employment or obligate the Company to employ me for any stated period of time. I understand that I am an “at will” employee of the Company and that my employment can be terminated at any time, with or without notice and with or without cause, for any reason or for no reason, by either the Company or by me. I acknowledge that any statements or representations to the contrary are ineffective, unless put into a writing signed by the Company. I further acknowledge that my participation in any stock option or benefit program is not to be construed as any assurance of continuing employment for any particular period of time.
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13. Company Opportunities; Duty Not to Compete. During the period of my employment, I will at all times devote my best efforts to the interests of the Company, and I will not, without the prior written consent of the Company, engage in, or encourage or assist others to engage in, any other employment or activity that: (i) would divert from the Company any business opportunity in which the Company can reasonably be expected to have an interest; (ii) would directly compete with, or involve preparation to compete with, the current or future business of the Company; or (iii) would otherwise conflict with the Company’s interests or could cause a disruption of its operations or prospects.
14. Non-Solicitation of Employees/Consultants. During my employment with the Company and for a one (1) year period thereafter, I will not directly or indirectly solicit away employees or consultants of the Company for my own benefit or for the benefit of any other person or entity, nor will I encourage or assist others to do so.
15. Use of Name & Likeness. I hereby authorize the Company to use, reuse, and to grant others the right to use and reuse, my name, photograph, likeness (including caricature), voice, and biographical information, and any reproduction or simulation thereof, in any form of media or technology now known or hereafter developed, both during and after my employment, for any purposes related to the Company’s business, such as marketing, advertising, credits, and presentations.
16. Notification. I hereby authorize the Company, during and after the termination of my employment with the Company, to notify third parties, including, but not limited to, actual or potential customers or employers, of the terms of this Agreement and my responsibilities hereunder.
17. Injunctive Relief. I understand that a breach or threatened breach of this Agreement by me may cause the Company to suffer irreparable harm and that the Company will therefore be entitled to injunctive relief to enforce this Agreement.
18. Governing Law; Severability. This Agreement is intended to supplement, and not to supersede, any rights the Company may have in law or equity with respect to the duties of its employees and the protection of its trade secrets. This Agreement will be governed by and construed in accordance with the laws of the State of California without giving effect to any principles of conflict of laws that would lead to the application of the laws of another jurisdiction. If any provision of this Agreement is invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximum extent possible, given the fundamental intentions of the parties when entering into this Agreement. To the extent such provision cannot be so enforced, it will be stricken from this Agreement and the remainder of this Agreement will be enforced as if such invalid, illegal or unenforceable provision had never been contained in this Agreement.
19. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered will be deemed an original, and all of which together will constitute one and the same agreement.
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20. Entire Agreement. This Agreement and the documents referred to herein constitute the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, and supersede all prior understandings and agreements, whether oral or written, between the parties hereto with respect to such subject matter.
21. Amendment and Waiver. This Agreement may be amended only by a written agreement executed by each of the parties to this Agreement. No amendment or waiver of, or modification of any obligation under, this Agreement will be enforceable unless specifically set forth in a writing signed by the party against which enforcement is sought. A waiver by either party of any of the terms and conditions of this Agreement in any instance will not be deemed or construed to be a waiver of such term or condition with respect to any other instance, whether prior, concurrent or subsequent.
22. Successors and Assigns; Assignment. Except as otherwise provided in this Agreement, this Agreement, and the rights and obligations of the parties hereunder, will bind and benefit the parties and their respective successors, assigns, heirs, executors, administrators, and legal representatives. The Company may assign any of its rights and obligations under this Agreement. I understand that I will not be entitled to assign or delegate this Agreement or any of my rights or obligations hereunder, whether voluntarily or by operation of law, except with the prior written consent of the Company.
23. Further Assurances. The parties will execute such further documents and instruments and take such further actions as may be reasonably necessary to carry out the purposes and intent of this Agreement. Upon termination of my employment with the Company, I will execute and deliver a document or documents in a form reasonably requested by the Company confirming my agreement to comply with the post-employment obligations contained in this Agreement.
24. Acknowledgement. I certify and acknowledge that I have carefully read all of the provisions of this Agreement and that I understand and will fully and faithfully comply with this Agreement.
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25. Effective Date of Agreement. This Agreement is and will be effective on and after the first day of my employment by the Company, which is 2.1.2013, (the “Effective Date”).
REVIVA PHARMACEUTICALS, INC.: Employee:
By: | /s/ Laxminarayan Bhat | /s/ Marc Cantillon | |
Signature | |||
Name: | Laxminarayan Bhat, PhD | Marc Cantillon, MD | |
Name (Please Print) | |||
Title: | President and CEO |
Exhibit A
LIST OF EXCLUDED INVENTIONS UNDER SECTION 4
Identifying Number | ||
Title | Date | or Brief Description |
x | No inventions, improvements, or original works of authorship |
¨ | Additional sheets attached |
Signature of Employee: | /s/ Marc Cantillon |
Print Name of Employee: | Marc Cantillon, MD |
Date: | 12.14.12 |
Exhibit B
CALFORNIA LABOR CODE 2870 NOTICE:
California Labor Code Section 2870 provides as follows:
Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or (2) result from any work performed by the employee for the employer. To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under California Labor Code Section 2870(a), the provision is against the public policy of this state and is unenforceable.
Exhibit 10.7
To: Marc Cantillon, Chief Medical Officer
From: Laxminarayan Bhat, President and CEO
Date: October 28, 2015
Subject: Compensation Reduction
As you know, due to lack of needed funding, Reviva Pharmaceuticals Inc (the “Company”) must implement certain cost-cutting measures. To that end, the Company is reducing the pay for certain executive employees, and effective November 1, 2015, your base salary will be reduced by $100,000.00, percent (50%). Taking this reduction into account, your base annual base salary will be $100,000.00.
While we hope this reduction will be temporary, there can be no assurances that compensation will be reinstated to its previous level at any point in the future.
We truly appreciate your loyalty, hard work and commitment to the Company. With your help and cooperation, I am confident that we will emerge stronger and hopeful the changes will allow us to effectively position the Company for future success.
Please note that your employment continues to be at will, meaning that either you or the Company have the right to terminate your employment at any time, within or without notice and for any or no reason.
Please acknowledge receipt of this memorandum by signing below and returning it to me. Do not hesitate to contact me should you have any questions.
READ AND UNDERSTOOD:
Employee name (printed):_____ Marc Cantillon_____
/s/ Marc Cantillon |
Date: | 10-29-2015 |
Exhibit 10.8
To: | Marc Cantillon, Chief Medical Officer |
From: | Laxminarayan Bhat, President and CEO |
Date: | March 15, 2016 |
Subject: | Compensation Reduction |
As you know, due to lack of needed funding, Reviva Pharmaceuticals Inc (the “Company”) must implement certain cost-cutting measures. To that end, the Company is reducing the pay for certain executive employees, and effective April 1, 2016, your base salary will be reduced to $2,500.00 per month. Taking this reduction into account, your base annual base salary will be $30,000.00.
While we hope this reduction will be temporary, there can be no assurances that compensation will be reinstated to its previous level at any point in the future.
We truly appreciate your loyalty, hard work and commitment to the Company. With your help and cooperation, I am confident that we will emerge stronger and hopeful the changes will allow us to effectively position the Company for future success.
Please note that your employment continues to be at will, meaning that either you or the Company have the right to terminate your employment at any time, within or without notice and for any or no reason.
Please acknowledge receipt of this memorandum by signing below and returning it to me. Do not hesitate to contact me should you have any questions.
READ AND UNDERSTOOD:
Employee name (printed):_________ Marc Cantillon MD______________
/s/ Marc Cantillon |
Signature: |
3900 Freedom Circle, Suite 101, Santa Clara, CA 95054, USA
(408) 816.1470 (phone-main) | (408) .904.6270 (fax)
www.revivapharma.com
Exhibit 10.9
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (“Agreement”) is made as of [___________] by and between Reviva Pharmaceuticals Holdings, Inc., a Delaware corporation (the “Company”), and [___________] (“Indemnitee”).
RECITALS
WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors or officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation and due to the fact that such exposure frequently bears no relationship to compensation paid to such officers and directors;
WHEREAS, the Company and Indemnitee recognize that plaintiffs often seek damages in such large amounts and the costs of litigation may be so enormous (whether or not the case is meritorious), that the defense and/or settlement of such litigation is often beyond the personal resources of directors and officers;
WHEREAS, the Company’s Bylaws provide for the indemnification of the officers and directors of the Company to the fullest extent permitted by the General Corporation Law of the State of Delaware (the “DGCL”). The Bylaws expressly provide that the indemnification provisions set forth therein are not exclusive and contemplate that contracts may be entered into between the Company and its directors and officers with respect to indemnification;
WHEREAS, Section 145 of the DGCL empowers the Company to indemnify its officers, directors, employees and agents by agreement and to indemnify persons who serve, at the Company’s request, as the directors, officers, employees or agents of other corporations or enterprises;
WHEREAS, Section 102(b)(7) of the DGCL allows the Company to include in its Certificate of Incorporation a provision limiting or eliminating the personal liability of a director for monetary damages in respect of claims by shareholders and corporations for breach of certain fiduciary duties, and the Company has so provided in its Certificate of Incorporation that each director shall be exculpated from such liability to the maximum extent permitted by law;
WHEREAS, the Company, after reasonable investigation, has determined that the liability insurance coverage presently available to the Company may be inadequate in certain circumstances to cover all possible exposure for which Indemnitee should be protected.
WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining highly competent persons to serve as directors and officers. The Board of Directors of the Company (the “Board”) has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;
WHEREAS, this Agreement is a supplement to and in furtherance of the Company’s Certificate of Incorporation and Bylaws and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and
WHEREAS, Indemnitee does not regard the protection available under the Company’s Certificate of Incorporation, Bylaws and insurance as adequate in the present circumstances, and may not be willing to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified.
NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:
Section 1. Services to the Company. Indemnitee agrees to serve as a director or officer of the Company or, at the request of the Company, as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue having Indemnitee serve in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries or any other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving at the Company’s request as a director, officer, employee, agent or fiduciary) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee’s employment or other service with the Company (or any of its subsidiaries or any other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving at the Company’s request as a director, officer, employee, agent or fiduciary), if any, is at will, and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in the Company’s organizational documents or any written employment contract between Indemnitee and the Company (or any of its subsidiaries or any other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving at the Company’s request as a director, officer, employee, agent or fiduciary). The foregoing notwithstanding, this Agreement shall continue in force after Indemnitee has ceased to serve as an officer or director of the Company.
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Section 2. Definitions. As used in this Agreement:
(a) A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:
i. Acquisition of Stock by Third Party. Any Person (as defined below) after the date of this Agreement (who is not such on or prior to the date of this Agreement) becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing thirty-five percent (35%) or more of the combined voting power of the Company’s then outstanding securities;
ii. Change in Board. During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 2(a)(i), 2(a)(iii) or 2(a)(iv)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the members of the Board;
iii. Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 51% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity;
iv. Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; and
v. Other Events. There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement.
For purposes of this Section 2(a), the following terms shall have the following meanings:
(A) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(B) “Person” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that Person shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
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(C) “Beneficial Owner” shall have the meaning given to such term in Rule 13d-3 under the Exchange Act; provided, however, that Beneficial Owner shall exclude any Person otherwise becoming a Beneficial Owner by reason of the stockholders of the Company approving a merger of the Company with another entity.
(b) “Corporate Status” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, limited liability company, partnership or joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Company.
(c) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.
(d) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 13(d) only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.
(e) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
(f) “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative legislative, or investigative nature, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action taken by him or of any action on his part while acting as director or officer of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, limited liability company, partnership, joint venture, trust or other enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses can be provided under this Agreement; except one initiated by an Indemnitee to enforce his rights under this Agreement.
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Section 3. Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal proceeding had no reasonable cause to believe that his conduct was unlawful.
Section 4. Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.
Section 5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. If the Indemnitee is not wholly successful in such Proceeding, the Company also shall indemnify Indemnitee against all Expenses reasonably incurred in connection with a claim, issue or matter related to any claim, issue, or matter on which the Indemnitee was successful. For purposes of this Section and without limiting the foregoing, if any Proceeding is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to Indemnitee, (ii) an adjudication that Indemnitee was liable to the Company, (iii) a plea of guilty or nolo contendere by Indemnitee, (iv) an adjudication that Indemnitee did not act in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and (v) with respect to any criminal proceeding, an adjudication that Indemnitee had reasonable cause to believe Indemnitee’s conduct was unlawful, Indemnitee shall be considered for purposes of this Agreement to have been successful with respect thereto.
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Section 6. Indemnification For Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of his Corporate Status, a witness or otherwise participates in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.
Section 7. Additional Indemnification.
(a) Notwithstanding any limitation in Sections 3, 4, or 5, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee in connection with the Proceeding.
(b) For purposes of Section 7(a), the meaning of the phrase “to the fullest extent permitted by applicable law” shall include, but not be limited to:
i. to the fullest extent permitted by the provision of the DGCL that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL, and
ii. to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.
Section 8. Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:
(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision; or
(b) for any Proceedings with respect to which final judgment is rendered against Indemnitee for payment of (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act (as defined in Section 2(a) hereof) or similar provisions of state statutory law or common law, or (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act), or
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(c) any Proceeding involving the enforcement of non-compete and/or non-disclosure agreements or the non-compete and/or non-disclosure provisions of employment, consulting or similar agreements the Indemnitee may be a party to with the Company or any subsidiary of the Company or any other applicable foreign or domestic corporation, partnership, joint venture, trust or other enterprise, if any; or
(d) except as provided in Section 13(d) of this Agreement, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.
Section 9. Advances of Expenses. The Company shall advance, to the extent not prohibited by law, the Expenses incurred by Indemnitee in connection with any Proceeding, and such advancement shall be made within thirty (30) days after receipt by the Corporation of (i) a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of any Proceeding, and (ii) an undertaking by or on behalf of Indemnitee to repay such amount or amounts, only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Corporation as authorized by this Agreement or otherwise. Such undertaking shall be accepted without reference to the financial ability of Indemnitee to make such repayment. Advances shall be unsecured and interest free. Advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. This Section 9 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 8 or to any Proceeding for which the Company has assumed the defense thereof in accordance with Section 10(b) of this Agreement.
Section 10. Procedure for Notification and Defense of Claim.
(a) Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or advancement of Expenses hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice thereof. The written notification to the Company shall include a description of the nature of the Proceeding and the facts underlying the Proceeding. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such action, suit or proceeding. The omission by Indemnitee to notify the Company hereunder will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.
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(b) In the event the Company shall be obligated to pay the Expenses of Indemnitee with respect to a Proceeding, as provided in this Agreement, the Company shall be entitled to assume the defense of such Proceeding, with counsel reasonably acceptable to Indemnitee, upon delivery of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Proceeding, provided that (1) Indemnitee shall have the right to employ Indemnitee’s own counsel in such Proceeding at Indemnitee’s expense and (2) if (i) the employment of counsel by Indemnitee has been previously authorized in writing by the Company, (ii) counsel to the Company or Indemnitee shall have reasonably concluded that there may be a conflict of interest or position, or reasonably believes that a conflict is likely to arise, on any significant issue between the Company and the Indemnitee in the conduct of such defense or (iii) the Company shall not, in fact, have employed counsel to assume the defense of such Proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company, except as otherwise expressly provided by this Agreement.
(c) The Company will be entitled to participate in the Proceeding at its own expense.
Section 11. Procedure Upon Application for Indemnification.
(a) Upon written request by Indemnitee for indemnification pursuant to Section 10(a), a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case: (i) if a Change in Control shall have occurred after the date of this Agreement, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not have occurred after the date of this Agreement, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee or (D) if so directed by the Disinterested Directors, by the stockholders of the Company; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
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(b) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 11(a) hereof, the Independent Counsel shall be selected as provided in this Section 11(b). If a Change in Control shall not have occurred after the date of this Agreement, the Independent Counsel shall be selected by the Board, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred after the date of this Agreement, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within twenty (20) days after the submission by Indemnitee or the Company, as the case may be, of a written objection, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 11(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 13(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).
Section 12. Presumptions and Effect of Certain Proceedings.
(a) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 10(a) of this Agreement, and the Company shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.
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(b) Subject to Section 13(e), if the person, persons or entity empowered or selected under Section 11 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by law, be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 12(b) shall not apply (i) if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 11(a) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination the Board has resolved to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 11(a) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.
(d) Reliance as Safe Harbor. For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Company or other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving as a director, officer, employee, agent or fiduciary, including financial statements, or on information supplied to Indemnitee by the officers of the Company or other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving as a director, officer, employee, agent or fiduciary in the course of their duties, or on the advice of legal counsel for the enterprise or on information or records given or reports made to the Company or other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving as a director, officer, employee, agent or fiduciary by an independent certified public accountant or by an appraiser or other expert selected with the reasonable care by the Company or other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving as a director, officer, employee, agent or fiduciary. The provisions of this Section 12(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.
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(e) Actions of Others. The knowledge and/or actions, or failure to act, of any other director, officer, agent or employee of the Company or other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving as a director, officer, employee, agent or fiduciary shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.
Section 13. Remedies of Indemnitee.
(a) Subject to Section 13(e), in the event that (i) a determination is made pursuant to Section 11 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 9 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 11(a) of this Agreement within ninety (90) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5 or 6 or the last sentence of Section 11(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) payment of indemnification pursuant to Section 3, 4 or 7 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vi) in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding designed to deny, or to recover from, the Indemnitee the benefits provided or intended to be provided to the Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by a court of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 13(a); provided, however, that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his rights under Section 5 of this Agreement. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 13 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 13 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 13, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.
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(d) The Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 13 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. It is the intent of the Company that the Indemnitee not be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Indemnitee hereunder. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be.
(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.
Section 14. Non-exclusivity; Survival of Rights; Insurance; Subrogation.
(a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Company’s Certificate of Incorporation, the Company’s By-laws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company’s Certificate of Incorporation, the Company’s By-laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.
(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company and the Indemnitee shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.
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(c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee with respect to any insurance policy, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided hereunder) hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.
(e) The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise.
Section 15. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.
Section 16. Enforcement. The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director or officer of the Company. The Company shall not seek from a court, or agree to, a “bar order” which would have the effect of prohibiting or limiting the Indemnitee’s rights to receive advancement of expenses under this Agreement.
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Section 17. Entire Agreement; Supersedes Prior Agreements. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that (i) this Agreement is a supplement to and in furtherance of the Certificate of Incorporation and Bylaws of the Company and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder and (ii) this Agreement will not affect the rights under any other indemnification or similar agreements between the Company and the Indemnitee relating to periods prior to the date of this Agreement.
Section 18. Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer or director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 13 hereof) by reason of his Corporate Status, whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives.
Section 19. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.
Section 20. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise except to the extent the Corporation is prejudiced in its defense of such action, suit or proceeding as a result of such failure.
Section 21. Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed or (d) sent by facsimile transmission, with receipt of oral confirmation that such transmission has been received:
(a) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide to the Company.
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(b) If to the Company to
Reviva Pharmaceuticals Holdings, Inc.
19925 Stevens Creek Blvd., Suite 100
Cupertino, CA 95014
Attention: Chairman of the Board
With a copy (which shall not constitute notice) to:
Lowenstein Sandler LLP
One Lowenstein Drive
Roseland, New Jersey 07068
Attn: Steven M. Skolnick, Esq.
Email: sskolnick@lowenstein.com
or to any other address as may have been furnished to Indemnitee by the Company.
Section 22. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).
Section 23. Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 13 of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, irrevocably Corporation Services Company as its agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.
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Section 24. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
Section 25. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun or neuter form where appropriate. The headings of the Sections and other subdivisions of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. In this Agreement, unless the context otherwise requires: (a) the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) the term “including” (and with correlative meaning “include”) shall be deemed in each case to be followed by the words “without limitation”; (c) the words “herein,” “hereto,” and “hereby” and other words of similar import shall be deemed in each case to refer to this Agreement as a whole and not to any particular section or other subdivision of this Agreement; and (d) the term “or” means “and/or”.
{Remainder of Page Intentionally Left Blank; Signature Page Follows}
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.
REVIVA PHARMACEUTICALS HOLDINGS, INC.
By: | ||
Name: Laxminarayan Bhat | ||
Title: Chief Executive Officer |
INDEMNITEE
Name: | ||
Address: | ||
[Signature Page to Indemnification Agreement]
Exhibit 10.10
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (“Agreement”) is made as of December 14, 2020 by and between Reviva Pharmaceuticals Holdings, Inc., a Delaware corporation (the “Company”), and Parag Saxena (“Indemnitee”).
RECITALS
WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors or officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation and due to the fact that such exposure frequently bears no relationship to compensation paid to such officers and directors;
WHEREAS, the Company and Indemnitee recognize that plaintiffs often seek damages in such large amounts and the costs of litigation may be so enormous (whether or not the case is meritorious), that the defense and/or settlement of such litigation is often beyond the personal resources of directors and officers;
WHEREAS, the Company’s Bylaws provide for the indemnification of the officers and directors of the Company to the fullest extent permitted by the General Corporation Law of the State of Delaware (the “DGCL”). The Bylaws expressly provide that the indemnification provisions set forth therein are not exclusive and contemplate that contracts may be entered into between the Company and its directors and officers with respect to indemnification;
WHEREAS, Section 145 of the DGCL empowers the Company to indemnify its officers, directors, employees and agents by agreement and to indemnify persons who serve, at the Company’s request, as the directors, officers, employees or agents of other corporations or enterprises;
WHEREAS, Section 102(b)(7) of the DGCL allows the Company to include in its Certificate of Incorporation a provision limiting or eliminating the personal liability of a director for monetary damages in respect of claims by shareholders and corporations for breach of certain fiduciary duties, and the Company has so provided in its Certificate of Incorporation that each director shall be exculpated from such liability to the maximum extent permitted by law;
WHEREAS, the Company, after reasonable investigation, has determined that the liability insurance coverage presently available to the Company may be inadequate in certain circumstances to cover all possible exposure for which Indemnitee should be protected.
WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining highly competent persons to serve as directors and officers. The Board of Directors of the Company (the “Board”) has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;
WHEREAS, this Agreement is a supplement to and in furtherance of the Company’s Certificate of Incorporation and Bylaws and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder;
WHEREAS, Indemnitee does not regard the protection available under the Company’s Certificate of Incorporation, Bylaws and insurance as adequate in the present circumstances, and may not be willing to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified; and
WHEREAS, Indemnitee may have certain rights to indemnification and/or insurance provided by a stockholder of the Company (or such stockholder’s affiliates) which Indemnitee and such stockholder intend to be secondary to the primary obligation of the Company to indemnify Indemnitee as provided herein, with the Company’s acknowledgement and agreement to the foregoing being a material condition to Indemnitee’s willingness to serve on the Board.
NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:
Section 1. Services to the Company. Indemnitee agrees to serve as a director or officer of the Company or, at the request of the Company, as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue having Indemnitee serve in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries or any other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving at the Company’s request as a director, officer, employee, agent or fiduciary) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee’s employment or other service with the Company (or any of its subsidiaries or any other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving at the Company’s request as a director, officer, employee, agent or fiduciary), if any, is at will, and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in the Company’s organizational documents or any written employment contract between Indemnitee and the Company (or any of its subsidiaries or any other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving at the Company’s request as a director, officer, employee, agent or fiduciary). The foregoing notwithstanding, this Agreement shall continue in force after Indemnitee has ceased to serve as an officer or director of the Company.
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Section 2. Definitions. As used in this Agreement:
(a) A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:
i. Acquisition of Stock by Third Party. Any Person (as defined below) after the date of this Agreement (who is not such on or prior to the date of this Agreement) becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing thirty-five percent (35%) or more of the combined voting power of the Company’s then outstanding securities;
ii. Change in Board. During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 2(a)(i), 2(a)(iii) or 2(a)(iv)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the members of the Board;
iii. Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 51% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity;
iv. Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; and
v. Other Events. There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement.
For purposes of this Section 2(a), the following terms shall have the following meanings:
(A) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
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(B) “Person” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that Person shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
(C) “Beneficial Owner” shall have the meaning given to such term in Rule 13d-3 under the Exchange Act; provided, however, that Beneficial Owner shall exclude any Person otherwise becoming a Beneficial Owner by reason of the stockholders of the Company approving a merger of the Company with another entity.
(b) “Corporate Status” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, limited liability company, partnership or joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Company.
(c) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.
(d) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 13(d) only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.
(e) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
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(f) “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative legislative, or investigative nature, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action taken by him or of any action on his part while acting as director or officer of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, limited liability company, partnership, joint venture, trust or other enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses can be provided under this Agreement; except one initiated by an Indemnitee to enforce his rights under this Agreement.
Section 3. Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal proceeding had no reasonable cause to believe that his conduct was unlawful.
Section 4. Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.
Section 5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. If the Indemnitee is not wholly successful in such Proceeding, the Company also shall indemnify Indemnitee against all Expenses reasonably incurred in connection with a claim, issue or matter related to any claim, issue, or matter on which the Indemnitee was successful. For purposes of this Section and without limiting the foregoing, if any Proceeding is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to Indemnitee, (ii) an adjudication that Indemnitee was liable to the Company, (iii) a plea of guilty or nolo contendere by Indemnitee, (iv) an adjudication that Indemnitee did not act in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and (v) with respect to any criminal proceeding, an adjudication that Indemnitee had reasonable cause to believe Indemnitee’s conduct was unlawful, Indemnitee shall be considered for purposes of this Agreement to have been successful with respect thereto.
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Section 6. Indemnification For Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of his Corporate Status, a witness or otherwise participates in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.
Section 7. Additional Indemnification.
(a) Notwithstanding any limitation in Sections 3, 4, or 5, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee in connection with the Proceeding.
(b) For purposes of Section 7(a), the meaning of the phrase “to the fullest extent permitted by applicable law” shall include, but not be limited to:
i. to the fullest extent permitted by the provision of the DGCL that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL, and
ii. to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.
Section 8. Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:
(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision (provided that the foregoing shall not affect the rights of Indemnitee or the Stockholder Indemnitors as set forth in Section 14(c)); or
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(b) for any Proceedings with respect to which final judgment is rendered against Indemnitee for payment of (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act (as defined in Section 2(a) hereof) or similar provisions of state statutory law or common law, or (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act), or
(c) any Proceeding involving the enforcement of non-compete and/or non-disclosure agreements or the non-compete and/or non-disclosure provisions of employment, consulting or similar agreements the Indemnitee may be a party to with the Company or any subsidiary of the Company or any other applicable foreign or domestic corporation, partnership, joint venture, trust or other enterprise, if any; or
(d) except as provided in Section 13(d) of this Agreement, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.
Section 9. Advances of Expenses. Notwithstanding any other provision of this Agreement, the Company shall advance, to the extent not prohibited by law, the Expenses incurred by Indemnitee in connection with any Proceeding, and such advancement shall be made within thirty (30) days after receipt by the Corporation of (i) a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of any Proceeding, and (ii) an undertaking by or on behalf of Indemnitee to repay such amount or amounts, only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Corporation as authorized by this Agreement or otherwise. Such undertaking shall be accepted without reference to the financial ability of Indemnitee to make such repayment. Advances shall be unsecured and interest free. Advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. This Section 9 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 8 or to any Proceeding for which the Company has assumed the defense thereof in accordance with Section 10(b) of this Agreement.
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Section 10. Procedure for Notification and Defense of Claim.
(a) Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or advancement of Expenses hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice thereof. The written notification to the Company shall include a description of the nature of the Proceeding and the facts underlying the Proceeding. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such action, suit or proceeding. The omission by Indemnitee to notify the Company hereunder will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.
(b) In the event the Company shall be obligated to pay the Expenses of Indemnitee with respect to a Proceeding, as provided in this Agreement, the Company shall be entitled to assume the defense of such Proceeding, with counsel reasonably acceptable to Indemnitee, upon delivery of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Proceeding, provided that (1) Indemnitee shall have the right to employ Indemnitee’s own counsel in such Proceeding at Indemnitee’s expense and (2) if (i) the employment of counsel by Indemnitee has been previously authorized in writing by the Company, (ii) counsel to the Company or Indemnitee shall have reasonably concluded that there may be a conflict of interest or position, or reasonably believes that a conflict is likely to arise, on any significant issue between the Company and the Indemnitee in the conduct of such defense or (iii) the Company shall not, in fact, have employed counsel to assume the defense of such Proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company, except as otherwise expressly provided by this Agreement.
(c) The Company will be entitled to participate in the Proceeding at its own expense.
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Section 11. Procedure Upon Application for Indemnification.
(a) Upon written request by Indemnitee for indemnification pursuant to Section 10(a), a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case: (i) if a Change in Control shall have occurred after the date of this Agreement, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not have occurred after the date of this Agreement, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee or (D) if so directed by the Disinterested Directors, by the stockholders of the Company; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(b) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 11(a) hereof, the Independent Counsel shall be selected as provided in this Section 11(b). If a Change in Control shall not have occurred after the date of this Agreement, the Independent Counsel shall be selected by the Board, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred after the date of this Agreement, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within twenty (20) days after the submission by Indemnitee or the Company, as the case may be, of a written objection, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 11(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 13(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).
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Section 12. Presumptions and Effect of Certain Proceedings.
(a) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 10(a) of this Agreement, and the Company shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.
(b) Subject to Section 13(e), if the person, persons or entity empowered or selected under Section 11 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by law, be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 12(b) shall not apply (i) if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 11(a) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination the Board has resolved to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 11(a) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.
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(d) Reliance as Safe Harbor. For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Company or other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving as a director, officer, employee, agent or fiduciary, including financial statements, or on information supplied to Indemnitee by the officers of the Company or other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving as a director, officer, employee, agent or fiduciary in the course of their duties, or on the advice of legal counsel for the enterprise or on information or records given or reports made to the Company or other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving as a director, officer, employee, agent or fiduciary by an independent certified public accountant or by an appraiser or other expert selected with the reasonable care by the Company or other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving as a director, officer, employee, agent or fiduciary. The provisions of this Section 12(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.
(e) Actions of Others. The knowledge and/or actions, or failure to act, of any other director, officer, agent or employee of the Company or other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving as a director, officer, employee, agent or fiduciary shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.
Section 13. Remedies of Indemnitee.
(a) Subject to Section 13(e), in the event that (i) a determination is made pursuant to Section 11 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 9 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 11(a) of this Agreement within ninety (90) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5 or 6 or the last sentence of Section 11(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) payment of indemnification pursuant to Section 3, 4 or 7 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vi) in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding designed to deny, or to recover from, the Indemnitee the benefits provided or intended to be provided to the Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by a court of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 13(a); provided, however, that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his rights under Section 5 of this Agreement. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.
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(b) In the event that a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 13 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 13 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 13, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.
(d) The Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 13 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. It is the intent of the Company that the Indemnitee not be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Indemnitee hereunder. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be.
(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.
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Section 14. Non-exclusivity; Survival of Rights; Insurance; Primacy of Indemnification; Subrogation.
(a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Company’s Certificate of Incorporation, the Company’s By-laws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company’s Certificate of Incorporation, the Company’s By-laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.
(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company and the Indemnitee shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.
(c) The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of expenses and/or insurance provided by a stockholder of the Company and/or certain of such stockholder’s affiliates (collectively, the “Stockholder Indemnitors”). The Company hereby agrees that, notwithstanding anything to the contrary in this Agreement, it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any obligation of the Stockholder Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary) and that the Company will not assert that the Indemnitee must seek expense advancement or reimbursement, or indemnification, from any Stockholder Indemnitor before the Company must perform its expense advancement and reimbursement, and indemnification obligations, under this Agreement. The Company further agrees that no advancement or payment by the Stockholder Indemnitors on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Company shall affect the foregoing, and the Stockholder Indemnitors shall be subrogated to the extent of such advancement or payment to all of the rights of recovery which Indemnitee would have had against the Company if the Stockholder Indemnitors had not advanced or paid any amount to or on behalf of Indemnitee. If for any reason a court of competent jurisdiction determines that the Stockholder Indemnitors are not entitled to the subrogation rights described in the preceding sentence, the Stockholder Indemnitors shall have a right of contribution by the Company to the Stockholder Indemnitors with respect to any advance or payment by the Stockholder Indemnitors to or on behalf of the Indemnitee.
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(d) Except as provided in Section 14(c), in the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee (other than against the Stockholder Indemnitors) with respect to any insurance policy, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
(e) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided hereunder) hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise, provided, that the foregoing shall not affect the rights of Indemnitee or the Stockholder Indemnitors set forth in Section 14(c) above.
(f) The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise.
Section 15. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.
Section 16. Enforcement. The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director or officer of the Company. The Company shall not seek from a court, or agree to, a “bar order” which would have the effect of prohibiting or limiting the Indemnitee’s rights to receive advancement of expenses under this Agreement.
Section 17. Entire Agreement; Supersedes Prior Agreements. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that (i) this Agreement is a supplement to and in furtherance of the Certificate of Incorporation and Bylaws of the Company and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder and (ii) this Agreement will not affect the rights under any other indemnification or similar agreements between the Company and the Indemnitee relating to periods prior to the date of this Agreement.
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Section 18. Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer or director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 13 hereof) by reason of his Corporate Status, whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. The Company and Indemnitee agree that each Stockholder Indemnitee is an express third party beneficiary of this Agreement.
Section 19. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.
Section 20. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise except to the extent the Corporation is prejudiced in its defense of such action, suit or proceeding as a result of such failure.
Section 21. Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed or (d) sent by facsimile transmission, with receipt of oral confirmation that such transmission has been received:
(a) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide to the Company.
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(b) | If to the Company to |
Reviva Pharmaceuticals Holdings, Inc.
19925 Stevens Creek Blvd., Suite 100
Cupertino, CA 95014
Attention: Chairman of the Board
With a copy (which shall not constitute notice) to:
Lowenstein Sandler LLP
One Lowenstein Drive
Roseland, New Jersey 07068
Attn: Steven M. Skolnick, Esq.
Email: sskolnick@lowenstein.com
or to any other address as may have been furnished to Indemnitee by the Company.
Section 22. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).
Section 23. Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 13 of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, irrevocably Corporation Services Company as its agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.
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Section 24. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
Section 25. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun or neuter form where appropriate. The headings of the Sections and other subdivisions of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. In this Agreement, unless the context otherwise requires: (a) the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) the term “including” (and with correlative meaning “include”) shall be deemed in each case to be followed by the words “without limitation”; (c) the words “herein,” “hereto,” and “hereby” and other words of similar import shall be deemed in each case to refer to this Agreement as a whole and not to any particular section or other subdivision of this Agreement; and (d) the term “or” means “and/or”.
{Remainder of Page Intentionally Left Blank; Signature Page Follows}
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.
REVIVA PHARMACEUTICALS HOLDINGS, INC.
By: | |||
Name: | Laxminarayan Bhat | ||
Title: | Chief Executive Officer |
INDEMNITEE | ||
Name: |
Address: | ||
[Signature Page to Indemnification Agreement]
Exhibit 10.11
NON-REDEMPTION AGREEMENT
This NON-REDEMPTION AGREEMENT (this “Agreement”) is entered into as of December 8, 2020, by and among (i) Tenzing Acquisition Corp., a company incorporated in the British Virgin Islands (together with its successors, including after the Conversion (as defined below), “Tenzing”), (ii) Tenzing LLC, a Delaware limited liability company (the “Sponsor”), and (iii) the undersigned shareholder (“Shareholder”). Tenzing, the Sponsor and Shareholder are sometimes referred to herein as a “Party” and collectively as the “Parties”.
W I T N E S S E T H:
WHEREAS, as of the date hereof, Shareholder “beneficially owns” (as such term is defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) and is entitled to dispose of (or to direct the disposition of) and to vote (or to direct the voting of) 367,000 ordinary shares, no per share (“Ordinary Shares”), of Tenzing (such Ordinary Shares, the “Shareholder Shares”), together with any other Ordinary Shares which are directly or indirectly acquired or beneficially owned by Shareholder during the period from and including the date hereof through and including the date on which this Agreement is terminated in accordance with its terms (such period, the “Term”), are collectively referred to herein as the “Subject Shares”);
WHEREAS, Tenzing is a special purpose acquisition company that, in accordance with its organizational documents and the final prospectus of Tenzing, dated as of August 20, 2018, and filed with the U.S. Securities and Exchange Commission (“SEC”) on August 22, 2018 (File Nos. 333-226263 and 333-226952) (the “IPO Prospectus”), is required to redeem all of its outstanding public shares and dissolve and liquidate if it does not consummate its initial business combination (as such term is used in the IPO Prospectus) (the “Business Combination”) within eighteen (18) months after the closing of its initial public offering (the “IPO”), which has since been extended by amendment to Tenzing’s organizational documents to December 28, 2020 (subject to further extension by Tenzing by amendment to its organizational documents); and
WHEREAS, on July 20, 2020, Tenzing entered into that certain Agreement and Plan of Merger (as it may be amended, the “Merger Agreement”) by and among (A) Tenzing, (B) Tenzing Merger Subsidiary Inc., a Delaware corporation and a wholly-owned subsidiary of Tenzing (“Merger Sub”), (C) the Sponsor, in its capacity as the Purchaser Representative thereunder, (D) Laxminarayan Bhat, in the capacity as the Seller Representative thereunder, and (E) Reviva Pharmaceuticals, Inc., a Delaware corporation (together with its successors, “Reviva”), pursuant to which Merger Agreement, upon the consummation of the transactions contemplated thereby (the “Closing”), among other matters, (x) Tenzing will continue out of the British Virgin Islands and into the State of Delaware so as to re-domicile as and become a Delaware corporation (the “Conversion”), and (y) Merger Sub will merge with and into Reviva, with Reviva continuing as the surviving entity (the “Merger”), and as a result of which, all of the issued and outstanding capital stock of Reviva immediately prior to the consummation of the Merger shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, in exchange for the right to receive shares of common stock, par value $0.0001 per share, of Tenzing after the Conversion (“Common Stock”), and with outstanding options and warrants of Reviva being assumed by Tenzing, in each case, subject to the terms and conditions of the Merger Agreement (the Conversion, the Merger and the other transactions contemplated by the Merger Agreement, collectively, the “Transactions”).
NOW, THEREFORE, in consideration of the foregoing and the mutual premises, representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, hereby agree as follows:
Article I
WAIVER AND TRANSFER RESTRICTIONS
Section 1.1 Waiver of Redemption Rights. Shareholder hereby waives and agrees not to exercise any right that it may have to elect to have Tenzing redeem or convert any Subject Shares, whether in connection with the Transactions or any amendment of Tenzing’s organizational documents after the date hereof to extend Tenzing’s deadline to consummate its Business Combination (an “Extension”), and to reverse and revoke any prior redemption or conversion elections made with respect to the Subject Shares. The waiver granted by Shareholder pursuant to this Section 1.1 is irrevocable unless and until this Agreement is terminated in accordance with Section 3.1 and is granted in consideration of Tenzing entering into this Agreement and incurring certain related fees and expenses and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged.
Section 1.2 Transfer Restrictions. Shareholder agrees that, during the Term, Shareholder shall not, and shall cause its affiliates not to, directly or indirectly, without Tenzing’s prior written consent: (i) offer for sale, sell (including short sales), transfer, tender, pledge, encumber, assign or otherwise dispose of (including by gift) (collectively, a “Transfer”), or enter into any contract, option, derivative, hedging or other agreement or arrangement or understanding (including any profit-sharing arrangement) with respect to, or consent to, a Transfer of, any or all of the Subject Shares; (ii) grant any proxies or powers of attorney with respect to any or all of the Subject Shares; (iii) permit to exist any lien of any nature whatsoever with respect to any or all of the Subject Shares; or (iv) take any action that would have the effect of preventing, impeding, interfering with or adversely affecting Shareholder’s ability to perform its obligations under this Agreement.
Section 1.3 Acknowledgements. In furtherance of the foregoing restrictions in this Article I, Shareholder hereby:
(a) authorizes Tenzing to enter, or cause its transfer agent to enter, a stop transfer order with respect to all of the Subject Shares with respect to any transfer not permitted hereunder and to include the following legend on any share certificates for such shares: “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN TRANSFER AND NON-REDEMPTION RESTRICTIONS PURSUANT TO THAT CERTAIN NON-REDEMPTION AGREEMENT, DATED AS OF DECEMBER 8, 2020, BY AND AMONG TENZING ACQUISITION CORP., TENZING LLC AND [____________]. ANY TRANSFER OF SUCH SHARES IN VIOLATION OF THE TERMS AND PROVISIONS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND HAVE NO FORCE OR EFFECT WHATSOEVER”;
(b) irrevocably constitutes and appoints Tenzing and its designees, with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead, to revoke any redemption election made with respect to any Subject Shares and to cause Tenzing’s transfer agent to fail to redeem such Subject Shares in connection with the Transactions or any Extension; and
(c) in the event (i) of a breach of Section 1.2 or (ii) that a redemption election is made and not revoked with respect to any Subject Shares (the “Redeemed Shares”), unconditionally and irrevocably agrees to, or cause its affiliate to, if requested in writing by Tenzing, subscribe for and purchase, from Tenzing (or from its assignee(s) or designee(s), including, if applicable, its equityholders), the same number of such Redeemed Shares, for a per share purchase price equal to the greater of (A) the amount to be received for each Redeemed Share in connection with such redemption or (B) the dollar volume-weighted average price of the Ordinary Shares on the principal securities exchange or securities market on which such Ordinary Shares is then traded during the period beginning at 9:30:01 a.m., New York time, on the day that is twenty days prior to the date of redemption, and ending at 4:00:00 p.m., New York time, on the day immediately prior to the date of redemption, as reported by Bloomberg through its “HP” function (set to weighted average).
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Article II
CONSIDERATION
Section 2.1 Additional Tenzing Share Issuance. In consideration of Shareholder’s covenants under this Agreement, subject to Shareholder’s compliance with its obligations under the Agreement and the consummation of the Closing, Tenzing shall at the Closing issue to the Shareholder fifty-five thousand and fifty (55,050) shares of Common Stock (each such share of Common Stock, an “Additional Share”, and the Additional Shares collectively with the Subject Shares, the “Shares”).
Section 2.2 Sponsor Warrant Transfer. In consideration of Shareholder’s covenants under this Agreement, subject to Shareholder’s compliance with its obligations under the Agreement, the Sponsor hereby agrees to transfer to Shareholder on the first day after the Closing (i) all of the three hundred forty-three thousand (343,000) warrants to acquire Ordinary Shares of Tenzing that were acquired by the Sponsor as part of the private placement units that were issued to the Sponsor in the private placement conducted by Tenzing in connection with the IPO, each of which warrants will become an equivalent warrant to acquire shares of Common Stock in the Conversion (the “Private Placement Warrants”), and (ii) all of the one hundred ninety-seven thousand five hundred (197,500) warrants to acquire shares of Common Stock of Tenzing that will be issued to the Sponsor at the Closing as part of the private placement units of Tenzing issued upon conversion of $1.975,000 in working capital loans owed by Tenzing to the Sponsor (the “Working Capital Warrants” and, together with the Private Placement Warrants, the “Sponsor Warrants” and collectively with the Additional Shares, the “Additional Securities”). Shareholder hereby notifies the Company that it elects to be subject to Section 3.3.5 of the Warrant Agreement, dated as of August 20, 2018 (the “Warrant Agreement”), by and between Tenzing and Continental Stock Transfer & Trust Company, as warrant agent, upon Shareholder’s receipt of the Sponsor Warrants.
Section 2.3 Registration Rights Agreement. Upon the Closing, Tenzing and Shareholder will enter into the Registration Rights Agreement in the form attached as Exhibit A hereto (the “Registration Rights Agreement”) granting Shareholder registration rights with respect to the Additional Securities.
Section 2.4 Equity Financing Standstill. Tenzing hereby agrees that from the Closing until the one (1) month anniversary of the effectiveness of the resale registration statement filed by Tenzing in connection with the Registration Rights Agreement, Tenzing will not, without the prior written consent of the Shareholder, issue any shares of Common Stock or other equity securities of Tenzing (or warrants, options or other rights to acquire Common Stock) (any of the foregoing, “Tenzing Equity Interests”) in connection with any equity financing of Tenzing or its subsidiaries; provided, that the foregoing will not prevent Tenzing from issuing any Tenzing Equity Interests (i) securities issued pursuant to acquisitions or strategic transactions (including a strategic financing transaction) approved by a majority of the disinterested directors of Tenzing, provided that such securities are issued as “restricted securities” (as defined in Rule 144 (“Rule 144”) under the Securities Act of 1933, as amended (“Securities Act”), and carry no registration rights that are senior to the registration rights of the Shareholder under the Registration Rights Agreement, and provided that any such issuance shall only be to a third-party which is, itself or through its affiliates, an operating company or an owner of an asset in a business synergistic with the business of Tenzing and shall provide to Tenzing additional benefits in addition to the investment of funds, (ii) upon the exercise of outstanding warrants, options or other rights to acquire Common Stock that are issued and outstanding as of the Closing, provided that such securities are not amended after the Closing to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations) or to extend the term of such securities, (iii) in connection with an acquisition, license, joint venture or other strategic business transaction, (iv) as compensation or incentives to employees, directors or other service providers of Tenzing or its subsidiaries, (v) to suppliers or third party service providers in connection with the provision of goods or services to Tenzing or its subsidiaries, (vi) to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction involving Tenzing or its subsidiaries (provided that in the case of clauses (iii)-(vi), such securities are issued as “restricted securities” (as defined in Rule 144 under the Securities Act (as defined below) and carry no registration rights carry no registration rights that are senior to the registration rights of the Shareholder under the Registration Rights Agreement), or (vii) pursuant to a stock split or stock dividend.
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Section 2.5 Transfer Restrictions.
(a) The Additional Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Additional Securities other than pursuant to an effective registration statement or Rule 144, to Tenzing or to an affiliate of Shareholder or in connection with a pledge as contemplated in Section 2.5(b), Tenzing may require the transferor thereof to provide to Tenzing an opinion of counsel selected by the transferor and reasonably acceptable to Tenzing, the form and substance of which opinion shall be reasonably satisfactory to Tenzing, to the effect that such transfer does not require registration of such transferred Additional Securities under the Securities Act.
(b) Shareholder agrees to the imprinting, so long as is required by this Section 2.5, of a legend on any of the Additional Securities in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
Tenzing acknowledges and agrees that Shareholder may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Additional Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and, if required under the terms of such arrangement, Shareholder may transfer pledged or secured Additional Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of Tenzing and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At Shareholder’s expense, Tenzing will execute and deliver such reasonable documentation as a pledgee or secured party of Additional Securities may reasonably request in connection with a pledge or transfer of the Additional Securities, including, if the Additional Securities are subject to registration pursuant to the Registration Rights Agreement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders (as defined in the Registration Rights Agreement) thereunder.
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(c) Certificates evidencing the Additional Securities shall not contain any legend (including the legend set forth in Section 2.5(b) hereof), (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Additional Securities pursuant to Rule 144 (assuming for such purposes cashless exercise of the Sponsor Warrants to the extent applicable), (iii) if such Additional Securities are eligible for sale under Rule 144 (assuming for such purposes cashless exercise of the Sponsor Warrants to the extent applicable), without the requirement for Tenzing to be in compliance with the current public information required under Rule 144 as to such Additional Securities and without volume or manner-of-sale restrictions or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). If all or any portion of a Sponsor Warrant is exercised at a time when there is an effective registration statement to cover the resale of the Warrant Shares, or if such Additional Securities may be sold under Rule 144 and Tenzing is then in compliance with the current public information required under Rule 144 (assuming for such purposes cashless exercise of the Sponsor Warrants to the extent applicable), or if the Additional Securities may be sold under Rule 144 without the requirement for Tenzing to be in compliance with the current public information required under Rule 144 as to such Additional Securities or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then such Warrant Shares shall be issued free of all legends. Tenzing agrees that following the time as such legend is no longer required under this Section 2.5(c), it will, no later than two (2) Trading Days (as defined in the Registration Rights Agreement) following the delivery by Shareholder to Tenzing or the transfer agent of Tenzing (“Transfer Agent”) of a certificate representing Additional Securities, as the case may be, issued with a restrictive legend (such date, the “Legend Removal Date”), deliver or cause to be delivered to Shareholder a certificate representing such shares that is free from all restrictive and other legends. Tenzing may not make any notation on its records or give instructions to its transfer agent that enlarge the restrictions on transfer set forth in this Section 2.5. Certificates for Additional Securities subject to legend removal hereunder shall be transmitted to Shareholder by crediting the account of Shareholder’s prime broker with the Depository Trust Company System as directed by Shareholder.
(d) In addition to Shareholder’s other available remedies, Tenzing shall pay to Shareholder, in cash, (i) as partial liquidated damages and not as a penalty, for each $1,000 of Additional Securities (based on the VWAP (as defined in the Registration Rights Agreement) of such Additional Securities on the date such Additional Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 2.5(c), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such damages have begun to accrue) for each Trading Day after the Legend Removal Date until such certificate is delivered without a legend and (ii) if Tenzing fails to (a) issue and deliver (or cause to be delivered) to Shareholder by the Legend Removal Date a certificate representing the Additional Securities so delivered to Tenzing by such Shareholder that is free from all restrictive and other legends and (b) if after the Legend Removal Date such Shareholder purchases (in an open market transaction or otherwise) shares of Common Stock or public warrants of Tenzing (“Public Warrants”) to deliver in satisfaction of a sale by Shareholder of all or any portion of the number of shares of Common Stock or Sponsor Warrants, as applicable, or a sale of a number of shares of Common Stock or Public Warrants equal to all or any portion of the number of shares of Common Stock or Sponsor Warrants that such Shareholder anticipated receiving from Tenzing without any restrictive legend, then, an amount equal to the excess of Shareholder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock or Public Warrants so purchased (including brokerage commissions and other out-of-pocket expenses, if any) (the “Buy-In Price”) over the product of (A) such number of Additional Securities that Tenzing was required to deliver to Shareholder by the Legend Removal Date multiplied by (B) the lowest closing sale price of the Common Stock or Public Warrant, as applicable, on any Trading Day during the period commencing on the date of the delivery by Shareholder to Tenzing of the applicable Additional Securities (as the case may be) and ending on the date of such delivery and payment under this clause (ii).
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(e) Shareholder agrees with Tenzing that Shareholder will sell any Additional Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Additional Securities are sold pursuant to a registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Additional Securities as set forth in this Section 2.5 is predicated upon Tenzing’s reliance upon this understanding.
Section 2.6 Furnishing of Information; Public Information.
(a) Until the earliest of the time that (i) Shareholder owns no Additional Securities or (ii) the Sponsor Warrants have expired, Tenzing covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by Tenzing after the date hereof pursuant to the Exchange Act.
(b) At any time during the period commencing from the six (6) month anniversary of the date hereof and ending at such time that all of the Additional Securities may be sold without the requirement for Tenzing to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if Tenzing shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “Public Information Failure”) then, in addition to Shareholder’s other available remedies, such Public Information Failure shall be deemed an “Event” under the Registration Rights Agreement and, in addition to any amounts payable thereunder for failure to register the Additional Securities, Tenzing shall pay to Shareholder, in cash, as partial liquidated damages and not as a penalty, the amounts required to be paid thereunder (prorated for periods totaling less than thirty (30) days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required for Shareholder to transfer the Additional Securities pursuant to Rule 144. The payments to which Shareholder shall be entitled pursuant to this Section 2.6(b) are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3rd) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event Tenzing fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of twelve percent (12%) per annum (prorated for partial months) until paid in full. Nothing herein shall limit Shareholder’s right to pursue actual damages for the Public Information Failure, and Shareholder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
Section 2.7 No Other Agreement. Neither Tenzing nor any affiliate of Tenzing has entered into any non-redemption agreement or side letter or similar agreement with any other shareholder of Tenzing in connection with such shareholder’s non-redemption agreement that are more favorable to such shareholder than the terms of this Agreement.
Article III
TERMINATION
Section 3.1 Termination. This Agreement shall automatically terminate, and no Party shall have any rights or obligations hereunder, and this Agreement shall become null and void and have no effect, upon the earliest to occur of (a) the mutual written consent of the Parties or (b) the termination of the Merger Agreement in accordance with its terms.
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Article IV
RESPRESENTATIONS, WARRANTIES AND COVENANTS
Section 4.1 Representations, Warranties and Covenants of Shareholder. Shareholder hereby represents, warrants and covenants to each of Tenzing and Sponsor as of the date hereof and throughout the Term as follows:
(a) Shareholder acknowledges that no person or entity has made or makes any representation or warranty to Shareholder in respect of Tenzing, the Sponsor, Reviva, the Subject Shares, the Additional Securities or the Transactions except as expressly set forth in in this Article IV.
(b) Shareholder has been duly formed or incorporated and is validly existing in good standing under the laws of its jurisdiction of incorporation or formation. The execution, delivery and performance by Shareholder of this Agreement are within the powers of Shareholder, have been duly authorized and will not constitute or result in a material breach or material default under or material conflict with any federal or state statute, rule or regulation applicable to Shareholder, any order, ruling or regulation of any court or other tribunal or of any governmental commission or agency, or any material agreement or other material undertaking, to which Shareholder is a party or by which Shareholder is bound, and will not violate any provisions of Shareholder’s organizational documents. This Agreement has been duly authorized, executed and delivered by Shareholder and constitutes a legal, valid and binding obligation of Shareholder enforceable against Shareholder in accordance with its terms, except to the extent that enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization and moratorium laws and other laws of general application affecting the enforcement of creditors’ rights generally and subject to general principles of equity.
(c) Shareholder, directly or indirectly through its affiliates, owns the Shareholder Shares, free and clear of any liens (other than imposed by applicable securities laws, Tenzing’s organizational documents and this Agreement). There are no proxies, voting rights, shareholders’ agreements or other agreements or understandings, to which Shareholder or its affiliates is a party or bound with respect to the voting or transfer of any Ordinary Shares other than this Agreement.
(d) Shareholder acknowledges that, in connection with the Conversion, the Ordinary Shares, including any Subject Shares acquired by Shareholder, will be converted into shares of Common Stock of the Delaware successor to Tenzing.
(e) Shareholder acknowledges that the Additional Shares cannot be sold unless subsequently registered under the Securities Act and applicable state securities laws or an exemption from such registration is available. Shareholder understands that the Additional Shares (i) have not been (and upon their sale will not be) registered under the Securities Act or any state securities laws, (ii) have been offered and will be sold in reliance upon an exemption from the registration and prospectus delivery requirements of the Securities Act, and (iii) will be issued in reliance upon exemptions from the registration and prospectus delivery requirements of state securities laws which relate to private offerings. Pursuant to the foregoing, Shareholder acknowledges that until such time as the resale of the Additional Shares have been registered under the Securities Act or may otherwise may be sold pursuant to an exemption from registration, any certificates representing any Additional Shares acquired by Shareholder shall bear a customary restrictive legend (and a stop-transfer order may be placed against transfer of any certificates evidencing such Additional Shares) reflecting such limitations in form and substance reasonably acceptable to Tenzing.
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(f) Shareholder further represents and warrants that it is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act, or an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act, and Shareholder has executed the Investor Questionnaire attached hereto as Exhibit B (the “Questionnaire”) and shall provide to Tenzing an updated Questionnaire for any change in circumstances at any time on or prior to the Closing. As of the date of this Agreement, Shareholder and its affiliates do not have, and during the thirty (30) day period prior to the date of this Agreement, Shareholder and its affiliates have not, in a seller, transferor or other similar capacity, entered into, any “put equivalent position” as such term is defined in Rule 16a-1 of the Exchange Act or short sale positions with respect to the securities of Tenzing. In addition, Shareholder shall comply with all applicable provisions of Regulation M promulgated under the Securities Act.
(g) Shareholder and each of its affiliates holding Subject Shares is not (i) a person or entity named on the List of Specially Designated Nationals and Blocked Persons administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) or in any Executive Order issued by the President of the United States and administered by OFAC, or a person or entity prohibited by any OFAC sanctions program, (ii) a Designated National as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515, or (iii) a non-U.S. shell bank or providing banking services indirectly to a non-U.S. shell bank. Shareholder agrees to, and to cause its affiliates to, provide law enforcement agencies, if requested thereby, such records as required by applicable law, provided that Shareholder or its affiliates, as applicable, is permitted to do so under applicable law. If Shareholder or its affiliates holding Subject Shares is a financial institution subject to the Bank Secrecy Act (31 U.S.C. Section 5311 et seq.), as amended by the USA PATRIOT Act of 2001, and its implementing regulations (collectively, the “BSA/Patriot Act”), Shareholder and such affiliates, as applicable, maintain policies and procedures reasonably designed to comply with applicable obligations under the BSA/Patriot Act. To the extent required, Shareholder and each of its affiliates holding Subject Shares maintains policies and procedures reasonably designed (i) for the screening of its investors against the OFAC sanctions programs and (ii) to ensure that the funds held by Shareholder and/or its designated purchasing affiliates and used to purchase the Subject Shares were legally derived.
Section 4.2 Representations, Warranties and Covenants of Tenzing. Tenzing hereby represents, warrants and covenants to Shareholder as of the date hereof and throughout the Term as follows:
(a) Tenzing has been duly formed or incorporated and is validly existing in good standing under the laws of its jurisdiction of incorporation or formation. The execution, delivery and performance by Tenzing of this Agreement are within the powers of Tenzing. This Agreement has been duly authorized, executed and delivered by Tenzing and constitutes a legal, valid and binding obligation of Tenzing enforceable against Tenzing in accordance with its terms, except to the extent that enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization and moratorium laws and other laws of general application affecting the enforcement of creditors’ rights generally and subject to general principles of equity.
(b) The issuance of the Additional Shares and the compliance by Tenzing with all of the provisions of this Agreement and the consummation of the transactions herein will be done in accordance with the NASDAQ marketplace rules and will not conflict with or result in a material breach or material violation of any of the terms or provisions of, or constitute a material default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of Tenzing or any of its subsidiaries pursuant to the terms of (i) any indenture, mortgage, deed of trust, loan agreement, license, lease or any other agreement or instrument to which Tenzing or any of its subsidiaries is a party or by which Tenzing or any of its subsidiaries is bound or to which any of the property or assets of Tenzing is subject, which would have a material adverse effect on the business, properties, financial condition, stockholders' equity or results of operations of Tenzing and its subsidiaries, taken as a whole (a “Material Adverse Effect”), or materially affect the validity of the Additional Shares or the legal authority of Tenzing to comply in all material respects with the terms of this Agreement; (ii) result in any material violation of the provisions of the organizational documents of Tenzing; or (iii) result in any violation of any statute or any judgment, order, rule or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over Tenzing or any of its properties that would have a Material Adverse Effect or materially affect the validity of the Additional Shares or the legal authority of Tenzing to comply with this Agreement; subject, in the case of the foregoing clauses (i) and (iii) with respect to the consummation of the transactions therein contemplated.
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(c) The Additional Shares have been duly authorized and, when issued and delivered to Shareholder at the Closing in accordance with the terms of this Agreement, the Additional Shares will be validly issued, fully paid and non-assessable and will not have been issued in violation of or subject to any preemptive or similar rights created under Tenzing’s organizational documents or under the laws of the British Virgin Islands or the State of Delaware.
(d) Assuming the accuracy of Shareholder’s representations and warranties set forth in Section 4.1, in connection with the offer, sale and delivery of the Additional Shares in the manner contemplated by this Agreement, it is not necessary to register the issuance of the Additional Shares under the Securities Act.
(e) As of their respective dates, all reports (the “SEC Reports”) required to be filed by Tenzing with the SEC (as defined below) complied in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of Tenzing included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing and fairly present in all material respects the financial position of Tenzing as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, year-end audit adjustments. A copy of each SEC Report is available to Shareholder via the SEC’s EDGAR system. There are no outstanding or unresolved comments in comment letters received by Tenzing from the staff of the Division of Corporation Finance of the SEC with respect to any of the SEC Reports.
Section 4.3 Representations, Warranties and Covenants of Sponsor. Sponsor hereby represents, warrants and covenants to Shareholder as of the date hereof and throughout the Term as follows:
(a) Sponsor has been duly formed or incorporated and is validly existing in good standing under the laws of its jurisdiction of incorporation or formation. The execution, delivery and performance by Sponsor of this Agreement are within the powers of Sponsor, have been duly authorized and will not constitute or result in a material breach or material default under or material conflict with any federal or state statute, rule or regulation applicable to Sponsor, any order, ruling or regulation of any court or other tribunal or of any governmental commission or agency, or any material agreement or other material undertaking, to which Sponsor is a party or by which Sponsor is bound, and will not violate any provisions of Sponsor’s organizational documents. This Agreement has been duly authorized, executed and delivered by Sponsor and constitutes a legal, valid and binding obligation of Sponsor enforceable against Sponsor in accordance with its terms, except to the extent that enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization and moratorium laws and other laws of general application affecting the enforcement of creditors’ rights generally and subject to general principles of equity.
(b) Sponsor owns good and valid title to the Private Placement Warrants, and upon the issuance of the Working Capital Warrants by Tenzing at the Closing will have good and valid title to the Working Capital Warrants, in each case, free and clear of any liens, other than applicable securities laws or as set forth in (i) this Agreement, (ii) Tenzing’s organizational documents, (iii) the Warrant Agreement, (iv) the letter agreement, dated as of August 20, 2018, by and among Tenzing, the Sponsor and certain other insiders of Tenzing named therein, or (v) the Subscription Agreement, dated as of August 20, 2018, by and among Tenzing, Sponsor, and Maxim Group LLC. Upon delivery to Shareholder of the Sponsor Warrants by Sponsor in accordance with the terms and conditions of this Agreement, the entire legal and beneficial interest in the Sponsor Warrants will transfer to Shareholder free and clear of any liens, other than applicable securities laws or as set forth in (i) this Agreement, (ii) Tenzing’s organizational documents or (iii) the Warrant Agreement.
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Article V
MISCELLANEOUS
Section 5.1 Survival. All representations, warranties and covenants contained in this Agreement shall survive changes in the transactions, documents and instruments described herein, in each case until the end of the Term.
Section 5.2 Further Assurances. From time to time, at the other Party’s request and without further consideration, each Party shall execute and deliver such additional documents and take all such further action as may be reasonably necessary or desirable to consummate the transactions contemplated by this Agreement.
Section 5.3 Fees and Expenses. Each of the Parties shall be responsible for its own fees and expenses (including the fees and expenses of investment bankers, accountants and counsel) in connection with the entering into of this Agreement and the consummation of the transactions contemplated hereby.
Section 5.4 No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in Tenzing or Sponsor any direct or indirect ownership or incidence of ownership of or with respect to any Subject Shares.
Section 5.5 Amendments, Waivers, etc. This Agreement may not be amended, changed, supplemented, waived or otherwise modified, except upon the execution and delivery of a written agreement executed by each of the Parties hereto. The failure of any Party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other Party hereto with its obligations hereunder, and any custom or practice of the Parties at variance with the terms hereof shall not constitute a waiver by such Party of its right to exercise any such or other right, power or remedy or to demand such compliance.
Section 5.6 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery (i) in person, (ii) by facsimile or email (with affirmative confirmation receipt) or (iii) by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):
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Section 5.7 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible.
Section 5.8 Entire Agreement; Assignment; No Third Party Beneficiaries. This Agreement (including the exhibits hereto, which are hereby incorporated herein by reference and deemed part of this Agreement) constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, among the Parties, or any of them, with respect to the subject matter hereof. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of the other Party. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective heirs, successors and permitted assigns. This Agreement does not confer any rights or remedies upon any person or entity other than the Parties hereto and their heirs, successors and permitted assigns.
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Section 5.9 Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. When reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The words “hereof,” “herein,” “hereby” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The word “or” shall not be exclusive. Whenever used in this Agreement, any noun or pronoun shall be deemed to include the plural as well as the singular and to cover all genders. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted. For purposes of this Agreement, the term “affiliate” shall have the meaning ascribed to such term in Rule 12b-2 of the Exchange Act (and, for the avoidance of doubt, any reference in this Agreement to an affiliate of Tenzing prior to the Business Combination will include the Sponsor).
Section 5.10 Governing Law; Jurisdiction; WAIVER OF JURY TRIAL. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York without regard to the conflict of laws principles thereof. Any action, claim, suit or other legal proceeding (a “Proceeding”) arising out of or relating to this Agreement shall be heard and determined exclusively in any state or federal court located in New York, New York (or in any court in which appeal from such courts may be taken) (the “Specified Courts”). Each Party hereto hereby (a) submits to the exclusive jurisdiction of any Specified Court for the purpose of any Proceeding arising out of or relating to this Agreement and (b) irrevocably waives, and agrees not to assert by way of motion, defense or otherwise, in any such Proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the Proceeding is brought in an inconvenient forum, that the venue of the Proceeding is improper, or that this Agreement or the transactions contemplated hereby may not be enforced in or by any Specified Court. Each Party agrees that a final judgment in any Proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law. Each Party irrevocably consents to the service of the summons and complaint and any other process in any other Proceeding relating to the transactions contemplated by this Agreement, on behalf of itself, or its property, by personal delivery of copies of such process to such Party at the applicable address set forth in Section 5.6. Nothing in this Section 5.11 shall affect the right of any Party to serve legal process in any other manner permitted by law. Each Party hereto hereby waives to the fullest extent permitted by applicable law any right it may have to a trial by jury with respect to any Proceeding directly or indirectly arising out of, under or in connection with this Agreement or the transactions contemplated hereby.
Section 5.11 Specific Performance. The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each Party shall be entitled to obtain an injunction or restraining order to prevent threatened, actual or continuing breaches of this Agreement and to enforce specifically the terms and provisions hereof, in each case without the requirement to post any bond or other security or to prove actual damages or that money damages would be inadequate, this being in addition to any other right or remedy to which such Party may be entitled under this Agreement, at law or in equity.
Section 5.12 No Partnership, Agency or Joint Venture. This Agreement is intended to create a contractual relationship between the Parties, and is not intended to create, and does not create, any agency, partnership, joint venture or any like relationship between or among the Parties hereto. Without limiting the generality of the foregoing sentence, Shareholder (a) is entering into this Agreement solely on its own behalf and shall not have any obligation to perform on behalf of any other holder of Ordinary Shares or any liability (regardless of the legal theory advanced) for any breach of this Agreement by any other holder of Ordinary Shares and (b) by entering into this Agreement does not intend to form a “group” for purposes of Rule 13d-5(b)(1) of the Exchange Act or any other similar provision of applicable law. Shareholder has acted independently regarding its decision to enter into this Agreement.
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Section 5.13 Waiver against Trust. Shareholder understands that, as described in the IPO Prospectus, Tenzing has established a trust account (the “Trust Account”) containing the proceeds of its IPO and the overallotment securities acquired by its underwriters and from certain private placements occurring simultaneously with its IPO (including interest accrued from time to time thereon) for the benefit of Tenzing’s public shareholders (including overallotment shares acquired by Tenzing’s underwriters, the “Public Shareholders”), and that, except as otherwise described in the IPO Prospectus, Tenzing may disburse monies from the Trust Account only: (a) to the Public Shareholders in the event they elect to redeem their Tenzing shares in connection with the consummation of a Business Combination or in connection with an extension of Tenzing’s deadline to consummate a Business Combination, (b) to the Public Shareholders if Tenzing fails to consummate a Business Combination within eighteen (18) months after the closing of the IPO, which has since been extended by amendment to Tenzing’s organizational documents to December 28, 2020, and is subject to further extension by additional amendments to Tenzing’s organizational documents, (c) with respect to any interest earned on the amounts held in the Trust Account, amounts necessary to pay for any taxes, or (d) to Tenzing after or concurrently with the consummation of a Business Combination. For and in consideration of Tenzing entering into this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Shareholder hereby agrees on behalf of itself and its affiliates that, notwithstanding anything to the contrary in this Agreement, neither Shareholder nor any of its affiliates do now or shall at any time hereafter have any right, title, interest or claim of any kind in or to any monies in the Trust Account or distributions therefrom, or make any claim against the Trust Account (including any distributions therefrom), regardless of whether such claim arises as a result of, in connection with or relating in any way to, this Agreement or any other matter, and regardless of whether such claim arises based on contract, tort, equity or any other theory of legal liability (collectively, the “Released Claims”). Shareholder on behalf of itself and its affiliates hereby irrevocably waives any Released Claims that Shareholder or any of its affiliates may have against the Trust Account (including any distributions therefrom) now or in the future and will not seek recourse against the Trust Account (including any distributions therefrom) for any reason whatsoever. Shareholder agrees and acknowledges that such irrevocable waiver is material to this Agreement and specifically relied upon by Tenzing and its affiliates to induce Tenzing to enter into this Agreement, and Shareholder further intends and understands such waiver to be valid, binding and enforceable against Shareholder and each of its affiliates under applicable law. This Section 5.14 shall survive any termination of this Agreement and continue indefinitely. Notwithstanding the foregoing, this Section 5.14 shall not prevent Shareholder or its affiliates in the capacity as a Public Shareholder from receiving funds from the Trust Account after the termination of this Agreement upon the redemption of Shareholder’s or its affiliates’ Ordinary Shares or upon the liquidation of Tenzing.
Section 5.14 Counterparts. This Agreement may be executed in counterparts (including by facsimile or pdf or other electronic document transmission), each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
{Remainder of Page Intentionally Left Blank; Signature Page Follows}
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IN WITNESS WHEREOF, the Parties hereto have caused this Non-Redemption Agreement to be duly executed as of the date first set forth above.
Tenzing: | ||
Tenzing Acquisition Corp. | ||
By: | ||
Name: | ||
Title: | ||
The Sponsor: | ||
Tenzing LLC | ||
By: | ||
Name: | ||
Title: | ||
Shareholder: | ||
By: | ||
Name: | ||
Title: |
{Signature Page to Non-Redemption Agreement}
Exhibit A
Registration Rights Agreement
See attachment.
Exhibit B
Investor Questionnaire
B-1
Exhibit 10.12
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this “Agreement”) is made and entered into as of December 14, 2020, by and between Reviva Pharmaceuticals Holdings, Inc., a Delaware corporation (formerly Tenzing Acquisition Corp., a company incorporated in the British Virgin Islands (the “Predecessor”)) (together with the Predecessor and its successors, the “Company”), and [__________] (“Holder”).
This Agreement is made in connection with the Non-Redemption Agreement, dated as of December 8, 2020, by and between the Company and Holder (the “Non-Redemption Agreement”). The Company and Holder hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Non-Redemption Agreement shall have the meanings given such terms in the Redemption Agreement. As used in this Agreement, the following terms shall have the following meanings:
“Advice” shall have the meaning set forth in Section 6(c).
“Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 of the Exchange Act.
“Commission” means the United States Securities and Exchange Commission or any successor thereto.
“Common Stock” means shares of shares of common stock, par value $0.0001 per share, of the Company, along with any equity securities into which such shares are exchanged or converted after the date hereof.
“Effectiveness Date” means, with respect to the Initial Registration Statement required to be filed hereunder, the 60th calendar day following the date hereof (or, in the event of a “full review” by the Commission, the 90th calendar day following the date hereof) and with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the 60th calendar day following the date on which an additional Registration Statement is required to be filed hereunder (or, in the event of a “full review” by the Commission, the 90th calendar day following the date such additional Registration Statement is required to be filed hereunder); provided, however, that in the event the Company is notified by the Commission that one or more of the above Registration Statements will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date as to such Registration Statement shall be the fifth Trading Day following the date on which the Company is so notified if such date precedes the dates otherwise required above, provided, further, if such Effectiveness Date falls on a day that is not a Trading Day, then the Effectiveness Date shall be the next succeeding Trading Day.
“Effectiveness Period” shall have the meaning set forth in Section 2(a).
“Event” shall have the meaning set forth in Section 2(d).
“Event Date” shall have the meaning set forth in Section 2(d).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.
“Filing Date” means, with respect to the Initial Registration Statement required hereunder, the 15th calendar day following the date hereof and, with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the earliest practical date on which the Company is permitted by SEC Guidance to file such additional Registration Statement related to the Registrable Securities.
“Indemnified Party” shall have the meaning set forth in Section 5(c).
“Indemnifying Party” shall have the meaning set forth in Section 5(c).
“Initial Registration Statement” means the initial Registration Statement filed pursuant to this Agreement.
“Losses” shall have the meaning set forth in Section 5(a).
“Person” means an individual, corporation, partnership (including a general partnership, limited partnership or limited liability partnership), limited liability company, association, trust or other entity or organization, including a government, domestic or foreign, or political subdivision thereof, or an agency or instrumentality thereof.
“Plan of Distribution” shall have the meaning set forth in Section 2(a).
“Proceeding” means any claim, action, suit, litigation or other legal proceeding by or before any governmental authority.
“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.
“Registrable Securities” means, as of any date of determination, (a) the Additional Shares issued by the Company to Holder under Section 2.1 of the Non-Redemption Agreement, (b) the Sponsor Warrants transferred to Holder by the Sponsor under Section 2.2 of the Non-Redemption Agreement, (c) all shares of Common Stock issuable upon exercise of the Sponsor Warrants (the “Warrant Shares”), and (d) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) for so long as (i) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by Holder in accordance with such effective Registration Statement, (ii) such Registrable Securities have been previously sold in accordance with Rule 144, or (iii) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and reasonably acceptable to the Company’s transfer agent and Holder (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company, as reasonably determined by the Company, upon the advice of counsel to the Company.
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“Registration Statement” means any registration statement required to be filed hereunder pursuant to Section 2(a) and any additional registration statements contemplated by Section 2(c) or Section 3(c), including (in each case) the Prospectus, amendments and supplements to any such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in any such registration statement.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“SEC Guidance” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.
“Selling Stockholder Questionnaire” shall have the meaning set forth in Section 3(a).
“Trading Day” means any day on which shares of Common Stock are traded on the principal securities exchange or securities market on which the Common Stock are then traded.
“VWAP” means, for any security as of any date(s), the dollar volume-weighted average price for such security on the principal securities exchange or securities market on which such security is then traded during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set to weighted average) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported by OTC Markets Group Inc. If the VWAP cannot be calculated for such security on such date(s) on any of the foregoing bases, the VWAP of such security on such date(s) shall be the fair market value as determined reasonably and in good faith by a majority of the board of directors (or equivalent governing body) of the applicable issuer. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.
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2. Shelf Registration.
(a) On or prior to each Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all of the Registrable Securities that are not then registered on an effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415. Each Registration Statement filed hereunder shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on Form S-1 or another appropriate form in accordance herewith, subject to the provisions of Section 2(e)) and shall contain (unless otherwise directed by Holder) substantially the “Plan of Distribution” attached hereto as Annex A and substantially the “Selling Stockholder” section attached hereto as Annex B; provided, however, that Holder shall not be required to be named as an “underwriter” without Holder’s express prior written consent. Subject to the terms of this Agreement, the Company shall use its best efforts to cause a Registration Statement filed under this Agreement (including, without limitation, under Section 3(c)) to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the applicable Effectiveness Date, and shall use its best efforts to keep such Registration Statement continuously effective under the Securities Act until the date that all Registrable Securities covered by such Registration Statement (i) have been sold, thereunder or pursuant to Rule 144, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and Holder (the “Effectiveness Period”). The Company shall telephonically request effectiveness of a Registration Statement as of 5:00 p.m. (New York City time) on a Trading Day. The Company shall immediately notify Holder via facsimile or by e-mail of the effectiveness of a Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission, which shall be the date requested for effectiveness of such Registration Statement. The Company shall, by 9:30 a.m. (New York City time) on the Trading Day after the effective date of such Registration Statement, file a final Prospectus with the Commission as required by Rule 424. Failure to so notify Holder within one (1) Trading Day of such notification of effectiveness or failure to file a final Prospectus as foresaid shall be deemed an Event under Section 2(d).
(b) Notwithstanding the registration obligations set forth in Section 2(a), if the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly inform Holder thereof and use its commercially reasonable efforts to file amendments to the Initial Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-3, S-1 or such other form available to register for resale the Registrable Securities as a secondary offering, subject to the provisions of Section 2(e); with respect to filing on Form S-3, S-1 or other appropriate form, and subject to the provisions of Section 2(d) with respect to the payment of liquidated damages; provided, however, that prior to filing such amendment, the Company shall be obligated to use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including without limitation, Compliance and Disclosure Interpretation 612.09.
(c) Notwithstanding any other provision of this Agreement and subject to the payment of liquidated damages pursuant to Section 2(d), if the Commission or any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced as follows:
(i) First, the Company shall reduce or eliminate any securities to be included other than Registrable Securities;
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(ii) Second, the Company shall reduce Registrable Securities represented by Warrant Shares;
(iii) Third, the Company shall reduce Registrable Securities represented by Sponsor Warrants; and
(iv) Fourth, the Company shall reduce other Registrable Securities.
In the event of a cutback hereunder, the Company shall give Holder at least five (5) Trading Days prior written notice along with the calculations as to Holder’s allotment. In the event the Company amends the Initial Registration Statement in accordance with the foregoing, the Company will use its best efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-3, S-1 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement, as amended.
(d) If: (i) the Initial Registration Statement is not filed on or prior to its Filing Date (if the Company files the Initial Registration Statement without affording Holder the reasonable opportunity to promptly review and comment on the same as required by Section 3(a) herein, the Company shall be deemed to have not satisfied this clause (i)), or (ii) the Company fails to file with the Commission a request for acceleration of a Registration Statement in accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act, within five (5) Trading Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review, or (iii) prior to the effective date of a Registration Statement, the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the Commission in respect of such Registration Statement within ten (10) calendar days after the receipt of comments by or notice from the Commission that such amendment is required in order for such Registration Statement to be declared effective, or (iv) a Registration Statement registering for resale all of the Registrable Securities is not declared effective by the Commission by the Effectiveness Date of the Initial Registration Statement, or (v) after the effective date of a Registration Statement, such Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities included in such Registration Statement, or Holder is otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities, for more than ten (10) consecutive calendar days or more than an aggregate of twenty (20) calendar days (which need not be consecutive calendar days) during any 12-month period (any such failure or breach being referred to as an “Event”, and for purposes of clauses (i) and (iv), the date on which such Event occurs, and for purpose of clause (ii) the date on which such five (5) Trading Day period is exceeded, and for purpose of clause (iii) the date which such ten (10) calendar day period is exceeded, and for purpose of clause (v) the date on which such ten (10) or twenty (20) calendar day period, as applicable, is exceeded being referred to as “Event Date”), then, in addition to any other rights Holder may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to Holder an amount in cash, as partial liquidated damages and not as a penalty, with respect to each type of the Registrable Securities described in clauses (a) and (b) in the definition thereof (or clause (d) with respect to clauses (a) and (b)), the “Primary Registrable Securities”) equal to the product of (A) 2.0% multiplied by (B) with respect to each type of Holder’s Primary Registrable Security the quotient of (I) the number of Holder’s Primary Registrable Securities of such type that are not then covered by a Registration Statement that is then effective and available for use by Holder divided by (II) the total number of Holder’s Primary Registrable Securities of such type multiplied by (C) the VWAP of such Primary Registrable Securities over the five (5) Trading Days ending at the close of business on the principal securities exchange or securities market on which such type of Primary Registrable Securities are then traded immediately prior to the date of determination. Notwithstanding the foregoing, the parties agree that the maximum aggregate liquidated damages payable to Holder under this Agreement (including any interest thereon) shall be equal to $700,000. If the Company fails to pay any partial liquidated damages pursuant to this Section in full within seven days after the date payable, the Company will pay interest thereon at a rate of 12% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to Holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event.
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(e) If Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the Commission.
(f) Notwithstanding anything to the contrary contained herein, in no event shall the Company be permitted to name Holder or Affiliate of Holder as any Underwriter without the prior written consent of Holder.
3. Registration Procedures. In connection with the Company’s registration obligations hereunder, the Company shall:
(a) Not less than three (3) Trading Days prior to the filing of each Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to Holder copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the reasonable review of Holder, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such reasonable inquiries as shall be necessary, in the reasonable opinion of respective counsel to Holder, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which Holder shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than three (3) Trading Days after Holder has been so furnished copies of a Registration Statement or one (1) Trading Day after Holder has been so furnished copies of any related Prospectus or amendments or supplements thereto. Holder agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Annex B (a “Selling Stockholder Questionnaire”) on a date that is not less than two (2) Trading Days prior to the Filing Date or by the end of the second (2nd) Trading Day following the date on which Holder receives draft materials in accordance with this Section.
(b) (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities, (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to Holder true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that, the Company shall excise any information contained therein which would constitute material non-public information regarding the Company or any of its subsidiaries), and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by Holder set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.
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(c) If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of securities then registered in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the applicable Filing Date, an additional Registration Statement covering the resale by Holder of not less than the number of such Registrable Securities.
(d) Notify Holder (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by Holder) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose, (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus; provided, however, that in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company or any of its subsidiaries.
(e) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.
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(f) Furnish to Holder, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by Holder, and all exhibits to the extent requested by Holder (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission, provided that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.
(g) Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by Holder in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(d).
(h) Prior to any resale of Registrable Securities by Holder, use its commercially reasonable efforts to register or qualify or cooperate with Holder in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by Holder under the securities or Blue Sky laws of such jurisdictions within the United States as Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement, provided that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.
(i) If requested by Holder, cooperate with Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as Holder may request.
(j) Upon the occurrence of any event contemplated by Section 3(d), as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies Holder in accordance with clauses (iii) through (vi) of Section 3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then Holder shall suspend use of such Prospectus. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company shall be entitled to exercise its right under this Section 3(j) to suspend the availability of a Registration Statement and Prospectus, subject to the payment of partial liquidated damages otherwise required pursuant to Section 2(d), for a period not to exceed 60 calendar days (which need not be consecutive days) in any 12-month period.
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(k) Otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission under the Securities Act and the Exchange Act, including, without limitation, Rule 172 under the Securities Act, file any final Prospectus, including any supplement or amendment thereof, with the Commission pursuant to Rule 424 under the Securities Act, promptly inform Holder in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, Holder is required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder.
(l) Once it is available to the Company as a former shell company, the Company shall use its best efforts to maintain eligibility for use of Form S-3 (or any successor form thereto) for the registration of the resale of Registrable Securities.
(m) The Company may require Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities solely because Holder fails to furnish such information within two (2) Trading Days of the Company’s request, any liquidated damages that are accruing at such time as to Holder shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to Holder, until such information is delivered to the Company.
4. Registration Expenses. All fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any securities exchange or securities market on which the Common Stock is then listed for trading, and (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of Holder or any legal fees or other costs of Holder.
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5. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person who controls Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding Holder furnished in writing to the Company by Holder expressly for use therein, or to the extent that such information relates to Holder or Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto (it being understood that Holder has approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use by Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by Holder and prior to the receipt by Holder of the Advice contemplated in Section 6(c). The Company shall notify Holder promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified person and shall survive the transfer of any Registrable Securities by Holder in accordance with Section 6(f).
(b) Indemnification by Holder. Holder shall indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by Holder to the Company expressly for inclusion in such Registration Statement or such Prospectus or (ii) to the extent, but only to the extent, that such information relates to Holder’s information provided in the Selling Stockholder Questionnaire or the proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement (it being understood that Holder has approved Annex A hereto for this purpose), such Prospectus or in any amendment or supplement thereto. In no event shall the liability of Holder be greater in amount than the dollar amount of the proceeds (net of all expenses paid by Holder in connection with any claim relating to this Section 5 and the amount of any damages Holder has otherwise been required to pay by reason of such untrue statement or omission) received by Holder upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.
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(c) Conduct of Indemnification Proceedings.
(i) If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof, provided that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party.
(ii) An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.
(iii) Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) Trading Days of written notice thereof to the Indemnifying Party, provided that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) not to be entitled to indemnification hereunder.
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(d) Contribution. If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in this Section 5(d). In no event shall the contribution obligation of Holder be greater in amount than the dollar amount of the proceeds (net of all expenses paid by Holder in connection with any claim relating to this Section 5 and the amount of any damages Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation. The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.
6. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by Holder of any of their respective obligations under this Agreement, Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. Each of the Company and Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.
(b) Entire Agreement. This Agreement (together with the Annexes hereto and the Non-Redemption Agreement to the extent incorporated herein, and including all agreements entered into pursuant hereto or thereto or referenced herein or therein and all certificates and instruments delivered pursuant hereto and thereto) constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, representations, understandings, negotiations and discussions between the parties, whether oral or written, relating to the subject matter hereof.
(c) Discontinued Disposition. By its acquisition of Registrable Securities, Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(d)(iii) through (vi), Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company agrees and acknowledges that any periods during which Holder is required to discontinue the disposition of the Registrable Securities hereunder shall be subject to the provisions of Section 2(d).
(d) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and Holder. No failure or delay by a party in exercising any right hereunder shall operate as a waiver thereof. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.
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(e) Notices. All notices, consents, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered (i) in person, (ii) by facsimile or other electronic means (including email), with affirmative confirmation of receipt, (iii) one Trading Day after being sent, if sent by reputable, nationally recognized overnight courier service or (iv) three (3) Trading Days after being mailed, if sent by registered or certified mail, pre-paid and return receipt requested, in each case to the applicable party at the following addresses (or at such other address for a party as shall be specified by like notice):
(f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties. Neither party may assign (except by merger) its rights or obligations hereunder without the prior written consent of the other party hereto (not to be unreasonably withheld, delayed or conditioned), and any purported assignment without such consent shall be null and void ab initio.
(g) [Reserved].
(h) Execution and Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
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(i) Governing Law; Jurisdiction; WAIVER OF JURY TRIAL. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York without regard to the conflict of laws principles thereof. Any Proceeding arising out of or relating to this Agreement shall be heard and determined exclusively in any state or federal court located in New York, New York (or in any court in which appeal from such courts may be taken) (the “Specified Courts”). Each party hereto hereby (a) submits to the exclusive jurisdiction of any Specified Court for the purpose of any Proceeding arising out of or relating to this Agreement and (b) irrevocably waives, and agrees not to assert by way of motion, defense or otherwise, in any such Proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the Proceeding is brought in an inconvenient forum, that the venue of the Proceeding is improper, or that this Agreement or the transactions contemplated hereby may not be enforced in or by any Specified Court. Each party agrees that a final judgment in any Proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law. Each party irrevocably consents to the service of the summons and complaint and any other process in any other Proceeding relating to the transactions contemplated by this Agreement, on behalf of itself, or its property, by personal delivery of copies of such process to such party at the applicable address set forth in Section 6(e). Nothing in this Section 6(i) shall affect the right of any party to serve legal process in any other manner permitted by law. Each party hereto hereby waives to the fullest extent permitted by applicable law any right it may have to a trial by jury with respect to any Proceeding directly or indirectly arising out of, under or in connection with this Agreement or the transactions contemplated hereby.
(j) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.
(k) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
(l) Headings; Interpretation. The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof. When reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The words “hereof,” “herein,” “hereby” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The word “or” shall not be exclusive. Whenever used in this Agreement, any noun or pronoun shall be deemed to include the plural as well as the singular and to cover all genders. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.
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(Signature Pages Follow)
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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.
The Company: | ||
REVIVA PHARMACEUTICALS HOLDINGS, INC. | ||
By: | ||
Name: | ||
Title: | ||
Holder: | ||
By: | ||
Name: | ||
Title: |
{Signature Page to Registration Rights Agreement}
Annex A
Plan of Distribution
Each selling stockholder (the “Selling Stockholders”) of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the principal stock exchange, market or trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods when selling securities:
· | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
· | block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
· | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
· | an exchange distribution in accordance with the rules of the applicable exchange; |
· | privately negotiated transactions; |
· | settlement of short sales; |
· | in transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such securities at a stipulated price per security; |
· | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
· | a combination of any such methods of sale; or |
· | any other method permitted pursuant to applicable law. |
The Selling Stockholders may also sell securities under Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), or any other exemption from registration under the Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2121; and in the case of a principal transaction a markup or markdown in compliance with FINRA Rule 2121.
In connection with the sale of the securities or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Stockholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person or entity to distribute the securities.
The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
The Company agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144 under the Securities Act, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), any person or entity engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M under the Exchange Act, prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the common stock by the Selling Stockholders or any other person. The Company will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
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Annex B
SELLING SHAREHOLDERS
The common stock and warrants being offered by the selling shareholders are those previously issued to the selling shareholders, and, with respect to common stock, those issuable to the selling shareholders, upon exercise of the warrants. For additional information regarding the issuances of those shares of common stock and warrants, see “[insert heading title]” above. We are registering the shares of common stock and warrants in order to permit the selling shareholders to offer the securities for resale from time to time. [Except for the ownership of shares of common stock and warrants, the selling shareholders have not had any material relationship with us within the past three years.]
The table below lists the selling shareholders and other information regarding the beneficial ownership of the shares of common stock by each of the selling shareholders. The second column lists the number of shares of common stock beneficially owned by each selling shareholder, based on its ownership of the shares of common stock and warrants, as of ________, 20[__], assuming exercise of the warrants held by the selling shareholders on that date, without regard to any limitations on exercises.
The third column lists the shares of common stock being offered by this prospectus by the selling shareholders.
In accordance with the terms of a registration rights agreement with the selling shareholders, this prospectus generally covers the resale of the sum of (i) the number of shares of common stock issued to the selling shareholders in the “[insert heading title]” described above and (ii) the maximum number of shares of common stock issuable upon exercise of the related warrants, determined as if the outstanding warrants were exercised in full as of the trading day immediately preceding the date this registration statement was initially filed with the Securities and Exchange Commission, each as of the trading day immediately preceding the applicable date of determination and all subject to adjustment as provided in the registration right agreement, without regard to any limitations on the exercise of the warrants. The fourth column assumes the sale of all of the securities offered by the selling shareholders pursuant to this prospectus.
Under the terms of the warrants, if affirmatively elected by a holder thereof, a selling shareholder may not exercise the warrants to the extent such exercise would cause such selling shareholder, together with its affiliates, to beneficially own a number of shares of common stock which would exceed 9.8% of our then outstanding common stock following such exercise, excluding for purposes of such determination shares of common stock issuable upon exercise of the warrants which have not been exercised. The number of shares in the second column does not reflect this limitation. The selling shareholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”
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Name of Selling Shareholder |
Number of shares
of
Common Stock Owned Prior to Offering |
Maximum Number
of
shares of Common Stock to be Sold Pursuant to this Prospectus |
Number of shares
of
Common Stock Owned After Offering |
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Annex C
Exhibit 10.13
REVIVA PHARMACEUTICALS HOLDINGS, INC.
2020 EQUITY INCENTIVE PLAN
1. Establishment and Purpose
The purpose of the Reviva Pharmaceuticals Holdings, Inc. 2020 Equity Incentive Plan (the “Plan”) is to provide a means whereby eligible employees, officers, non-employee directors and other individual service providers develop a sense of proprietorship and personal involvement in the development and financial success of the Company and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its stockholders. The Company, by means of the Plan, seeks to retain the services of such eligible persons and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Subsidiaries.
The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Stock Units, Performance Shares, Performance Units, Incentive Bonus Awards, Other Cash-Based Awards and Other Stock-Based Awards. This Plan, as amended and restated, shall become effective upon the date set forth in Section 17.1 hereof.
2. Definitions
Wherever the following capitalized terms are used in the Plan, they shall have the meanings specified below:
2.1 “Affiliate” means, with respect to a Person, a Person that directly or indirectly Controls, or is Controlled by, or is under common Control with, such Person.
2.2 “Applicable Law” means the requirements relating to the administration of equity-based awards or equity compensation plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.
2.3 “Award” means an award of a Stock Option, Stock Appreciation Right, Restricted Stock, Stock Unit, Performance Share, Performance Unit, Incentive Bonus Award, Other Cash-Based Award and/or Other Stock-Based Award granted under the Plan.
2.4 “Award Agreement” means either (i) a written or electronic agreement entered into between the Company and a Participant setting forth the terms and conditions of an Award including any amendment or modification thereof, or (ii) a written or electronic statement issued by the Company to a Participant describing the terms and provisions of such Award, including any amendment or modification thereof. The Committee may provide for the use of electronic, internet or other non-paper Award Agreements, and the use of electronic, internet or other non-paper means for the acceptance thereof and actions thereunder by a Participant. Each Award Agreement shall be subject to the terms and conditions of the Plan and need not be identical.
2.5 “Board” means the Board of Directors of the Company.
2.6 “Cause” means (i) conviction of, or the entry of a plea of guilty or no contest to, a felony or any other crime that causes the Company or its Affiliates public disgrace or disrepute, or materially and adversely affects the Company’s or its Affiliates’ operations or financial performance or the relationship the Company has with its customers, (ii) gross negligence or willful misconduct with respect to the Company or any of its Affiliates, including, without limitation fraud, embezzlement, theft or proven dishonesty in the course of his or her employment; (iii) refusal to perform any lawful, material obligation or fulfill any duty (other than any duty or obligation of the type described in clause (v) below) to the Company or its Affiliates (other than due to a Disability), which refusal, if curable, is not cured within 10 days after delivery of written notice thereof; (iv) material breach of any agreement with or duty owed to the Company or any of its Affiliates (other than any breach of the type described in clause (v) below), which breach, if curable, is not cured within 10 days after the delivery of written notice thereof; or (v) any breach of any obligation or duty to the Company or any of its Affiliates (whether arising by statute, common law or agreement) relating to confidentiality, noncompetition, nonsolicitation or proprietary rights. Notwithstanding the foregoing, if a Participant and the Company (or any of its Affiliates) have entered into an employment agreement, consulting agreement or other similar agreement that specifically defines “cause,” then with respect to such Participant, “Cause” shall have the meaning defined in that employment agreement, consulting agreement or other agreement.
2.7 “Change in Control” shall be deemed to have occurred if any one of the following events shall occur:
(i) Any Person becomes the beneficial owner (as defined in Rule 13(d)-3 under the Exchange Act) of shares of Common Stock representing more than 50% of the total number of votes that may be cast for the election of directors of the Company;
(ii) The consummation of any merger or other business combination of the Company, sale of all or substantially all of the Company’s assets or combination of the foregoing transactions (a “Transaction”), other than a Transaction involving only the Company and one or more of its subsidiaries, or a Transaction immediately following which the shareholders of the Company immediately prior to the Transaction continue to have a majority of the voting power in the resulting entity;
(iii) Within any 12-month period beginning on or after the Effective Date, the persons who were directors of the Company immediately before the beginning of such period (the “Incumbent Directors”) shall cease (for any reason other than death) to constitute at least a majority of the Board (or the board of directors of any successor to the Company); provided that any director who was not a director as of the date hereof shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually or by prior operation of the foregoing unless such election, recommendation or approval was the result of an actual or threatened election contest of the type contemplated by Rule 14a-11 promulgated under the Exchange Act or any successor provision; or
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(iv) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, no event or condition shall constitute a Change in Control to the extent that, if it were, a penalty tax would be imposed under Section 409A of the Code; provided that, in such a case, the event or condition shall continue to constitute a Change in Control to the maximum extent possible (e.g., if applicable, in respect of vesting without an acceleration of distribution) without causing the imposition of such penalty tax.
2.8 “Code” means the Internal Revenue Code of 1986, as amended. For purposes of this Plan, references to sections of the Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.
2.9 “Committee” means the committee of the Board delegated with the authority to administer the Plan, or the full Board, as provided in Section 3 of the Plan. With respect to any decision relating to a Reporting Person, the Committee shall consist solely of two or more directors who are disinterested within the meaning of Rule 16b-3 promulgated under the Exchange Act, as amended from time to time, or any successor provision. The fact that a Committee member shall fail to qualify under any of these requirements shall not invalidate an Award if the Award is otherwise validly made under the Plan. The Board may at any time appoint additional members to the Committee, remove and replace members of the Committee with or without Cause, and fill vacancies on the Committee however caused.
2.10 “Common Stock” means the Company’s Common Stock, par value $.0001 per share.
2.11 “Company” means Reviva Pharmaceuticals Holdings, Inc., a Delaware corporation, and any successor thereto as provided in Section 15.8.
2.12 “Control” means, as to any Person, the power to direct or cause the direction of the management and policies of such Person, or the power to appoint directors of the Company, whether through the ownership of voting securities, by contract or otherwise (the terms “Controlled by” and “under common Control with” shall have correlative meanings).
2.13 “Date of Grant” means the date on which an Award under the Plan is granted by the Committee, or such later date as the Committee may specify to be the effective date of an Award.
2.14 “Disability” means a Participant being considered “disabled” within the meaning of Section 409A of the Code and Treasury Regulation 1.409A-3(i)(4), as well as any successor regulation or interpretation.
2.15 “Effective Date” means the date set forth in Section 17.1 hereof.
2.16 “Eligible Person” means any person who is an employee, officer, director, consultant, advisor or other individual service provider of the Company or any Subsidiary, or any person who is determined by the Committee to be a prospective employee, officer, director, consultant, advisor or other individual service provider of the Company or any Subsidiary; provided that the Award Agreement for any grant of an Award to a prospective employee, officer, director, consultant, advisor or other individual service provider will contain appropriate forfeiture provisions in the event such individual does not become employed or engaged by the Company or applicable Subsidiary .
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2.17 “Exchange Act” means the Securities Exchange Act of 1934, as amended.
2.18 “Fair Market Value” of a share of Common Stock shall be, as applied to a specific date (i) the closing price of a share of Common Stock as of such date on the principal established stock exchange or national market system on which the Common Stock is then traded (or, if there is no trading in the Common Stock as of such date, the closing price of a share of Common Stock on the most recent date preceding such date on which trades of the Common Stock were recorded), or (ii) if the shares of Common Stock are not then traded on an established stock exchange or national market system but are then traded in an over-the-counter market, the average of the closing bid and asked prices for the shares of Common Stock in such over-the-counter market as of such date (or, if there are no closing bid and asked prices for the shares of Common Stock as of such date, the average of the closing bid and the asked prices for the shares of Common Stock on the most recent date preceding such date on which such closing bid and asked prices are available on such over-the-counter market), or (iii) if the shares of Common Stock are not then listed on a national securities exchange or national market system or traded in an over-the-counter market, the price of a share of Common Stock as determined by the Committee in its discretion in a manner consistent with Section 409A of the Code and Treasury Regulation 1.409A-1(b)(5)(iv), as well as any successor regulation or interpretation.
2.19 “Incentive Bonus Award” means an Award granted under Section 12 of the Plan.
2.20 “Incentive Stock Option” means a Stock Option granted under Section 6 hereof that is intended to meet the requirements of Section 422 of the Code and the regulations promulgated thereunder.
2.21 “Nonqualified Stock Option” means a Stock Option granted under Section 6 hereof that is not an Incentive Stock Option.
2.22 “Other Cash-Based Award” means a contractual right granted to an Eligible Person under Section 13 hereof entitling such Eligible Person to receive a cash payment at such times, and subject to such conditions, as are set forth in the Plan and the applicable Award Agreement.
2.23 “Other Stock-Based Award” means a contractual right granted to an Eligible Person under Section 13 representing a notional unit interest equal in value to a share of Common Stock to be paid and distributed at such times, and subject to such conditions as are set forth in the Plan and the applicable Award Agreement.
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2.24 “Participant” means any Eligible Person who holds an outstanding Award under the Plan.
2.25 “Performance Shares” means a contractual right granted to an Eligible Person under Section 10 hereof representing a notional unit interest equal in value to a share of Common Stock to be paid and distributed at such times, and subject to such conditions, as are set forth in the Plan and the applicable Award Agreement.
2.26 “Performance Unit” means a contractual right granted to an Eligible Person under Section 11 hereof representing a notional dollar interest as determined by the Committee to be paid and distributed at such times, and subject to such conditions, as are set forth in the Plan and the applicable Award Agreement.
2.27 “Person” shall mean any individual, partnership, firm, trust, corporation, limited liability company or other similar entity. When two or more Persons act as a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding or disposing of Common Stock, such partnership, limited partnership, syndicate or group shall be deemed a “Person”.
2.28 “Plan” means the Reviva Pharmaceuticals Holdings, Inc. 2020 Equity Incentive Plan, as set forth herein and as may be amended from time to time.
2.29 “Reporting Person” means an officer, director or greater than ten percent stockholder of the Company within the meaning of Rule 16a-2 under the Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the Exchange Act.
2.30 “Restricted Stock Award” means a grant of shares of Common Stock to an Eligible Person under Section 8 hereof that are issued subject to such vesting and transfer restrictions and such other conditions as are set forth in the Plan and the applicable Award Agreement.
2.31 “Securities Act” means the Securities Act of 1933, as amended.
2.32 “Service” means a Participant’s employment or other service relationship with the Company or any Subsidiary. A change in the capacity in which a Participant renders service to the Company or a Subsidiary as an employee, director or consultant or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s Service with the Company or a Subsidiary, will not terminate a Participant’s Service; provided, however, that if the entity for which a Participant is rendering services ceases to qualify as a Subsidiary, as determined by the Committee in its sole discretion, such Participant’s Service will be considered to have terminated on the date such entity ceases to qualify as a Subsidiary. For example, a change in status from an employee of the Company to a consultant to or director of the Company will not constitute an interruption of Service. To the extent permitted by Applicable Law, the Committee or the chief executive officer of the Company, in that party’s sole discretion, may determine whether a Participant’s Service will be considered interrupted in the case of (i) any leave of absence approved by the Company or chief executive officer, including sick leave, military leave or any other personal leave, or (ii) transfers between the Company, a Subsidiary, or their successors. Notwithstanding the foregoing, a leave of absence will be treated as Service for purposes of vesting in an Award only to such extent as may be provided in the Company’s (or a Subsidiary’s) leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by Applicable Law. Unless the Committee provides otherwise, in its discretion, or as otherwise required by Applicable Law, vesting of Options shall be tolled during any unpaid leave of absence by a Participant.
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2.33 “Stock Appreciation Right” means a contractual right granted to an Eligible Person under Section 7 hereof entitling such Eligible Person to receive a payment, upon the exercise of such right, in such amount and at such time, and subject to such conditions, as are set forth in the Plan and the applicable Award Agreement.
2.34 “Stock Option” means a contractual right granted to an Eligible Person under Section 6 hereof to purchase shares of Common Stock at such time and price, and subject to such conditions, as are set forth in the Plan and the applicable Award Agreement.
2.35 “Stock Unit Award” means a contractual right granted to an Eligible Person under Section 9 hereof representing notional unit interests equal in value to a share of Common Stock to be paid and distributed at such times, and subject to such conditions, as are set forth in the Plan and the applicable Award Agreement.
2.36 “Subsidiary” means an entity (whether or not a corporation) that is wholly or majority owned or Controlled, directly or indirectly, by the Company; provided, however, that with respect to Incentive Stock Options, the term “Subsidiary” shall include only an entity that qualifies under Section 424(f) of the Code as a “subsidiary corporation” with respect to the Company.
3. Administration
Section 3.1 Committee Members. The Plan shall be administered by the Committee; provided that the entire Board may act in lieu of the Committee on any matter, subject to the requirements of Section 2.9 of the Plan with respect to an Award to a Reporting Person. If and to the extent permitted by Applicable Law, the Committee may authorize one or more Reporting Persons (or other officers) to make Awards to Eligible Persons who are not Reporting Persons (or other officers whom the Committee has specifically authorized to make Awards). Subject to Applicable Law and the restrictions set forth in the Plan, the Committee may delegate administrative functions to individuals who are Reporting Persons, officers, or employees of the Company or its Subsidiaries.
Section 3.2 Committee Authority. The Committee shall have such powers and authority as may be necessary or appropriate for the Committee to carry out its functions as described in the Plan. Subject to the express limitations of the Plan, the Committee shall have authority in its discretion to determine the Eligible Persons to whom, and the time or times at which, Awards may be granted, the number of shares, units or other rights subject to each Award, the exercise, base or purchase price of an Award (if any), the time or times at which an Award will become vested, exercisable or payable, the performance criteria, performance goals and other conditions of an Award, the duration of the Award, and all other terms of the Award. Subject to the terms of the Plan, the Committee shall have the authority to amend the terms of an Award in any manner that is not inconsistent with the Plan (including to extend the post-termination exercisability period of Stock Options and Stock Appreciation Rights), provided that no such action shall adversely affect the rights of a Participant with respect to an outstanding Award without the Participant’s consent. The Committee shall also have discretionary authority to interpret the Plan, to make all factual determinations under the Plan, and to make all other determinations necessary or advisable for Plan administration, including, without limitation, to correct any defect, to supply any omission or to reconcile any inconsistency in the Plan or any Award Agreement hereunder. The Committee may prescribe, amend, and rescind rules and regulations relating to the Plan. The Committee’s determinations under the Plan need not be uniform and may be made by the Committee selectively among Participants and Eligible Persons, whether or not such persons are similarly situated. The Committee shall, in its discretion, consider such factors as it deems relevant in making its interpretations, determinations and actions under the Plan including, without limitation, the recommendations or advice of any officer or employee of the Company or such attorneys, consultants, accountants or other advisors as it may select. All interpretations, determinations, and actions by the Committee shall be final, conclusive, and binding upon all parties.
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Section 3.3 No Liability; Indemnification. Neither the Board nor any Committee member, nor any Person acting at the direction of the Board or the Committee, shall be liable for any act, omission, interpretation, construction or determination made in good faith with respect to the Plan, any Award or any Award Agreement. The Company and its Subsidiaries shall pay or reimburse any member of the Committee, as well as any other Person who takes action on behalf of the Plan, for all reasonable expenses incurred with respect to the Plan, and to the full extent allowable under Applicable Law shall indemnify each and every one of them for any claims, liabilities, and costs (including reasonable attorney’s fees) arising out of their good faith performance of duties on behalf of the Company with respect to the Plan. The Company and its Subsidiaries may, but shall not be required to, obtain liability insurance for this purpose.
4. Shares Subject to the Plan
Section 4.1 Share Limitation.
(a) | Subject to adjustment pursuant to Section 4.3 hereof and the automatic increase set forth in Section 4.1(b), the maximum aggregate number of shares of Common Stock which may be issued under all Awards granted to Participants under the Plan shall be 461,587 shares (the “Initial Limit”), all of which may, but need not, be issued in respect of Incentive Stock Options. |
(b) | The number of shares of Common Stock available for issuance under the Plan shall automatically increase on January 1st of each year commencing with the January 1 following the Effective Date and on each January 1 thereafter until the Expiration Date (as defined in Section 17.2 of the Plan), in an amount equal to the least of (i) ten percent (10%) of the total number of shares of Common Stock outstanding on December 31st of the preceding calendar year or (ii) such number of shares of Common Stock determined by the Board (the “Annual Increase”). Notwithstanding the foregoing and, subject to adjustment as provided in Section 4.3, the maximum number of shares which may be issued in respect of Incentive Stock Options shall be equal to the Initial Limit. |
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(c) | Shares of Common Stock issued under the Plan may be either authorized but unissued shares or shares held in the Company’s treasury. Any shares of Common Stock subject to Awards that are settled in Common Stock shall be counted against the maximum share limitations of this Section 4.1(a) as one share of Common Stock for every share of Common Stock subject thereto. To the extent that any Award under the Plan payable in shares of Common Stock is forfeited, cancelled, returned to or repurchased by the Company for failure to satisfy vesting requirements or upon the occurrence of other forfeiture events, or otherwise terminates without payment being made thereunder, the shares of Common Stock covered thereby will no longer be counted against the foregoing maximum share limitations and may again be made subject to Awards under the Plan pursuant to such limitations. Shares of Common Stock that otherwise would have been issued upon the exercise of a Stock Option or Stock Appreciation Right or in payment with respect to any other form of Award, that are surrendered in payment or partial payment of the exercise price thereof and/or taxes withheld with respect to the exercise thereof or the making of such payment, will no longer be counted against the foregoing maximum share limitations and may again be made subject to Awards under the Plan pursuant to such limitations. |
Section 4.2 Individual Participant Limitations. Subject to adjustment as provided in Section 4.3, the number of shares of Common Stock with respect to which Awards may be granted during any calendar year to any one Eligible Person who is a non-employee director of the Board shall not exceed a number equal to twenty-five percent (25%) of all shares of Common Stock available for Awards under the Plan.
Section 4.3 Adjustments. If there shall occur any change with respect to the outstanding shares of Common Stock by reason of any recapitalization, reclassification, stock dividend, extraordinary dividend, stock split, reverse stock split, or other distribution with respect to the shares of Common Stock, or any merger, reorganization, consolidation, combination, spin-off or other similar corporate change, or any other change affecting the Common Stock, the Committee shall, in the manner and to the extent that it deems appropriate and equitable to the Participants and consistent with the terms of the Plan, cause an adjustment to be made in (i) the maximum numbers and kind of shares provided in Sections 4.1 and 4.2 hereof, (ii) the numbers and kind of shares of Common Stock, units, or other rights subject to then outstanding Awards, (iii) the price for each share or unit or other right subject to then outstanding Awards, (iv) the performance measures or goals relating to the vesting of an Award, and (v) any other terms of an Award that are affected by the event to prevent dilution or enlargement of a Participant’s rights under an Award. Notwithstanding the foregoing, in the case of Incentive Stock Options, any such adjustments shall, to the extent practicable, be made in a manner consistent with the requirements of Section 424(a) of the Code.
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5. Participation and Awards
Section 5.1 Designation of Participants. All Eligible Persons are eligible to be designated by the Committee to receive Awards and become Participants under the Plan. The Committee has the authority, in its discretion, to determine and designate from time to time those Eligible Persons who are to be granted Awards, the types of Awards to be granted and the number of shares of Common Stock, units or other amounts subject to such Awards. In selecting Eligible Persons to be Participants and in determining the type and amount of Awards to be granted under the Plan, the Committee shall consider any and all factors that it deems relevant or appropriate.
Section 5.2 Determination of Awards. The Committee shall determine the terms and conditions of all Awards granted to Participants in accordance with its authority under Section 3.2 hereof. An Award may consist of one type of right or benefit hereunder or of two or more such rights or benefits granted in tandem or in the alternative. To the extent deemed appropriate by the Committee, an Award shall be evidenced by an Award Agreement as described in Section 15.1 hereof.
6. Stock Options
Section 6.1 Grants of Stock Options. A Stock Option may be granted to any Eligible Person selected by the Committee. Subject to the provisions of Section 6.6 hereof and Section 422 of the Code, each Stock Option shall be designated, in the discretion of the Committee, as an Incentive Stock Option or as a Nonqualified Stock Option.
Section 6.2 Exercise Price. The exercise price per share of a Stock Option shall not be less than 100 percent of the Fair Market Value of a share of Common Stock on the Date of Grant, subject to adjustments as provided for under Section 4.2, provided that the Committee may in its discretion specify for any Stock Option an exercise price per share that is higher than the Fair Market Value on the Date of Grant and may establish an exercise price that is below Fair Market Value on the Date of Grant for Stock Options granted to Participants who are not residents of the U.S if permitted by applicable law and any applicable rules of the principal established stock exchange or national market system on which the Common Stock is traded.
Section 6.3 Vesting of Stock Options. The Committee shall in its discretion prescribe the time or times at which, or the conditions upon which, a Stock Option or portion thereof shall become vested and/or exercisable. The requirements for vesting and exercisability of a Stock Option may be based on the continued Service of the Participant for a specified time period (or periods) and/or on the attainment of a specified performance goal (or goals) established by the Committee in its discretion. The Committee may, in its discretion, accelerate the vesting or exercisability of any Stock Option at any time. The Committee in its sole discretion may allow a Participant to exercise unvested Nonqualified Stock Options, in which case the shares of Common Stock then issued shall be Restricted Stock having analogous vesting restrictions to the unvested Nonqualified Stock Options.
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Section 6.4 Term of Stock Options. The Committee shall in its discretion prescribe in an Award Agreement the period during which a vested Stock Option may be exercised, provided that the maximum term of a Stock Option shall be ten (10) years from the Date of Grant. A Stock Option may be earlier terminated as specified by the Committee and set forth in an Award Agreement upon or following the termination of a Participant’s Service, including by reason of voluntary resignation, death, Disability, termination for Cause or any other reason. Except as otherwise provided in this Section 6 or in an Award Agreement as such agreement may be amended from time to time upon authorization of the Committee, no Stock Option may be exercised at any time during the term thereof unless the Participant is then in Service. Notwithstanding the foregoing, unless an Award Agreement provides otherwise:
(a) If a Participant’s Service terminates by reason of his or her death, any Stock Option held by such Participant may, to the extent then exercisable, be exercised by such Participant’s estate or any person who acquires the right to exercise such Stock Option by bequest or inheritance at any time in accordance with its terms for up to one year after the date of such Participant’s death (but in no event after the earlier of the expiration of the term of such Stock Option or such time as the Stock Option is otherwise canceled or terminated in accordance with its terms). Upon expiration of such one-year period, no portion of the Stock Option held by such Participant shall be exercisable and the Stock Option shall be deemed to be canceled, forfeited and of no further force or effect.
(b) If a Participant’s Service terminates by reason of his or her Disability, any Stock Option held by such Participant may, to the extent then exercisable, be exercised by the Participant or his or her personal representative at any time in accordance with its terms for up to one year after the date of such Participant’s termination of Service (but in no event after the earlier of the expiration of the term of such Stock Option or such time as the Stock Option is otherwise canceled or terminated in accordance with its terms). Upon expiration of such one-year period, no portion of the Stock Option held by such Participant shall be exercisable and the Stock Option shall be deemed to be canceled, forfeited and of no further force or effect.
(c) If a Participant’s Service terminates for any reason other than death, Disability or Cause, any Stock Option held by such Participant may, to the extent then exercisable, be exercised by the Participant up until ninety (90) days following such termination of Service (but in no event after the earlier of the expiration of the term of such Stock Option or such time as the Stock Option is otherwise canceled or terminated in accordance with its terms). Upon expiration of such 90-day period, no portion of the Stock Option held by such Participant shall be exercisable and the Stock Option shall be deemed to be canceled, forfeited and of no further force or effect.
(d) If a Participant’s Service terminates for Cause, any Stock Option held by such Participant, whether vested or unvested, shall be deemed forfeited and canceled on the date of such termination of Service.
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(e) To the extent that a Stock Option of a Participant whose Service terminates is not exercisable, such Stock Option shall be deemed forfeited and canceled on the ninetieth (90th) day after such termination of Service or at such earlier time as the Committee may determine.
Section 6.5 Stock Option Exercise. Subject to such terms and conditions as shall be specified in an Award Agreement, a Stock Option may be exercised in whole or in part at any time during the term thereof by notice in the form required by the Company, and payment of the aggregate exercise price by certified or bank check, or such other means as the Committee may accept. As set forth in an Award Agreement or otherwise determined by the Committee, in its sole discretion, at or after grant, payment in full or in part of the exercise price of an Option may be made: (i) in the form of shares of Common Stock that have been held by the Participant for such period as the Committee may deem appropriate for accounting purposes or otherwise, valued at the Fair Market Value of such shares on the date of exercise; (ii) by surrendering to the Company shares of Common Stock otherwise receivable on exercise of the Option; (iii) by a cashless exercise program implemented by the Committee in connection with the Plan; and/or (iv) by such other method as may be approved by the Committee and set forth in an Award Agreement. Subject to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment of the exercise price and satisfaction of any applicable tax withholding pursuant to Section 16.5, the Company shall deliver to the Participant evidence of book entry shares of Common Stock, or upon the Participant’s request, Common Stock certificates in an appropriate amount based upon the number of shares of Common Stock purchased under the Option. Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in United States dollars or shares of Common Stock, as applicable.
Section 6.6 Additional Rules for Incentive Stock Options.
(a) Eligibility. An Incentive Stock Option may only be granted to an Eligible Person who is considered an employee under Treasury Regulation §1.421-7(h) of the Company or any Subsidiary.
(b) Annual Limits. No Incentive Stock Option shall be granted to an Eligible Person as a result of which the aggregate Fair Market Value (determined as of the Date of Grant) of the stock with respect to which Incentive Stock Options are exercisable for the first time in any calendar year under the Plan and any other stock option plans of the Company or any Subsidiary would exceed $100,000, determined in accordance with Section 422(d) of the Code. This limitation shall be applied by taking Incentive Stock Options into account in the order in which granted.
(c) Ten Percent Stockholders. If a Stock Option granted under the Plan is intended to be an Incentive Stock Option, and if the Participant, at the time of grant, owns stock possessing ten percent or more of the total combined voting power of all classes of Common Stock of the Company or any Subsidiary, then (A) the Stock Option exercise price per share shall in no event be less than 110 percent of the Fair Market Value of the Common Stock on the date of such grant and (B) such Stock Option shall not be exercisable after the expiration of five (5) years following the date such Stock Option is granted.
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(d) Disqualifying Dispositions. If shares of Common Stock acquired by exercise of an Incentive Stock Option are disposed of within two (2) years following the Date of Grant or one (1) year following the transfer of such shares to the Participant upon exercise, the Participant shall, promptly following such disposition, notify the Company in writing of the date and terms of such disposition and provide such other information regarding the disposition as the Company may reasonably require.
7. Stock Appreciation Rights
Section 7.1 Grant of Stock Appreciation Rights. A Stock Appreciation Right may be granted to any Eligible Person selected by the Committee. Stock Appreciation Rights may be granted on a basis that allows for the exercise of the right by the Participant or that provides for the automatic payment of the right upon a specified date or event.
Section 7.2 Base Price. The base price of a Stock Appreciation Right shall be determined by the Committee in its sole discretion; provided, however, that the base price for any grant of a Stock Appreciation Right shall not be less than 100 percent of the Fair Market Value of a share of Common Stock on the Date of Grant, subject to adjustments as provided for under Section 4.2.
Section 7.3 Vesting Stock Appreciation Rights. The Committee shall in its discretion prescribe the time or times at which, or the conditions upon which, a Stock Appreciation Right or portion thereof shall become vested and/or exercisable. The requirements for vesting and exercisability of a Stock Appreciation Right may be based on the continued Service of a Participant for a specified time period (or periods) or on the attainment of a specified performance goal (or goals) established by the Committee in its discretion. The Committee may, in its discretion, accelerate the vesting or exercisability of any Stock Appreciation Right at any time.
Section 7.4 Term of Stock Appreciation Rights. The Committee shall in its discretion prescribe in an Award Agreement the period during which a vested Stock Appreciation Right may be exercised, provided that the maximum term of a Stock Appreciation Right shall be ten (10) years from the Date of Grant. A Stock Appreciation Right may be earlier terminated as specified by the Committee and set forth in an Award Agreement upon or following the termination of a Participant’s Service, including by reason of voluntary resignation, death, Disability, termination for Cause or any other reason. Except as otherwise provided in this Section 7 or in an Award Agreement as such agreement may be amended from time to time upon authorization of the Committee, no Stock Appreciation Right may be exercised at any time during the term thereof unless the Participant is then in the Service of the Company or one of its Subsidiaries.
Section 7.5 Payment of Stock Appreciation Rights. Subject to such terms and conditions as shall be specified in an Award Agreement, a vested Stock Appreciation Right may be exercised in whole or in part at any time during the term thereof by notice in the form required by the Company and payment of any exercise price. Upon the exercise of a Stock Appreciation Right and payment of any applicable exercise price, a Participant shall be entitled to receive an amount determined by multiplying: (i) the excess of the Fair Market Value of a share of Common Stock on the date of exercise of the Stock Appreciation Right over the base price of such Stock Appreciation Right, by (ii) the number of shares as to which such Stock Appreciation Right is exercised. Payment of the amount determined under the immediately preceding sentence may be made, as approved by the Committee and set forth in the Award Agreement, in shares of Common Stock valued at their Fair Market Value on the date of exercise, in cash, or in a combination of shares of Common Stock and cash, subject to applicable tax withholding requirements set forth in Section 16.5. If Stock Appreciation Rights are settled in shares of Common Stock, then as soon as practicable following the date of settlement the Company shall deliver to the Participant evidence of book entry shares of Common Stock, or upon the Participant’s request, Common Stock certificates in an appropriate amount.
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8. Restricted Stock Awards
Section 8.1 Grant of Restricted Stock Awards. A Restricted Stock Award may be granted to any Eligible Person selected by the Committee. The Committee may require the payment by the Participant of a specified purchase price in connection with any Restricted Stock Award. The Committee may provide in an Award Agreement for the payment of dividends and distributions to the Participant at such times as paid to stockholders generally or at the times of vesting or other payment of the Restricted Stock Award. If any dividends or distributions are paid in stock while a Restricted Stock Award is subject to restrictions under Section 8.3 of the Plan, the dividends or other distributions shares shall be subject to the same restrictions on transferability as the shares of Common Stock to which they were paid unless otherwise set forth in the Award Agreement. The Committee may also subject the grant of any Restricted Stock Award to the execution of a voting agreement with the Company or with any Affiliate of the Company.
Section 8.2 Vesting Requirements. The restrictions imposed on shares of Common Stock granted under a Restricted Stock Award shall lapse in accordance with the vesting requirements specified by the Committee in the Award Agreement. Upon vesting of a Restricted Stock Award, such Award shall be subject to the tax withholding requirement set forth in Section 14.5. The requirements for vesting of a Restricted Stock Award may be based on the continued Service of the Participant for a specified time period (or periods) or on the attainment of a specified performance goal (or goals) established by the Committee in its discretion. The Committee may, in its discretion, accelerate the vesting of a Restricted Stock Award at any time. If the vesting requirements of a Restricted Stock Award shall not be satisfied, the Award shall be forfeited and the shares of Common Stock subject to the Award shall be returned to the Company. In the event that the Participant paid any purchase price with respect to such forfeited shares, unless otherwise provided by the Committee in an Award Agreement, the Company will refund to the Participant the lesser of (i) such purchase price and (ii) the Fair Market Value of such shares on the date of forfeiture.
Section 8.3 Restrictions. Shares granted under any Restricted Stock Award may not be transferred, assigned or subject to any encumbrance, pledge, or charge until all applicable restrictions are removed or have expired, unless otherwise allowed by the Committee. The Committee may require in an Award Agreement that certificates representing the shares granted under a Restricted Stock Award bear a legend making appropriate reference to the restrictions imposed, and that certificates representing the shares granted or sold under a Restricted Stock Award will remain in the physical custody of an escrow holder until all restrictions are removed or have expired.
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Section 8.4 Rights as Stockholder. Subject to the foregoing provisions of this Section 8 and the applicable Award Agreement, the Participant to whom a Restricted Stock Award is made shall have all rights of a stockholder with respect to the shares granted to the Participant under the Restricted Stock Award, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto, unless the Committee determines otherwise at the time the Restricted Stock Award is granted.
Section 8.5 Section 83(b) Election. If a Participant makes an election pursuant to Section 83(b) of the Code with respect to a Restricted Stock Award, the Participant shall file, within 30 days following the Date of Grant, a copy of such election with the Company (directed to the Secretary thereof) and with the Internal Revenue Service, in accordance with the regulations under Section 83 of the Code. The Committee may provide in an Award Agreement that the Restricted Stock Award is conditioned upon the Participant’s making or refraining from making an election with respect to the Award under Section 83(b) of the Code.
9. Stock Unit Awards
Section 9.1 Grant of Stock Unit Awards. A Stock Unit Award may be granted to any Eligible Person selected by the Committee. The value of each Stock Unit under a Stock Unit Award is equal to the Fair Market Value of the Common Stock on the applicable date or time period of determination, as specified by the Committee. A Stock Unit Award shall be subject to such restrictions and conditions as the Committee shall determine. A Stock Unit Award may be granted together with a dividend equivalent right with respect to the shares of Common Stock subject to the Award, which may be accumulated and may be deemed reinvested in additional Stock Units, as determined by the Committee in its discretion. If any dividend equivalents are paid while a Stock Unit Award is subject to restrictions under Section 9 of the Plan, the dividend equivalents shall be subject to the same restrictions on transferability as the Stock Units to which they were paid, unless otherwise set forth in the Award Agreement.
Section 9.2 Vesting of Stock Unit Awards. On the Date of Grant, the Committee shall, in its discretion, determine any vesting requirements with respect to a Stock Unit Award, which shall be set forth in the Award Agreement. The requirements for vesting of a Stock Unit Award may be based on the continued Service of the Participant for a specified time period (or periods) or on the attainment of a specified performance goal (or goals) established by the Committee in its discretion. The Committee may, in its discretion, accelerate the vesting of a Stock Unit Award at any time. A Stock Unit Award may also be granted on a fully vested basis, with a deferred payment date as may be determined by the Committee or elected by the Participant in accordance with rules established by the Committee.
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Section 9.3 Payment of Stock Unit Awards. A Stock Unit Award shall become payable to a Participant at the time or times determined by the Committee and set forth in the Award Agreement, which may be upon or following the vesting of the Award. Payment of a Stock Unit Award may be made, at the discretion of the Committee, in cash or in shares of Common Stock, or in a combination thereof as described in the Award Agreement, subject to applicable tax withholding requirements set forth in Section 16.5. Any cash payment of a Stock Unit Award shall be made based upon the Fair Market Value of the Common Stock, determined on such date or over such time period as determined by the Committee. Notwithstanding the foregoing, unless specified otherwise in the Award Agreement, any Stock Unit, whether settled in Common Stock or cash, shall be paid no later than two and one-half months after the later of the calendar year or fiscal year in which the Stock Units vest. If Stock Unit Awards are settled in shares of Common Stock, then as soon as practicable following the date of settlement the Company shall deliver to the Participant evidence of book entry shares of Common Stock, or upon the Participant’s request, Common Stock certificates in an appropriate amount.
10. Performance Shares
Section 10.1 Grant of Performance Shares. Performance Shares may be granted to any Eligible Person selected by the Committee. A Performance Share Award shall be subject to such restrictions and condition as the Committee shall specify. A Performance Share Award may be granted with a dividend equivalent right with respect to the shares of Common Stock subject to the Award, which may be accumulated and may be deemed reinvested in additional Stock Units, as determined by the Committee in its discretion.
Section 10.2 Value of Performance Shares. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the Grant Date. The Committee shall set performance goals in its discretion that, depending on the extent to which they are met over a specified time period, shall determine the number of Performance Shares that shall be paid to a Participant.
Section 10.3 Earning of Performance Shares. After the applicable time period has ended, the number of Performance Shares earned by the Participant over such time period shall be determined as a function of the extent to which the applicable corresponding performance goals have been achieved. This determination shall be made solely by the Committee. The Committee may, in its discretion, waive any performance or vesting conditions relating to a Performance Share Award.
Section 10.4 Form and Timing of Payment of Performance Shares. The Committee shall pay at the close of the applicable Performance Period, or as soon as practicable thereafter, any earned Performance Shares in the form of cash or in shares of Common Stock or in a combination thereof, as specified in a Participant’s Award Agreement, subject to applicable tax withholding requirements set forth in Section 16.5. Notwithstanding the foregoing, unless specified otherwise in the Award Agreement, all Performance Shares shall be paid no later than two and one-half months following the later of the calendar year or fiscal year in which such Performance Shares vest. Any shares of Common Stock paid to a Participant under this Section 10.4 may be subject to any restrictions deemed appropriate by the Committee. If Performance Shares are settled in shares of Common Stock, then as soon as practicable following the date of settlement the Company shall deliver to the Participant evidence of book entry shares of Common Stock, or upon the Participant’s request, Common Stock certificates in an appropriate amount.
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11. Performance Units
Section 11.1 Grant of Performance Units. Performance Units may be granted to any Eligible Person selected by the Committee. A Performance Unit Award shall be subject to such restrictions and condition as the Committee shall specify in a Participant’s Award Agreement.
Section 11.2 Value of Performance Units. Each Performance Unit shall have an initial notional value equal to a dollar amount determined by the Committee, in its sole discretion. The Committee shall set performance goals in its discretion that, depending on the extent to which they are met over a specified time period, will determine the number of Performance Units that shall be settled and paid to the Participant.
Section 11.3 Earning of Performance Units. After the applicable time period has ended, the number of Performance Units earned by the Participant, and the amount payable in cash, in shares or in a combination thereof, over such time period shall be determined as a function of the extent to which the applicable corresponding performance goals have been achieved. This determination shall be made solely by the Committee. The Committee may, in its discretion, waive any performance or vesting conditions relating to a Performance Unit Award.
Section 11.4 Form and Timing of Payment of Performance Units. The Committee shall pay at the close of the applicable Performance Period, or as soon as practicable thereafter, any earned Performance Units in the form of cash or in shares of Common Stock or in a combination thereof, as specified in a Participant’s Award Agreement, subject to applicable tax withholding requirements set forth in Section 16.5. Notwithstanding the foregoing, unless specified otherwise in the Award Agreement, all Performance Units shall be paid no later than two and one-half months following the later of the calendar year or fiscal year in which such Performance Units vest. Any shares of Common Stock paid to a Participant under this Section 11.4 may be subject to any restrictions deemed appropriate by the Committee. If Performance Units are settled in shares of Common Stock, then as soon as practicable following the date of settlement the Company shall deliver to the Participant evidence of book entry shares of Common Stock, or upon the Participant’s request, Common Stock certificates in an appropriate amount.
12. Incentive Bonus Awards
Section 12.1 Incentive Bonus Awards. The Committee, at its discretion, may grant Incentive Bonus Awards to such Participants as it may designate from time to time. The terms of a Participant’s Incentive Bonus Award shall be set forth in the Participant’s Award Agreement. Each Award Agreement shall specify such general terms and conditions as the Committee shall determine.
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Section 12.2 Incentive Bonus Award Performance Criteria. The determination of Incentive Bonus Awards for a given year or years may be based upon the attainment of specified levels of Company or Subsidiary performance as measured by pre-established, objective performance criteria determined at the discretion of the Committee. The Committee shall (i) select those Participants who shall be eligible to receive an Incentive Bonus Award, (ii) determine the performance period, (iii) determine target levels of performance, and (iv) determine the level of Incentive Bonus Award to be paid to each selected Participant upon the achievement of each performance level. The Committee generally shall make the foregoing determinations prior to the commencement of services to which an Incentive Bonus Award relates, to the extent applicable, and while the outcome of the performance goals and targets is uncertain.
Section 12.3 Payment of Incentive Bonus Awards.
(a) Incentive Bonus Awards shall be paid in cash or Common Stock, as set forth in a Participant’s Award Agreement. Payments shall be made following a determination by the Committee that the performance targets were attained and shall be made within two and one-half months after the later of the end of the fiscal or calendar year in which the Incentive Award is no longer subject to a substantial risk of forfeiture.
(b) The amount of an Incentive Bonus Award to be paid upon the attainment of each targeted level of performance shall equal a percentage of a Participant’s base salary for the fiscal year, a fixed dollar amount, or such other formula, as determined by the Committee.
13. Other Cash-Based Awards and Other Stock-Based Awards
Section 13.1 Other Cash-Based and Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the transfer of actual shares of Common Stock to a Participant, or payment in cash or otherwise of amounts based on the value of shares of Common Stock. In addition, the Committee, at any time and from time to time, may grant Cash-Based Awards to a Participant in such amounts and upon such terms as the Committee shall determine, in its sole discretion.
Section 13.2 Value of Cash-Based Awards and Other Stock-Based Awards. Each Other Stock-Based Award shall be expressed in terms of shares of Common Stock or units based on shares of Common Stock, as determined by the Committee, in its sole discretion. Each Other Cash-Based Award shall specify a payment amount or payment range as determined by the Committee, in its sole discretion. If the Committee exercises its discretion to establish performance goals, the value of Other Cash-Based Awards that shall be paid to the Participant will depend on the extent to which such performance goals are met.
Section 13.3 Payment of Cash-Based Awards and Other Stock-Based Awards. Payment, if any, with respect to Other Cash-Based Awards and Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash or Shares as the Committee determines.
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14. Change in Control
Section 14.1 Effect of Change in Control.
(a) The Committee may, at the time of the grant of an Award and as set forth in an Award Agreement, provide for the effect of a “Change in Control” on an Award. Such provisions may include any one or more of the following: (i) the acceleration or extension of time periods for purposes of exercising, vesting in, or realizing gain from any Award, (ii) the elimination or modification of performance or other conditions related to the payment or other rights under an Award, (iii) provision for the cash settlement of an Award for an equivalent cash value, as determined by the Committee, or (iv) such other modification or adjustment to an Award as the Committee deems appropriate to maintain and protect the rights and interests of Participants upon or following a Change in Control. To the extent necessary for compliance with Section 409A of the Code, an Award Agreement shall provide that an Award subject to the requirements of Section 409A that would otherwise become payable upon a Change in Control shall only become payable to the extent that the requirements for a “change in control” for purposes of Section 409A have been satisfied.
(b) Notwithstanding anything to the contrary set forth in the Plan, unless otherwise provided by an Award Agreement, upon or in anticipation of any Change in Control, the Committee may, in its sole and absolute discretion and without the need for the consent of any Participant, take one or more of the following actions contingent upon the occurrence of that Change in Control: (i) cause any or all outstanding Stock Options and Stock Appreciation Rights held by Participants affected by the Change in Control to become vested and immediately exercisable, in whole or in part; (ii) cause any or all outstanding Restricted Stock, Stock Units, Performance Shares, Performance Units, Incentive Bonus Award and any other Award held by Participants affected by the Change in Control to become non-forfeitable, in whole or in part; (iii) cancel any Stock Option or Stock Appreciation Right in exchange for a substitute option in a manner consistent with the requirements of Treasury Regulation §1.424-1(a) or §1.409A-1(b)(5)(v)(D), as applicable (notwithstanding the fact that the original Stock Option may never have been intended to satisfy the requirements for treatment as an Incentive Stock Option); (iv) cancel any Restricted Stock, Stock Units, Performance Shares or Performance Units held by a Participant in exchange for restricted stock or performance shares of or stock or performance units in respect of the capital stock of any successor corporation; (v) redeem any Restricted Stock held by a Participant affected by the Change in Control for cash and/or other substitute consideration with a value equal to the Fair Market Value of an unrestricted share of Common Stock on the date of the Change in Control; (vi) terminate any Award in exchange for an amount of cash and/or property equal to the amount, if any, that would have been attained upon the exercise of such Award or realization of the Participant’s rights as of the date of the occurrence of the Change in Control (the “Change in Control Consideration”); provided, however that if the Change in Control Consideration with respect to any Option or Stock Appreciation Right does not exceed the exercise price of such Option or Stock Appreciation Right, the Committee may cancel the Option or Stock Appreciation Right without payment of any consideration therefor. Any such Change in Control Consideration may be subject to any escrow, indemnification and similar obligations, contingencies and encumbrances applicable in connection with the Change in Control to holders of Common Stock. Without limitation of the foregoing, if as of the date of the occurrence of the Change in Control the Committee determines that no amount would have been attained upon the realization of the Participant’s rights, then such Award may be terminated by the Company without payment. The Committee may cause the Change in Control Consideration to be subject to vesting conditions (whether or not the same as the vesting conditions applicable to the Award prior to the Change in Control) and/or make such other modifications, adjustments or amendments to outstanding Awards or this Plan as the Committee deems necessary or appropriate.
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(c) The Committee may require a Participant to (i) represent and warrant as to the unencumbered title to the Participant’s Awards, (ii) bear such Participant’s pro rata share of any post-closing indemnity obligations, and be subject to the same or similar post-closing purchase price adjustments, escrow terms, offset rights, holdback terms and similar conditions as the other holders of Common Stock, and (iii) execute and deliver such documents and instruments as the Committee may reasonably require for the Participant to be bound by such obligations. The Committee will endeavor to take action under this Section 14 in a manner that does not cause a violation of Section 409A of the Code with respect to an Award.
15. General Provisions
Section 15.1 Award Agreement. To the extent deemed necessary by the Committee, an Award under the Plan shall be evidenced by an Award Agreement in a written or electronic form approved by the Committee setting forth the number of shares of Common Stock or units subject to the Award, the exercise price, base price, or purchase price of the Award, the time or times at which an Award will become vested, exercisable or payable and the term of the Award. The Award Agreement may also set forth the effect on an Award of termination of Service under certain circumstances. The Award Agreement shall be subject to and incorporate, by reference or otherwise, all of the applicable terms and conditions of the Plan, and may also set forth other terms and conditions applicable to the Award as determined by the Committee consistent with the limitations of the Plan. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code. The grant of an Award under the Plan shall not confer any rights upon the Participant holding such Award other than such terms, and subject to such conditions, as are specified in the Plan as being applicable to such type of Award (or to all Awards) or as are expressly set forth in the Award Agreement.
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Section 15.2 Forfeiture Events/Representations. The Committee may specify in an Award Agreement at the time of the Award that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events shall include, but shall not be limited to, termination of Service for Cause, violation of material Company policies, breach of noncompetition, confidentiality or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company. The Committee may also specify in an Award Agreement that the Participant’s rights, payments and benefits with respect to an Award shall be conditioned upon the Participant making a representation regarding compliance with noncompetition, confidentiality or other restrictive covenants that may apply to the Participant and providing that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment on account of a breach of such representation. Notwithstanding the foregoing, the confidentiality restrictions set forth in an Award Agreement shall not, and shall not be interpreted to, impair a Participant from exercising any legally protected whistleblower rights (including under Rule 21 of the Exchange Act). In addition and without limitation of the foregoing, any amounts paid hereunder shall be subject to recoupment in accordance with The Dodd–Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any “clawback” policy adopted by the Company or as is otherwise required by applicable law or stock exchange listing condition.
Section 15.3 No Assignment or Transfer; Beneficiaries.
(a) Awards under the Plan shall not be assignable or transferable by the Participant, except by will or by the laws of descent and distribution, and shall not be subject in any manner to assignment, alienation, pledge, encumbrance or charge. Notwithstanding the foregoing, the Committee may provide in an Award Agreement that the Participant shall have the right to designate a beneficiary or beneficiaries who shall be entitled to any rights, payments or other benefits specified under an Award following the Participant’s death. During the lifetime of a Participant, an Award shall be exercised only by such Participant or such Participant’s guardian or legal representative. In the event of a Participant’s death, an Award may, to the extent permitted by the Award Agreement, be exercised by the Participant’s beneficiary as designated by the Participant in the manner prescribed by the Committee or, in the absence of an authorized beneficiary designation, by the legatee of such Award under the Participant’s will or by the Participant’s estate in accordance with the Participant’s will or the laws of descent and distribution, in each case in the same manner and to the same extent that such Award was exercisable by the Participant on the date of the Participant’s death.
(b) Limited Transferability Rights. Notwithstanding anything else in this Section 15.3 to the contrary, the Committee may in its discretion provide in an Award Agreement that an Award in the form of a Nonqualified Stock Option, share-settled Stock Appreciation Right, Restricted Stock, Performance Share or share-settled Other Stock-Based Award may be transferred, on such terms and conditions as the Committee deems appropriate, either (i) by instrument to the Participant’s “Immediate Family” (as defined below), (ii) by instrument to an inter vivos or testamentary trust (or other entity) in which the Award is to be passed to the Participant’s designated beneficiaries, or (iii) by gift to charitable institutions. Any transferee of the Participant’s rights shall succeed and be subject to all of the terms of the applicable Award Agreement and the Plan. “Immediate Family” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships.
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Section 15.4 Rights as Stockholder. A Participant shall have no rights as a holder of shares of Common Stock with respect to any unissued securities covered by an Award until the date the Participant becomes the holder of record of such securities. Except as provided in Section 4.2 hereof, no adjustment or other provision shall be made for dividends or other stockholder rights, except to the extent that the Award Agreement provides for dividend payments or dividend equivalent rights.
Section 15.5 Employment or Service. Nothing in the Plan, in the grant of any Award or in any Award Agreement shall confer upon any Eligible Person or Participant any right to continue in Service, or interfere in any way with the right of the Company or any of its Subsidiaries to terminate the employment or other service relationship of an Eligible Person or Participant for any reason at any time.
Section 15.6 Fractional Shares. In the case of any fractional share or unit resulting from the grant, vesting, payment or crediting of dividends or dividend equivalents under an Award, the Committee shall have the discretionary authority to (i) disregard such fractional share or unit, (ii) round such fractional share or unit to the nearest lower or higher whole share or unit, or (iii) convert such fractional share or unit into a right to receive a cash payment.
Section 15.7 Other Compensation and Benefit Plans. The amount of any compensation deemed to be received by a Participant pursuant to an Award shall not constitute includable compensation for purposes of determining the amount of benefits to which a Participant is entitled under any other compensation or benefit plan or program of the Company or any Subsidiary, including, without limitation, under any bonus, pension, profit-sharing, life insurance, salary continuation or severance benefits plan, except to the extent specifically provided by the terms of any such plan.
Section 15.8 Plan Binding on Transferees. The Plan shall be binding upon the Company, its transferees and assigns, and the Participant, the Participant’s executor, administrator and permitted transferees and beneficiaries. In addition, all obligations of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
Section 15.9 Foreign Jurisdictions. The Committee may adopt, amend and terminate such arrangements and grant such Awards, not inconsistent with the intent of the Plan, as it may deem necessary or desirable to comply with any tax, securities, regulatory or other laws of other jurisdictions with respect to Awards that may be subject to such laws. The terms and conditions of such Awards may vary from the terms and conditions that would otherwise be required by the Plan solely to the extent the Committee deems necessary for such purpose. Moreover, the Board may approve such supplements to or amendments, restatements or alternative versions of the Plan, not inconsistent with the intent of the Plan, as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of the Plan as in effect for any other purpose.
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Section 15.10 Substitute Awards in Corporate Transactions. Nothing contained in the Plan shall be construed to limit the right of the Committee to grant Awards under the Plan in connection with the acquisition, whether by purchase, merger, consolidation or other corporate transaction, of the business or assets of any corporation or other entity. Without limiting the foregoing, the Committee may grant Awards under the Plan to an employee or director of another corporation who becomes an Eligible Person by reason of any such corporate transaction in substitution for Awards previously granted by such corporation or entity to such person. The terms and conditions of the substitute Awards may vary from the terms and conditions that would otherwise be required by the Plan solely to the extent the Committee deems necessary for such purpose. Any shares of Common Stock subject to these substitute Awards shall not be counted against any of the maximum share limitations set forth in the Plan.
16. Legal Compliance
Section 16.1 Securities Laws. No shares of Common Stock will be issued or transferred pursuant to an Award unless and until all then applicable requirements imposed by Federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any exchanges upon which the shares of Common Stock may be listed, have been fully met. As a condition precedent to the issuance of shares pursuant to the grant or exercise of an Award, the Company may require the Participant to take any reasonable action to meet such requirements. The Committee may impose such conditions on any shares of Common Stock issuable under the Plan as it may deem advisable, including, without limitation, restrictions under the Securities Act, as amended, under the requirements of any exchange upon which such shares of the same class are then listed, and under any blue sky or other securities laws applicable to such shares. The Committee may also require the Participant to represent and warrant at the time of issuance or transfer that the shares of Common Stock are being acquired only for investment purposes and without any current intention to sell or distribute such shares. All Common Stock issued pursuant to the terms of this Plan shall constitute “restricted securities,” as that term is defined in Rule 144 promulgated pursuant to the Securities Act, and may not be transferred except in compliance herewith and with the registration requirements of the Securities Act or an exemption therefrom. Certificates representing Common Stock acquired pursuant to an Award may bear such legend as the Company may consider appropriate under the circumstances.
Section 16.2 Incentive Arrangement. The Plan is designed to provide an ongoing, pecuniary incentive for Participants to produce their best efforts to increase the value of the Company. The Plan is not intended to provide retirement income or to defer the receipt of payments hereunder to the termination of a Participant’s employment or beyond. The Plan is thus intended not to be a pension or welfare benefit plan that is subject to Employee Retirement Income Security Act of 1974 (“ERISA”), and shall be construed accordingly. All interpretations and determinations hereunder shall be made on a basis consistent with the Plan’s status as not an employee benefit plan subject to ERISA.
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Section 16.3 Unfunded Plan. The adoption of the Plan and any reservation of shares of Common Stock or cash amounts by the Company to discharge its obligations hereunder shall not be deemed to create a trust or other funded arrangement. Except upon the issuance of Common Stock pursuant to an Award, any rights of a Participant under the Plan shall be those of a general unsecured creditor of the Company, and neither a Participant nor the Participant’s permitted transferees or estate shall have any other interest in any assets of the Company by virtue of the Plan. Notwithstanding the foregoing, the Company shall have the right to implement or set aside funds in a grantor trust, subject to the claims of the Company’s creditors or otherwise, to discharge its obligations under the Plan.
Section 16.4 Section 409A Compliance. To the extent applicable, it is intended that the Plan and all Awards hereunder comply with the requirements of Section 409A of the Code or an exemption thereto, and the Plan and all Award Agreements shall be interpreted and applied by the Committee in a manner consistent with this intent in order to avoid the imposition of any additional tax under Section 409A of the Code. Notwithstanding anything in the Plan to the contrary, in the event that any provision of the Plan or an Award Agreement is determined by the Committee, in its sole discretion, to not comply with the requirements of Section 409A of the Code or an exemption thereto, the Committee shall, in its sole discretion, have the authority to take such actions and to make such interpretations or changes to the Plan or an Award Agreement as the Committee deems necessary, regardless of whether such actions, interpretations or changes shall adversely affect a Participant, subject to the limitations, if any, of applicable law. If an Award is subject to Section 409A of the Code, any payment made to a Participant who is a “specified employee” of the Company or any Subsidiary shall not be made before the date that is six months after the Participant’s “separation from service” to the extent required to avoid the adverse consequences of Section 409A of the Code. For purposes of this Section 16.4, the terms “separation from service” and “specified employee” shall have the meanings set forth in Section 409A of the Code. In no event whatsoever shall the Company be liable for any additional tax, interest or penalties that may be imposed on any Participant by Section 409A of the Code or any damages for failing to comply with Section 409A of the Code.
Section 16.5 Tax Withholding.
(a) The Company shall have the power and the right to deduct or withhold, or require a participant to remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan, but in no event shall such deduction or withholding or remittance exceed the minimum statutory withholding requirements unless permitted by the Company and such additional withholding amount will not cause adverse accounting consequences and is permitted under Applicable Law. Notwithstanding the foregoing, if a minimum statutory amount of withholding does not apply under the laws of any foreign jurisdiction, the Company may withhold such amount for remittance to the applicable taxing authority of such jurisdiction as the Company determines in its discretion, uniformly applied, to be appropriate.
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(b) A Participant may, in order to fulfill the withholding obligation, tender previously-acquired shares of Common Stock or have shares of stock withheld from the exercise, provided that the shares have an aggregate Fair Market Value sufficient to satisfy in whole or in part the applicable withholding taxes. The broker-assisted exercise procedure described in Section 6.5 may also be utilized to satisfy the withholding requirements related to the exercise of a Stock Option.
(c) Notwithstanding the foregoing, a Participant may not use shares of Common Stock to satisfy the withholding requirements to the extent that (i) there is a substantial likelihood that the use of such form of payment or the timing of such form of payment would subject the Participant to a substantial risk of liability under Section 16 of the Exchange Act; (ii) such withholding would constitute a violation of the provisions of any law or regulation (including the Sarbanes-Oxley Act of 2002); or (iii) such withholding would cause adverse accounting consequences for the Company.
Section 16.6 No Guarantee of Tax Consequences. Neither the Company, the Board, the Committee nor any other Person make any commitment or guarantee that any federal, state, local or foreign tax treatment will apply or be available to any Participant or any other person hereunder.
Section 16.7 Severability. If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.
Section 16.8 Stock Certificates; Book Entry Form. Notwithstanding any provision of the Plan to the contrary, unless otherwise determined by the Committee or required by any applicable law, rule or regulation, any obligation set forth in the Plan pertaining to the delivery or issuance of stock certificates evidencing shares of Common Stock may be satisfied by having issuance and/or ownership of such shares recorded on the books and records of the Company (or, as applicable, its transfer agent or stock plan administrator).
Section 16.9 Governing Law. The Plan and all rights hereunder shall be subject to and interpreted in accordance with the laws of the State of Delaware, without reference to the principles of conflicts of laws, and to applicable Federal securities laws.
17. Effective Date, Amendment and Termination
Section 17.1 Effective Date. The effective date of the Plan shall be the date on which the Plan is approved by the Board; provided, however, that Awards granted under the Plan subsequent to the approval of the Plan by the Board shall be valid only if the Plan is approved by the requisite percentage of the holders of the Common Stock of the Company within one year of the date on which such Board approval occurs. If such stockholder approval is not obtained within one year after the date of the Board’s approval of the Plan, then all Awards previously granted under the Plan shall terminate and cease to be outstanding, and no further Awards shall be granted under the Plan.
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Section 17.2 Amendment; Termination. The Board may suspend or terminate the Plan (or any portion thereof) at any time and may amend the Plan at any time and from time to time in such respects as the Board may deem advisable or in the best interests of the Company or any Subsidiary; provided, however, that (a) no such amendment, suspension or termination shall materially and adversely affect the rights of any Participant under any outstanding Awards, without the consent of such Participant, (b) to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required, and (c) stockholder approval is required for any amendment to the Plan that (i) increases the number of shares of Common Stock available for issuance under the Plan, or (ii) changes the persons or class of persons eligible to receive Awards. The Plan will continue in effect until terminated in accordance with this Section 17.2; provided, however, that no Award will be granted hereunder on or after the 10th anniversary of the date of the adoption of the Plan by the Board (the “Expiration Date”); but provided further, that Awards granted prior to such Expiration Date may extend beyond that date.
ADOPTION AND APPROVAL OF PLAN
Date Plan initially adopted by Board: July 19, 2020
Date Plan approved by Shareholders: December 8, 2020
Effective Date of Plan: December 14, 2020
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Exhibit 10.14
INCENTIVE STOCK OPTION GRANT AGREEMENT
REVIVA PHARMACEUTICALS HOLDINGS, INC.
This Stock Option Grant Agreement (the “Grant Agreement”) is made and entered into effective on the Date of Grant set forth in Exhibit A (the “Date of Grant”) by and between Reviva Pharmaceuticals Holdings, Inc., a Delaware corporation (the “Company”), and the individual named in Exhibit A hereto (the “Optionee”).
WHEREAS, the Company desires to provide the Optionee an incentive to participate in the success and growth of the Company through the opportunity to earn a proprietary interest in the Company; and
WHEREAS, to give effect to the foregoing intention, the Company desires to grant the Optionee an option pursuant to the Reviva Pharmaceuticals Holdings, Inc. 2020 Equity Incentive Plan (the “Plan”) to acquire the Company’s common stock, par value $.0001 per share (the “Common Stock”);
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for good and valuable consideration, the parties hereto agree as follows:
1. Grant. The Company hereby grants the Optionee an Incentive Stock Option (the “Option”) to purchase up to the number of shares of Common Stock (the “Shares”) set forth in Exhibit A hereto at the exercise price per Share (the “Exercise Price”) set forth in Exhibit A, and on the vesting schedule set forth in Exhibit A, subject to the terms and conditions set forth herein and the provisions of the Plan, the terms of which are incorporated herein by reference. Capitalized terms used but not otherwise defined in this Grant Agreement shall have the meanings as set forth in the Plan.
This Option is intended to qualify as an Incentive Stock Option (“ISO”) under Section 422 of the Code. However, notwithstanding such designation, if the Optionee becomes eligible in any given year to exercise ISOs for Shares having a Fair Market Value in excess of $100,000, those options representing the excess shall be treated as Non-Qualified Stock Options. In the previous sentence, “ISOs” include ISOs granted under any plan of the Company or any parent or any Subsidiary of the Company. For the purpose of deciding which options apply to Shares that “exceed” the $100,000 limit, ISOs shall be taken into account in the same order as granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. The Optionee hereby acknowledges that there is no assurance that the Option will, in fact, be treated as an Incentive Stock Option under Section 422 of the Code.
2. Exercise Period Following Termination of Continuous Service. This Option shall terminate and be canceled to the extent not exercised within three (3) months following termination of the Optionee’s Continuous Service; provided that if such termination is due to the Optionee’s death or permanent and total disability within the meaning of Section 22(e)(3) of the Code, this Option shall terminate and be cancelled one (1) year from the date of termination of Continuous Service. Notwithstanding the foregoing, in the event that the Optionee’s Continuous Service is terminated for Cause, then the Option shall immediately terminate on the date of such termination of Continuous Service and shall not be exercisable for any period following such date. In no event, however, shall this Option be exercised later than the Expiration Date set forth in Exhibit A and in no event shall this Option be exercised for more Shares than the Shares which otherwise have become exercisable as of the date of termination.
3. Method of Exercise. This Option is exercisable by delivery to the Company of an exercise notice (the “Exercise Notice”) in a form satisfactory to the Committee or by such other form or means as the Committee may permit or require. Any Exercise Notice shall state or provide the number of Shares with respect to which the Option is being exercised (the “Exercised Shares”), and include such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price for the Exercised Shares in (i) cash; (ii) check; or (iii) such other manner as is acceptable to the Committee, provided that such form of consideration is permitted by the Plan and by applicable law. Upon exercise of the Option by the Optionee and prior to the delivery of such Exercised Shares, the Company shall have the right to require the Optionee to satisfy applicable federal and state tax income tax withholding requirements and the Optionee’s share of applicable employment withholding taxes in a method satisfactory to the Company. Notwithstanding the foregoing, no Exercised Shares shall be issued unless such exercise and issuance complies with the requirements relating to the administration of stock option plans and other applicable equity plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted, and the applicable laws of any foreign country or jurisdiction where stock grants or other applicable equity grants are made under the Plan; assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Optionee on the date the Option is exercised with respect to such Shares.
4. Covenants Agreement. This Option shall be subject to forfeiture at the election of the Company in the event that the Optionee breaches any agreement between the Optionee and the Company with respect to noncompetition, nonsolicitation, assignment of inventions and contributions and/or nondisclosure obligations of the Optionee.
5. Taxes. By executing this Grant Agreement, Optionee acknowledges and agrees that Optionee is solely responsible for the satisfaction of any applicable taxes that may be imposed on Optionee that arise as a result of the grant, vesting or exercise of the Option, including without limitation any taxes arising under Section 409A of the Code (regarding deferred compensation) or Section 4999 of the Code (regarding golden parachute excise taxes), and that neither the Company nor the Committee shall have any obligation whatsoever to pay such taxes or otherwise indemnify or hold Optionee harmless from any or all of such taxes.
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6. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of the Optionee only by the Optionee. The terms of the Plan and this Grant Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.
7. Securities Matters. All Shares and Exercised Shares shall be subject to the restrictions on sale, encumbrance and other disposition provided by federal or state law. The Company shall not be obligated to sell or issue any Shares or Exercised Shares pursuant to this Grant Agreement unless, on the date of sale and issuance thereof, such Shares are either registered under the Securities Act of 1933, as amended (the “Securities Act”), and all applicable state securities laws, or are exempt from registration thereunder. Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act, or have been registered or qualified under the securities laws of any state, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary in order to achieve compliance with the Securities Act or the securities laws of any state or any other law.
8. Investment Purpose. The Optionee represents and warrants that unless the Shares are registered under the Securities Act, any and all Shares acquired by the Optionee under this Grant Agreement will be acquired for investment for the Optionee’s own account and not with a view to, for resale in connection with, or with an intent of participating directly or indirectly in, any distribution of such Shares within the meaning of the Securities Act. The Optionee agrees not to sell, transfer or otherwise dispose of such Shares unless they are either (1) registered under the Securties Act and all applicable state securities laws, or (2) exempt from such registration in the opinion of Company counsel.
9. Lock-Up Agreement. The Optionee hereby agrees that in the event that the Optionee exercises this Option during a period in which any directors or officers of the Company have agreed with one or more underwriters not to sell securities of the Company, then, as a condition to such exercise, the Optionee shall enter into an agreement, in form and substance satisfactory to the Company, pursuant to which the Optionee shall agree to restrictions on transferability of the Shares comparable to the restrictions agreed upon by such directors or officers of the Company.
10. Other Plans. No amounts of income received by the Optionee pursuant to this Grant Agreement shall be considered compensation for purposes of any pension or retirement plan, insurance plan or any other employee benefit plan of the Company or its subsidiaries, unless otherwise expressly provided in such plan.
11. No Guarantee of Continued Service. The Optionee acknowledges and agrees that the right to exercise the Option pursuant to the exercise schedule hereof is earned only through Continuous Service and such other requirements, if any, as are set forth in Exhibit A (and not through the act of being hired, being granted an option or purchasing shares hereunder). The Optionee further acknowledges and agrees that (i) this Grant Agreement, the transactions contemplated hereunder and the exercise schedule set forth herein do not constitute an express or implied promise of continued employment or service for the exercise period or for any other period, and shall not interfere with the Optionee’s right or the right of the Company or its Subsidiaries to terminate the employment or service relationship at any time, with or without cause, subject to the terms of any written employment agreement that the Optionee may have entered into with the Company or any of its Subsidiaries; and (ii) the Company would not have granted this Option to the Optionee but for these acknowledgements and agreements.
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12. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Grant Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and the Optionee. In the event of any conflict between this Grant Agreement and the Plan, the Plan shall be controlling, except as otherwise specifically provided in the Plan. This Grant Agreement shall be construed under the laws of the State of Delaware, without regard to conflict of laws principles.
13. Opportunity for Review. Optionee and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Grant Agreement. The Optionee has reviewed the Plan and this Grant Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Agreement and fully understands all provisions of the Plan and this Grant Agreement. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan and this Grant Agreement. The Optionee further agrees to notify the Company upon any change in the residence address indicated herein.
14. Section 409A. This Option is intended to be excepted from coverage under Section 409A and shall be administered, interpreted and construed accordingly. The Company may, in its sole discretion and without the Optionee’s consent, modify or amend the terms of this Grant Agreement, impose conditions on the timing and effectiveness of the exercise of the Option by Optionee, or take any other action it deems necessary or advisable, to cause the Option to be excepted from Section 409A (or to comply therewith to the extent the Company determines it is not excepted).
15. Recoupment. In the event the Company restates its financial statements due to material noncompliance with any financial reporting requirements under applicable securities laws, any shares issued pursuant to this Agreement for or in respect of the year that is restated, or the prior three years, may be recovered to the extent the shares issued exceed the number that would have been issued based on the restatement. In addition and without limitation of the foregoing, any amounts paid hereunder shall be subject to recoupment in accordance with The Dodd–Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company or as is otherwise required by applicable law or stock exchange listing conditions.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Grant Agreement as of the date set forth in Exhibit A.
REVIVA PHARMACEUTICALS HOLDINGS, INC. | ||
By: | ||
Name: | ||
Title: | ||
OPTIONEE | ||
Name: |
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EXHIBIT A
INCENTIVE STOCK OPTION GRANT AGREEMENT
REVIVA PHARMACEUTICALS HOLDINGS, INC.
(a). Optionee’s Name: ___________________________________________________ | |
(b). Date of Grant: _____________________________ | |
(c). Number of Shares Subject to the Option: _____________________ | |
(d). Exercise Price: $______ per Share | |
(e). Expiration Date: ________________ | |
(f). Vesting Schedule: | |
_______ (Initials) | |
Optionee | |
_______ (Initials) | |
Company Signatory |
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Exhibit 10.15
NONQUALIFIED STOCK OPTION GRANT AGREEMENT
REVIVA PHARMACEUTICALS HOLDINGS, INC.
This Stock Option Grant Agreement (the “Grant Agreement”) is made and entered into effective on the Date of Grant set forth in Exhibit A (the “Date of Grant”) by and between Reviva Pharmaceuticals Holdings, Inc., a Delaware corporation (the “Company”), and the individual named in Exhibit A hereto (the “Optionee”).
WHEREAS, the Company desires to provide the Optionee an incentive to participate in the success and growth of the Company through the opportunity to earn a proprietary interest in the Company; and
WHEREAS, to give effect to the foregoing intention, the Company desires to grant the Optionee an option pursuant to the Reviva Pharmaceuticals Holdings, Inc. 2020 Equity Incentive Plan (the “Plan”) to acquire the Company’s common stock, par value $.0001 per share (the “Common Stock”);
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for good and valuable consideration, the parties hereto agree as follows:
1. Grant. The Company hereby grants the Optionee a Nonqualified Stock Option (the “Option”) to purchase up to the number of shares of Common Stock (the “Shares”) set forth in Exhibit A hereto at the exercise price per Share (the “Exercise Price”) set forth in Exhibit A, and on the vesting schedule set forth in Exhibit A, subject to the terms and conditions set forth herein and the provisions of the Plan, the terms of which are incorporated herein by reference. Capitalized terms used but not otherwise defined in this Grant Agreement shall have the meanings as set forth in the Plan.
2. Exercise Period Following Termination of Continuous Service. This Option shall terminate and be canceled to the extent not exercised within ninety (90) days after the Optionee’s continuous Service terminates, except that if such termination is due to the death or Disability of the Optionee, this Option shall terminate and be canceled twelve (12) months from the date of termination of Continuous Service. Notwithstanding the foregoing, in the event that the Optionee’s Continuous Service is terminated for Cause, then the Option shall immediately terminate on the date of such termination of Continuous Service and shall not be exercisable for any period following such date. In no event, however, shall this Option be exercised later than the Expiration Date set forth in Exhibit A and in no event shall this Option be exercised for more Shares than the Shares which otherwise have become exercisable as of the date of termination.
3. Method of Exercise. This Option is exercisable by delivery to the Company of an exercise notice (the “Exercise Notice”) in a form satisfactory to the Committee or by such other form or means as the Committee may permit or require. Any Exercise Notice shall state or provide the number of Shares with respect to which the Option is being exercised (the “Exercised Shares”), and include such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price for the Exercised Shares in (i) cash; (ii) check; or (iii) such other manner as is acceptable to the Committee, provided that such form of consideration is permitted by the Plan and by applicable law. Upon exercise of the Option by the Optionee and prior to the delivery of such Exercised Shares, the Company shall have the right to require the Optionee to satisfy applicable Federal and state tax income tax withholding requirements and the Optionee’s share of applicable employment withholding taxes in a method satisfactory to the Company. Notwithstanding the foregoing, no Exercised Shares shall be issued unless such exercise and issuance complies with the requirements relating to the administration of stock option plans and other applicable equity plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted, and the applicable laws of any foreign country or jurisdiction where stock grants or other applicable equity grants are made under the Plan; assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Optionee on the date the Option is exercised with respect to such Shares.
4. Covenants Agreement. This Option shall be subject to forfeiture at the election of the Company in the event that the Optionee breaches any agreement between the Optionee and the Company with respect to noncompetition, nonsolicitation, assignment of inventions and contributions and/or nondisclosure obligations of the Optionee.
5. Taxes. By executing this Grant Agreement, Optionee acknowledges and agrees that Optionee is solely responsible for the satisfaction of any applicable taxes that may be imposed on Optionee that arise as a result of the grant, vesting or exercise of the Option, including without limitation any taxes arising under Section 409A of the Code (regarding deferred compensation) or Section 4999 of the Code (regarding golden parachute excise taxes), and that neither the Company nor the Committee shall have any obligation whatsoever to pay such taxes or otherwise indemnify or hold Optionee harmless from any or all of such taxes.
6. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of the Optionee only by the Optionee. The terms of the Plan and this Grant Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.
7. Securities Matters. All Shares and Exercised Shares shall be subject to the restrictions on sale, encumbrance and other disposition provided by federal or state law. The Company shall not be obligated to sell or issue any Shares or Exercised Shares pursuant to this Grant Agreement unless, on the date of sale and issuance thereof, such Shares are either registered under the Securities Act of 1933, as amended (the “Securities Act”), and all applicable state securities laws, or are exempt from registration thereunder. Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act, or have been registered or qualified under the securities laws of any state, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary in order to achieve compliance with the Securities Act or the securities laws of any state or any other law.
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8. Investment Purpose. The Optionee represents and warrants that unless the Shares are registered under the Securities Act, any and all Shares acquired by the Optionee under this Grant Agreement will be acquired for investment for the Optionee’s own account and not with a view to, for resale in connection with, or with an intent of participating directly or indirectly in, any distribution of such Shares within the meaning of the Securities Act. The Optionee agrees not to sell, transfer or otherwise dispose of such Shares unless they are either (1) registered under the Securties Act and all applicable state securities laws, or (2) exempt from such registration in the opinion of Company counsel.
9. Lock-Up Agreement. The Optionee hereby agrees that in the event that the Optionee exercises this Option during a period in which any directors or officers of the Company have agreed with one or more underwriters not to sell securities of the Company, then, as a condition to such exercise, the Optionee shall enter into an agreement, in form and substance satisfactory to the Company, pursuant to which the Optionee shall agree to restrictions on transferability of the Shares comparable to the restrictions agreed upon by such directors or officers of the Company.
10. Other Plans. No amounts of income received by the Optionee pursuant to this Grant Agreement shall be considered compensation for purposes of any pension or retirement plan, insurance plan or any other employee benefit plan of the Company or its subsidiaries, unless otherwise expressly provided in such plan.
11. No Guarantee of Continued Service. The Optionee acknowledges and agrees that the right to exercise the Option pursuant to the exercise schedule hereof is earned only through Continuous Service and such other requirements, if any, as are set forth in Exhibit A (and not through the act of being hired, being granted an option or purchasing shares hereunder). The Optionee further acknowledges and agrees that (i) this Grant Agreement, the transactions contemplated hereunder and the exercise schedule set forth herein do not constitute an express or implied promise of continued employment or service for the exercise period or for any other period, and shall not interfere with the Optionee’s right or the right of the Company or its Subsidiaries to terminate the employment or service relationship at any time, with or without cause, subject to the terms of any written employment agreement that the Optionee may have entered into with the Company or any of its Subsidiaries; and (ii) the Company would not have granted this Option to the Optionee but for these acknowledgements and agreements.
12. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Grant Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and the Optionee. In the event of any conflict between this Grant Agreement and the Plan, the Plan shall be controlling, except as otherwise specifically provided in the Plan. This Grant Agreement shall be construed under the laws of the State of Delaware, without regard to conflict of laws principles.
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13. Opportunity for Review. Optionee and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Grant Agreement. The Optionee has reviewed the Plan and this Grant Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Agreement and fully understands all provisions of the Plan and this Grant Agreement. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan and this Grant Agreement. The Optionee further agrees to notify the Company upon any change in the residence address indicated herein.
14. Section 409A. This Option is intended to be excepted from coverage under Section 409A and shall be administered, interpreted and construed accordingly. The Company may, in its sole discretion and without the Optionee’s consent, modify or amend the terms of this Grant Agreement, impose conditions on the timing and effectiveness of the exercise of the Option by Optionee, or take any other action it deems necessary or advisable, to cause the Option to be excepted from Section 409A (or to comply therewith to the extent the Company determines it is not excepted).
15. Recoupment. In the event the Company restates its financial statements due to material noncompliance with any financial reporting requirements under applicable securities laws, any shares issued pursuant to this Agreement for or in respect of the year that is restated, or the prior three years, may be recovered to the extent the shares issued exceed the number that would have been issued based on the restatement. In addition and without limitation of the foregoing, any amounts paid hereunder shall be subject to recoupment in accordance with The Dodd–Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company or as is otherwise required by applicable law or stock exchange listing conditions.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Grant Agreement as of the date set forth in Exhibit A.
REVIVA PHARMACEUTICALS HOLDINGS, INC. | ||
By: | ||
Name: | ||
Title: | ||
OPTIONEE | ||
Name: |
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EXHIBIT A
NONQUALIFIED STOCK OPTION GRANT AGREEMENT
REVIVA PHARMACEUTICALS HOLDINGS, INC.
(a). Optionee’s Name: ________________________________________________ | |
(b). Date of Grant: ________________________ | |
(c). Number of Shares Subject to the Option: _________________ | |
(d). Exercise Price: $______ per Share | |
(e). Expiration Date: ___________________ | |
(f). Vesting Schedule: | |
_______ (Initials) | |
Optionee | |
_______ (Initials) | |
Company Signatory |
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Exhibit 10.16
REVIVA PHARMACEUTICALS, INC.
(a Delaware corporation)
2006 EQUITY INCENTIVE PLAN
As Adopted on August 22, 2006
1. PURPOSE. The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company, its Parent and Subsidiaries, by offering them an opportunity to participate in the Company’s future performance through awards of Options and Restricted Stock (the “Awards”). Capitalized terms not defined in the text are defined in Section 22 hereof. Although this Plan is intended to be a written compensatory benefit plan within the meaning of Rule 701 promulgated under the Securities Act, grants may be made pursuant to this plan which do not qualify for exemption under Rule 701 or Section 25102(o) of the California Corporations Code. Any requirement of this Plan which is required in law only because of Section 25102(o) need not apply if the Committee so provides.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 17 hereof, the total number of Shares reserved and available for grant and issuance pursuant to this Plan will be Four Million (4,000,000) Shares or such lesser number of Shares as permitted by applicable law.
Subject to Sections 2.2, 5.10 and 17 hereof, Shares subject to Awards previously granted will again be available for grant and issuance in connection with future Awards under this Plan to the extent such Shares: (i) cease to be subject to issuance upon exercise of an Option, other than due to exercise of such Option; (ii) are subject to an Award granted hereunder but the Shares subject to such Award are forfeited or repurchased by the Company at the original issue price; or (iii) are subject to an Award that otherwise terminates without Shares being issued. At all times the Company will reserve and keep available a sufficient number of Shares as will be required to satisfy the requirements of all Awards granted and outstanding under this Plan.
2.2 Adjustment of Shares. In the event that the number of outstanding shares of the Company’s Common Stock is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, then (i) the number of Shares reserved for issuance under this Plan, (ii) the Exercise Prices of and number of Shares subject to outstanding Options and (iii) the Purchase Prices of and number of Shares subject to other outstanding Awards will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided, however, that fractions of a Share will not be issued but will either be paid in cash at the Fair Market Value of such fraction of a Share or will be rounded down to the nearest whole Share, as determined by the Committee; and provided, further, that the Exercise Price of any Option may not be decreased to below the par value of the Shares.
3. ELIGIBILITY. ISOs (as defined in Section 5 hereof) may be granted only to employees (including officers and directors who are also employees) of the Company or of a Parent or Subsidiary of the Company. NQSOs (as defined in Section 5 hereof) and Restricted Stock Awards may be granted to employees, officers, directors and consultants of the Company or any Parent or Subsidiary of the Company; provided such consultants render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. A person may be granted more than one Award under this Plan.
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the Committee or the Board if no Committee is created by the Board. Subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan. Without limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to this Plan;
(c) approve persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to Awards;
(f) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or awards under any other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company;
(g) grant waivers of any conditions of this Plan or any Award;
(h) determine the terms of vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission, or reconcile any inconsistency in this Plan, any Award, any Award Agreement, any Exercise Agreement or any Restricted Stock Purchase Agreement;
(j) determine whether an Award has been earned;
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(k) make all other determinations necessary or advisable for the administration of this Plan; and
(l) extend the vesting period beyond a Participant’s Termination Date.
4.2 Committee Discretion. Unless in contravention of any express terms of this Plan or Award, any determination made by the Committee with respect to any Award will be made in its sole discretion either (i) at the time of grant of the Award, or (ii) subject to Section 5.9 hereof, at any later time. Any such determination will be final and binding on the Company and on all persons having an interest in any Award under this Plan. The Committee may delegate to one or more officers of the Company the authority to grant an Award under this Plan, provided such officer or officers are members of the Board.
5. OPTIONS. The Committee may grant Options to eligible persons described in Section 3 hereof and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ISOs”) or Nonqualified Stock Options (“NQSOs”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may be exercised, and all other terms and conditions of the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan will be evidenced by an Award Agreement which will expressly identify the Option as an ISO or an NQSO (“Stock Option Agreement”), and will be in such form and contain such provisions (which need not be the same for each Participant) as the Committee may from time to time approve, and which will comply with and be subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, unless a later date is otherwise specified by the Committee. The Stock Option Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option.
5.3 Exercise Period. Options may be exercisable immediately but subject to repurchase pursuant to Section 11 hereof or may be exercisable within the times or upon the events determined by the Committee as set forth in the Stock Option Agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted; and provided further that no ISO granted to a person who directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary of the Company (“Ten Percent Shareholder”) will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines. Subject to earlier termination of the Option as provided herein, to the extent section 25102(o) of the California Corporations Code is intended to apply, each Participant who is not an officer, director or consultant of the Company or of a Parent or Subsidiary of the Company shall have the right to exercise an Option granted hereunder at the rate of no less than twenty percent (20%) per year over five (5) years from the date such Option is granted.
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5.4 Exercise Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted and may not be less than eighty-five percent (85%) of the Fair Market Value of the Shares on the date of grant; provided that (i) the Exercise Price of an ISO will not be less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant and (ii) the Exercise Price of any Option granted to a Ten Percent Shareholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased must be made in accordance with Section 7 hereof.
5.5 Method of Exercise. Options may be exercised only by delivery to the Company of a written stock option exercise agreement (the “Exercise Agreement”) in a form approved by the Committee (which need not be the same for each Participant). The Exercise Agreement will state (i) the number of Shares being purchased, (ii) the restrictions imposed on the Shares purchased under such Exercise Agreement, if any, and (iii) such representations and agreements regarding Participant’s investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws. Participant shall execute and deliver to the Company the Exercise Agreement together with payment in full of the Exercise Price, and any applicable taxes, for the number of Shares being purchased.
5.6 Termination. Subject to earlier termination pursuant to Sections 17 and 18 hereof and notwithstanding the exercise periods set forth in the Stock Option Agreement, exercise of an Option will always be subject to the following:
(a) If the Participant is Terminated for any reason other than death, Disability or for Cause, then the Participant may exercise such Participant’s Options only to the extent that such Options are exercisable as to Vested Shares upon the Termination Date or as otherwise determined by the Committee. Such Options must be exercised by the Participant, if at all, as to all or some of the Vested Shares calculated as of the Termination Date or such other date determined by the Committee, within three (3) months after the Termination Date (or within such shorter time period, not less than thirty (30) days, or within such longer time period, not exceeding five (5) years, after the Termination Date as may be determined by the Committee, with any exercise beyond three (3) months after the Termination Date deemed to be an NQSO) but in any event, no later than the expiration date of the Options.
(b) If the Participant is Terminated because of Participant’s death or Disability (or the Participant dies within three (3) months after a Termination other than for Cause), then Participant’s Options may be exercised only to the extent that such Options are exercisable as to Vested Shares by Participant on the Termination Date or as otherwise determined by the Committee. Such options must be exercised by Participant (or Participant’s legal representative or authorized assignee), if at all, as to all or some of the Vested Shares calculated as of the Termination Date or such other date determined by the Committee, within twelve (12) months after the Termination Date (or within such shorter time period, not less than six (6) months, or within such longer time period, not exceeding five (5) years, after the Termination Date as may be determined by the Committee, with any exercise beyond (i) three (3) months after the Termination Date when the Termination is for any reason other than the Participant’s death or disability, within the meaning of Section 22(e)(3) of the Code, or (ii) twelve (12) months after the Termination Date when the Termination is for Participant’s disability, within the meaning of Section 22(e)(3) of the Code, deemed to be an NQSO) but in any event no later than the expiration date of the Options.
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(c) If the Participant is terminated for Cause, the Participant may exercise such Participant’s Options, but not to an extent greater than such Options are exercisable as to Vested Shares upon the Termination Date and Participant’s Options shall expire on such Participant’s Termination Date, or at such later time and on such conditions as are determined by the Committee.
5.7 Limitations on Exercise. The Committee may specify a reasonable minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent Participant from exercising the Option for the full number of Shares for which it is then exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value (determined as of the date of grant) of Shares with respect to which ISOs are exercisable for the first time by a Participant during any calendar year (under this Plan or under any other incentive stock option plan of the Company or any Parent or Subsidiary of the Company) will not exceed One Hundred Thousand Dollars ($100,000). If the Fair Market Value of Shares on the date of grant with respect to which ISOs are exercisable for the first time by a Participant during any calendar year exceeds One Hundred Thousand Dollars ($100,000), then the Options for the first One Hundred Thousand Dollars ($100,000) worth of Shares to become exercisable in such calendar year will be ISOs and the Options for the amount in excess of One Hundred Thousand Dollars ($100,000) that become exercisable in that calendar year will be NQSOs. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date (as defined in Section 18 hereof) to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code. Subject to Section 5.10 hereof, the Committee may reduce the Exercise Price of outstanding Options without the consent of Participants by a written notice to them; provided, however, that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 5.4 hereof for Options granted on the date the action is taken to reduce the Exercise Price; provided, further, that the Exercise Price will not be reduced below the par value of the Shares, if any.
5.10 No Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant, to disqualify any Participant’s ISO under Section 422 of the Code. In no event shall the total number of Shares issued (counting each reissuance of a Share that was previously issued and then forfeited or repurchased by the Company as a separate issuance) under the Plan upon exercise of ISOs exceed Forty Million (40,000,000) Shares (adjusted in proportion to any adjustments under Section 2.2 hereof) over the term of the Plan.
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6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company to sell to an eligible person Shares that are subject to certain specified restrictions. The Committee will determine to whom an offer will be made, the number of Shares the person may purchase, the Purchase Price, the restrictions to which the Shares will be subject, and all other terms and conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a Restricted Stock Award made pursuant to this Plan will be evidenced by an Award Agreement (“Restricted Stock Purchase Agreement”) that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. The Restricted Stock Award will be accepted by the Participant’s execution and delivery of the Restricted Stock Purchase Agreement and full payment for the Shares to the Company within thirty (30) days from the date the Restricted Stock Purchase Agreement is delivered to the person. If such person does not execute and deliver the Restricted Stock Purchase Agreement along with full payment for the Shares to the Company within such thirty (30) days, then the offer will terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a Restricted Stock Award will be determined by the Committee and will be at least eighty-five percent (85%) of the Fair Market Value of the Shares on the date the Restricted Stock Award is granted or at the time the purchase is consummated, except in the case of a sale to a Ten Percent Shareholder, in which case the Purchase Price will be one hundred percent (100%) of the Fair Market Value on the date the Restricted Stock Award is granted or at the time the purchase is consummated. Payment of the Purchase Price must be made in accordance with Section 7 hereof.
6.3 Restrictions. Restricted Stock Awards may be subject to the restrictions set forth in Section 11 hereof or such other restrictions not inconsistent with Section 25102(o) of the California Corporations Code.
7. PAYMENT FOR SHARE PURCHASES.
7.1 Payment. Payment for Shares purchased pursuant to this Plan may be made in cash (by check) or, where expressly approved for the Participant by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company owed to the Participant;
(b) by surrender of shares that: (i) either (A) have been owned by Participant for more than six (6) months and have been paid for within the meaning of SEC Rule 144 (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares) or (B) were obtained by Participant in the public market and (ii) are clear of all liens, claims, encumbrances or security interests;
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(c) by tender of a full recourse promissory note having such terms as may be approved by the Committee and bearing interest at a rate sufficient to avoid (i) imputation of income under Sections 483 and 1274 of the Code and (ii) variable accounting treatment under Financial Accounting Standards Board Interpretation No. 44 to APB No. 25; provided, however, that Participants who are not employees or directors of the Company will not be entitled to purchase Shares with a promissory note unless the note is adequately secured by collateral other than the Shares; provided, further, that the portion of the Exercise Price or Purchase Price, as the case may be, equal to the par value of the Shares must be paid in cash or other legal consideration permitted by Delaware General Corporation Law;
(d) by waiver of compensation due or accrued to the Participant from the Company for services rendered;
(e) with respect only to purchases upon exercise of an Option, and provided that a public market for the Company’s stock exists:
(i) through a “same day sale” commitment from the Participant and a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby the Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased sufficient to pay the total Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the total Exercise Price directly to the Company; or
(ii) through a “margin” commitment from the Participant and an NASD Dealer whereby the Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the total Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the total Exercise Price directly to the Company; or
(f) by any combination of the foregoing.
7.2 Loan Guarantees. The Committee may, in its sole discretion, elect to assist the Participant in paying for Shares purchased under this Plan by authorizing a guarantee by the Company of a third-party loan to the Participant.
8. WITHHOLDING TAXES.
8.1 Withholding Generally. Whenever Shares are to be issued in satisfaction of Awards granted under this Plan, the Company may require the Participant to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such Shares. Whenever, under this Plan, payments in satisfaction of Awards are to be made in cash by the Company, such payment will be net of an amount sufficient to satisfy federal, state, and local withholding tax requirements.
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8.2 Stock Withholding. When, under applicable tax laws, a Participant incurs tax liability in connection with the exercise or vesting of any Award that is subject to tax withholding and the Participant is obligated to pay the Company the amount required to be withheld, the Committee may in its sole discretion allow the Participant to satisfy the minimum withholding tax obligation by electing to have the Company withhold from the Shares to be issued that minimum number of Shares having a Fair Market Value equal to the minimum amount required to be withheld, determined on the date that the amount of tax to be withheld is to be determined; but in no event will the Company withhold Shares if such withholding would result in adverse accounting consequences to the Company. All elections by a Participant to have Shares withheld for this purpose will be made in accordance with the requirements established by the Committee for such elections and be in writing in a form acceptable to the Committee.
9. PRIVILEGES OF STOCK OWNERSHIP.
9.1 Voting and Dividends. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock. The Participant will have no right to retain such stock dividends or stock distributions with respect to Unvested Shares that are repurchased pursuant to Section 11 hereof. To the extent required, the Company will comply with Section 260.140.1 of Title 10 of the California Code of Regulations with respect to the voting rights of Common Stock.
9.2 Financial Statements. The Company will provide financial statements to each Participant annually during the period such Participant has Awards outstanding, or as otherwise required under Section 260.140.46 of Title 10 of the California Code of Regulations. Notwithstanding the foregoing, the Company will not be required to provide such financial statements to Participants when issuance of Awards is limited to key employees whose services in connection with the Company assure them access to equivalent information.
10. TRANSFERABILITY. Except as permitted by the Committee, Awards granted under this Plan, and any interest therein, will not be transferable or assignable by Participant, other than by will or by the laws of descent and distribution, and, with respect to NQSOs, by instrument to an inter vivos or testamentary trust in which the options are to be passed to beneficiaries upon the death of the trustor (settlor), or by gift to “immediate family” as that term is defined in 17 C.F.R. 240.16a-1(e), and may not be made subject to execution, attachment or similar process. During the lifetime of the Participant an Award will be exercisable only by the Participant or Participant’s legal representative and any elections with respect to an Award may be made only by the Participant or Participant’s legal representative.
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11. RESTRICTIONS ON SHARES.
11.1 Right of First Refusal. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) in the Award Agreement a right of first refusal to purchase all Shares that a Participant (or a subsequent transferee) may propose to transfer to a third party, unless otherwise not permitted by Section 25102(o) of the California Corporations Code, provided that such right of first refusal terminates upon the Company’s initial public offering of Common Stock pursuant to an effective registration statement filed under the Securities Act.
11.2 Right of Repurchase. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) in the Award Agreement a right to repurchase Unvested Shares held by a Participant for cash and/or cancellation of purchase money indebtedness owed to the Company by the Participant following such Participant’s Termination at any time within the later of ninety (90) days after the Participant’s Termination Date and the date the Participant purchases Shares under the Plan at the Participant’s Exercise Price or Purchase Price, as the case may be, provided that to the extent Section 25102(o) of the California Corporations Code is intended to apply, unless the Participant is an officer, director or consultant of the Company or of a Parent or Subsidiary of the Company, such right of repurchase lapses at the rate of no less than twenty percent (20%) per year over five (5) years from: (a) the date of grant of the Option or (b) in the case of Restricted Stock, the date the Participant purchases the Shares.
12. CERTIFICATES. All certificates for Shares or other securities delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted.
13. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a Participant’s Shares set forth in Section 11 hereof, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated. The Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of Participant’s obligation to the Company under the promissory note; provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s Shares or other collateral. In connection with any pledge of the Shares, Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.
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14. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from time to time, authorize the Company, with the consent of the respective Participants, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards. The Committee may at any time buy from a Participant an Award previously granted with payment in cash, shares of Common Stock of the Company (including Restricted Stock) or other consideration, based on such terms and conditions as the Committee and the Participant may agree.
15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. Although this Plan is intended to be a written compensatory benefit plan within the meaning of Rule 701 promulgated under the Securities Act, grants may be made pursuant to this plan which do not qualify for exemption under Rule 701 or Section 25102(o) of the California Corporations Code. Any requirement of this Plan which is required in law only because of Section 25102(o) need not apply if the Committee so provides. An Award will not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to (i) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable, and/or (ii) compliance with any exemption, completion of any registration or other qualification of such Shares under any state or federal law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so.
16. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent or Subsidiary of the Company or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate Participant’s employment or other relationship at any time, with or without Cause.
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17. CORPORATE TRANSACTIONS.
17.1 Assumption or Replacement of Awards by Successor or Acquiring Company. In the event of (i) a dissolution or liquidation of the Company, (ii) any reorganization, consolidation, merger or similar transaction or series of related transactions (each, a “combination transaction”)) in which the Company is a constituent corporation or is a party if, as a result of such combination transaction, the voting securities of the Company that are outstanding immediately prior to the consummation of such combination transaction (other than any such securities that are held by an “Acquiring Stockholder”, as defined below) do not represent, or are not converted into, securities of the surviving corporation of such combination transaction (or such surviving corporation’s parent corporation if the surviving corporation is owned by the parent corporation) that, immediately after the consummation of such combination transaction, together possess at least a majority of the total voting power of all securities of such surviving corporation (or its parent corporation, if applicable) that are outstanding immediately after the consummation of such combination transaction, including securities of such surviving corporation (or its parent corporation, if applicable) that are held by the Acquiring Stockholder; or (b) a sale of all or substantially all of the assets of the Company, that is followed by the distribution of the proceeds to the Company’s stockholders, any or all outstanding Awards may be assumed, converted or replaced by the successor or acquiring corporation (if any), which assumption, conversion or replacement will be binding on all Participants. In the alternative, the successor or acquiring corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was provided to stockholders of the Company (after taking into account the existing provisions of the Awards). The successor or acquiring corporation may also substitute by issuing, in place of outstanding Shares of the Company held by the Participant, substantially similar shares or other property subject to repurchase restrictions and other provisions no less favorable to the Participant than those which applied to such outstanding Shares immediately prior to such transaction described in this Section 17.1. For purposes of this Section 17.1, an “Acquiring Stockholder” means a stockholder or stockholders of the Company that (i) merges or combines with the Company in such combination transaction or (ii) owns or controls a majority of another corporation that merges or combines with the Company in such combination transaction.
In the event such successor or acquiring corporation (if any) does not assume, convert, replace or substitute Awards, as provided above, pursuant to a transaction described in this Section 17.1, then notwithstanding any other provision in this Plan to the contrary, the vesting of such Awards will accelerate and the Options will become exercisable in full prior to the consummation of such event at such times and on such conditions as the Committee determines, and if such Options are not exercised prior to the consummation of the corporate transaction, they shall terminate in accordance with the provisions of this Plan.
17.2 Other Treatment of Awards. Subject to any greater rights granted to Participants under the foregoing provisions of this Section 17, in the event of the occurrence of any transaction described in Section 17.1 hereof, any outstanding Awards will be treated as provided in the applicable agreement or plan of reorganization, merger, consolidation, dissolution, liquidation or sale of assets.
17.3 Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either (i) granting an Award under this Plan in substitution of such other company’s award or (ii) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the exercise price and the number and nature of shares issuable upon exercise of any such option will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price.
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18. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective on the date that it is adopted by the Board (the “Effective Date”). This Plan will be approved by the stockholders of the Company (excluding Shares issued pursuant to this Plan), consistent with applicable laws, within twelve (12) months before or after the Effective Date. Upon the Effective Date, the Board may grant Awards pursuant to this Plan; provided, however, that: (i) no Option may be exercised prior to initial stockholder approval of this Plan; (ii) no Option granted pursuant to an increase in the number of Shares approved by the Board shall be exercised prior to the time such increase has been approved by the stockholders of the Company; (iii) in the event that initial stockholder approval is not obtained within the time period provided herein, all Awards granted hereunder shall be canceled, any Shares issued pursuant to any Award shall be canceled and any purchase of Shares issued hereunder shall be rescinded; and (iv) Awards granted pursuant to an increase in the number of Shares approved by the Board which increase is not timely approved by stockholders shall be canceled, any Shares issued pursuant to any such Awards shall be canceled, and any purchase of Shares subject to any such Award shall be rescinded.
19. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein, this Plan will terminate ten (10) years from the Effective Date or, if earlier, the date of stockholder approval. This Plan and all agreements hereunder shall be governed by and construed in accordance with the laws of the State of California.
20. AMENDMENT OR TERMINATION OF PLAN. Subject to Section 5.9 hereof, the Board may at any time terminate or amend this Plan in any respect, including without limitation amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan; provided, however, that the Board will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder approval pursuant to Section 25102(o) of the California Corporations Code or the Code or the regulations promulgated thereunder as such provisions apply to ISO plans.
21. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options and other equity awards otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
22. DEFINITIONS. As used in this Plan, the following terms will have the following meanings:
“Award” means any award under this Plan, including any Option or Restricted Stock Award.
“Award Agreement” means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award, including the Stock Option Agreement and Restricted Stock Agreement.
“Board” means the Board of Directors of the Company.
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“Cause” means Termination because of (i) any willful, material violation by the Participant of any law or regulation applicable to the business of the Company or a Parent or Subsidiary of the Company, the Participant’s conviction for, or guilty plea to, a felony or a crime involving moral turpitude, or any willful perpetration by the Participant of a common law fraud, (ii) the Participant’s commission of an act of personal dishonesty which involves personal profit in connection with the Company or any other entity having a business relationship with the Company, (iii) any material breach by the Participant of any provision of any agreement or understanding between the Company or any Parent or Subsidiary of the Company and the Participant regarding the terms of the Participant’s service as an employee, officer, director or consultant to the Company or a Parent or Subsidiary of the Company, including without limitation, the willful and continued failure or refusal of the Participant to perform the material duties required of such Participant as an employee, officer, director or consultant of the Company or a Parent or Subsidiary of the Company, other than as a result of having a Disability, or a breach of any applicable invention assignment and confidentiality agreement or similar agreement between the Company or a Parent or Subsidiary of the Company and the Participant, (iv) Participant’s disregard of the policies of the Company or any Parent or Subsidiary of the Company so as to cause loss, damage or injury to the property, reputation or employees of the Company or a Parent or Subsidiary of the Company, or (v) any other misconduct by the Participant which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company or a Parent or Subsidiary of the Company.
“Code” means the Internal Revenue Code of 1986, as amended.
“Committee” means the committee created and appointed by the Board to administer this Plan, or if no committee is created and appointed, the Board.
“Company” means Reviva Pharmaceuticals, Inc. or any successor corporation.
“Disability” means a disability, whether temporary or permanent, partial or total, as determined by the Committee.
“Exercise Price” means the price at which a holder of an Option may purchase the Shares issuable upon exercise of the Option.
“Fair Market Value” means, as of any date, the value of a share of the Company’s Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National Market, its closing price on the Nasdaq National Market on the date of determination as reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal;
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(c) if such Common Stock is publicly traded but is not quoted on the Nasdaq National Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported by The Wall Street Journal (or, if not so reported, as otherwise reported by any newspaper or other source as the Board may determine); or
(d) if none of the foregoing is applicable, by the Committee in good faith.
“Option” means an award of an option to purchase Shares pursuant to Section 5 hereof.
“Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock representing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
“Participant” means a person who receives an Award under this Plan.
“Plan” means this Reviva Pharmaceuticals, Inc. 2006 Equity Incentive Plan, as amended from time to time.
“Purchase Price” means the price at which a Participant may purchase Restricted Stock.
“Restricted Stock” means Shares purchased pursuant to a Restricted Stock Award.
“Restricted Stock Award” means an award of Shares pursuant to Section 6 hereof.
“SEC” means the Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.
“Shares” means shares of the Company’s Common Stock, $0.0001 par value per share, reserved for issuance under this Plan, as adjusted pursuant to Sections 2 and 17 hereof, and any successor security.
“Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock representing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
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“Termination” or “Terminated” means, for purposes of this Plan with respect to a Participant, that the Participant has for any reason ceased to provide services as an employee, officer, director or consultant to the Company or a Parent or Subsidiary of the Company. A Participant will not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Committee, provided that such leave is for a period of not more than ninety (90) days (a) unless reinstatement (or, in the case of an employee with an ISO, reemployment) upon the expiration of such leave is guaranteed by contract or statute, or (b) unless provided otherwise pursuant to formal policy adopted from time to time by the Company’s Board and issued and promulgated in writing. In the case of any Participant on (i) sick leave, (ii) military leave or (iii) an approved leave of absence, the Committee may make such provisions respecting suspension of vesting of the Award while on leave from the Company or a Parent or Subsidiary of the Company as it may deem appropriate, except that in no event may an Option be exercised after the expiration of the term set forth in the Stock Option Agreement. The Committee will have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the “Termination Date”).
“Unvested Shares” means “Unvested Shares” as defined in the Award Agreement.
“Vested Shares” means “Vested Shares” as defined in the Award Agreement.
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Exhibit 10.17
FIRST AMENDMENT TO REVIVA PHARMACEUTICALS, INC.
2006 EQUITY INCENTIVE PLAN
WHEREAS, pursuant to Section 20 of the Reviva Pharmaceuticals, Inc. 2006 Equity Incentive Plan (the “Plan”), the Board of Directors (the “Board”) of Reviva Pharmaceuticals, Inc. (“Reviva”) may modify, amend, alter, suspend, discontinue or terminate the Plan;
WHEREAS, capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Plan; and
WHEREAS, the Board believes it would be in the best interest of Reviva to amend the Plan as provided in this First Amendment to the Plan (this “Amendment No. 1”) to reflect the assumption of the Plan by Tenzing Acquisition Corp., a Delaware corporation (the “Purchaser”), pursuant to that certain Agreement and Plan of Merger, dated as of July 20, 2020 by and among the Purchaser, Tenzing Merger Subsidiary Inc., Tenzing LLC, Reviva, and the other parties thereto (the “Merger Agreement”).
NOW, THEREFORE, in accordance with Section 20 of the Plan, the Plan shall be amended, subject to stockholder approval of the Merger (as defined in the Merger Agreement), effective upon the Effective Time (as defined in the Merger Agreement) as follows:
1. | The title of the Plan shall be amended and restated as follows: “Reviva Pharmaceuticals Holdings, Inc. 2006 Equity Incentive Plan.” |
2. | The definition of “Company” in Section 22 is hereby amended and restated as follows: |
‘Company’ means Reviva Pharmaceuticals Holdings, Inc., a Delaware corporation.”
3. | The definition of “Plan” in Section 22 is hereby amended and restated as follows: |
‘Plan’ means this Reviva Pharmaceuticals Holdings, Inc. 2006 Equity Incentive Plan, as it may be amended, supplemented, restated or otherwise modified from time to time.”
IN WITNESS WHEREOF, this Amendment to the Plan is adopted as of as of this 11th day of December, 2020
REVIVA PHARMACEUTICALS, INC. | |||
By: |
/s/ Laxminarayan Bhat |
||
Name: | Laxminarayan Bhat | ||
Title: | President & CEO |
[Signature Page to Equity Plan Amendment]
Exhibit 10.18
REVIVA PHARMACEUTICALS, INC.
2006 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement (the “Agreement”) is made and entered into as of the Date of Grant set forth below (the “Date of Grant”) by and between Reviva Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and the participant named below (the “Participant”).
Capitalized terms not defined herein shall have the meaning ascribed to them in the Company’s 2006 Equity Incentive Plan (the “Plan”).
Participant: | ||
Participant’s Address: | ||
Social Security Number: | ||
Total Option Shares: | ||
Exercise Price Per Share: | ||
Date of Grant: | ||
First Vesting Date: | ||
Expiration Date: | ||
(unless earlier terminated under Section 5.6 of the Plan) |
Classification of Participant: | [ ] Exempt Employee |
[ ] Nonexempt Employee | |
[ ] Independent Contractor | |
Type of Stock Option: | [ ] Incentive Stock Option | [ ] Nonqualified Stock Option |
1. GRANT OF OPTION. The Company hereby grants to Participant an option (this “Option”) to purchase the total number of shares of Common Stock, $0.0001 par value per share, of the Company set forth above as Total Option Shares (the “Shares”) at the Exercise Price Per Share set forth above (the “Exercise Price”), subject to all of the terms and conditions of this Agreement and the Plan. If designated as an Incentive Stock Option above, the Option is intended to qualify as an “incentive stock option” (an “ISO”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), except that if on the date of grant the Participant is not subject to U.S. income tax, then this Option shall be an NQSO.
2. EXERCISE PERIOD.
2.1 Exercise Period of Option. Provided Participant continues to provide services as an employee, officer, director or consultant to the Company or any Subsidiary or Parent of the Company, the Option will become vested and exercisable as to portions of the Shares as follows: (i) this Option shall not vest nor be exercisable with respect to any of the Shares until the First Vesting Date set forth on the first page of this Agreement (the “First Vesting Date”); (ii) on the six month anniversary of the First Vesting Date, the Option will become vested and exercisable as to 1/8th of the Total Option Shares; and (iii) thereafter on the same day of each succeeding calendar month (or if there is no such day in any month, then the last day of such calendar month) the Option will become vested and exercisable as to an additional 1/48th of the remaining Shares until the Shares are vested with respect to 100% of the Shares. If application of the vesting percentage causes a fractional share, such share shall be rounded down to the nearest whole share for each month except for the last month in such vesting period, at the end of which last month this Option shall become vested for the full remainder of the Shares.
2.2 Vesting of Options. Shares that are vested pursuant to the schedule set forth in Section 2.1 are “Vested Shares.” Shares that are not vested pursuant to the schedule set forth in Section 2.1 are “Unvested Shares.”
2.3 Expiration. The Option shall expire on the Expiration Date set forth above or earlier as provided in Section 3 below or pursuant to Section 5.6 of the Plan.
3. TERMINATION.
3.1 Termination for Any Reason Except Death, Disability or Cause. If Participant is Terminated for any reason except death, Disability or for Cause, the Option, to the extent (and only to the extent) that it would have been exercisable by Participant on the Termination Date, may be exercised by Participant no later than three (3) months after the Termination Date, but in any event no later than the Expiration Date.
3.2 Termination Because of Death or Disability. If Participant is Terminated because of death or Disability of Participant (or Participant dies within three (3) months of Termination when Termination is for any reason other than Participant’s Disability or for Cause), the Option, to the extent that it is exercisable by Participant on the Termination Date, may be exercised by Participant (or Participant’s legal representative) no later than ninety (90) days after the Termination Date, but in any event no later than the Expiration Date. Any exercise beyond
(i) | three (3) months after the Termination Date when the Termination is for any reason other than the Participant’s death or disability, within the meaning of Section 22(e)(3) of the Code; or |
(ii) | twelve (12) months after the Termination Date when the termination is for Participant’s disability, within the meaning of Section 22(e)(3) of the Code, is deemed to be an NQSO. |
3.3 Termination for Cause. If the Participant is terminated for Cause, the Participant may exercise such Participant’s Options, but not to an extent greater than such Options are exercisable as to Vested Shares upon the Termination Date and Participant’s Options shall expire on such Participant’s Termination Date, or at such later time and on such conditions as are determined by the Committee.
3.4 No Obligation to Employ. Nothing in the Plan or this Agreement shall confer on Participant any right to continue in the employ of, or other relationship with, the Company or any Parent or Subsidiary of the Company, or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate Participant’s employment or other relationship at any time, with or without Cause.
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4. MANNER OF EXERCISE.
4.1 Stock Option Exercise Agreement. To exercise this Option, Participant (or in the case of exercise after Participant’s death or incapacity, Participant’s executor, administrator, heir or legatee, as the case may be) must deliver to the Company an executed stock option exercise agreement (the “Exercise Agreement”) in the form of stock option exercise agreement then in use by the Company, a copy of which agreement’s current form has been attached hereto as Exhibit A, which stock option exercise agreement shall set forth, inter alia, (i) Participant’s election to exercise the Option, (ii) the number of Shares being purchased, (iii) any restrictions imposed on the Shares and (iv) any representations, warranties and agreements regarding Participant’s investment intent and access to information as may be required by the Company to comply with applicable securities laws. If someone other than Participant exercises the Option, then such person must submit documentation reasonably acceptable to the Company verifying that such person has the legal right to exercise the Option and such person shall be subject to all of the restrictions contained herein as if such person were the Participant.
4.2 Limitations on Exercise. The Option may not be exercised unless such exercise is in compliance with all applicable federal and state securities laws, as they are in effect on the date of exercise. The Option may not be exercised as to fewer than one hundred (100) Shares unless it is exercised as to all Shares as to which the Option is then exercisable.
4.3 Payment. The Exercise Agreement shall be accompanied by full payment of the Exercise Price for the shares being purchased in cash (by check), or where permitted by law and by the Committee:
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of fully-paid, nonassessable and vested shares of the Company’s Common Stock that (i) either (A) have been owned by Participant for more than six (6) months and for which the Company has received “full payment of the purchase price” within the meaning of SEC Rule 144 (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares) or (B) were obtained by Participant in the open public market; and (ii) are clear of all liens, claims, encumbrances or security interests;
(c) by waiver of compensation due or accrued to Participant for services rendered;
(d) provided that a public market for the Company’s stock exists:
(i) | through a “same day sale” commitment from Participant and a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased sufficient to pay for the total Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the total Exercise Price directly to the Company, or (ii) through a “margin” commitment from Participant and an NASD Dealer whereby Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the total Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the total Exercise Price directly to the Company; |
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(e) any other form of consideration approved by the Committee; or
(f) by any combination of the foregoing.
4.4 Tax Withholding. Prior to the issuance of the Shares upon exercise of the Option, Participant must pay or provide for any applicable federal, state and local withholding obligations of the Company. If the Committee permits, Participant may provide for payment of withholding taxes upon exercise of the Option by requesting that the Company retain the minimum number of Shares with a Fair Market Value equal to the minimum amount of taxes required to be withheld; but in no event will the Company withhold Shares if such withholding would result in adverse accounting consequences to the Company. In such case, the Company shall issue the net number of Shares to the Participant by deducting the Shares retained from the Shares issuable upon exercise.
4.5 Issuance of Shares. Provided that the Exercise Agreement and payment are in form and substance satisfactory to counsel for the Company, the Company shall issue the Shares registered in the name of Participant, Participant’s authorized assignee, or Participant’s legal representative, and shall deliver certificates representing the Shares with the appropriate legends affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option is an ISO, and if Participant sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two (2) years after the Date of Grant and (ii) the date one (1) year after the purchase of such Shares by Participant upon exercise of the Option, Participant shall immediately notify the Company in writing of such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant from the early disposition by payment in cash or out of the current wages or other compensation payable to Participant.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The Plan and this Agreement are intended to comply with Section 25102(o) of the California Corporations Code and any regulations relating thereto. Any provision of this Agreement that is inconsistent with Section 25102(o) or any regulations relating thereto shall, without further act or amendment by the Company or the Board, be reformed to comply with the requirements of Section 25102(o) and any regulations relating thereto. The exercise of the Option and the issuance and transfer of Shares shall be subject to compliance by the Company and Participant with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s Common Stock may be listed at the time of such issuance or transfer. Participant understands that the Company is under no obligation to register or qualify the Shares with the SEC, any state securities commission or any stock exchange to effect such compliance.
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7. NONTRANSFERABILITY OF OPTION. The Option may not be transferred in any manner other than by will or by the laws of descent and distribution, and, with respect to NQSOs, by instrument to an inter vivos or testamentary trust in which the options are to be passed to beneficiaries upon the death of the trustor (settlor), or by gift to “immediate family” as that term is defined in 17 C.F.R. 240.16a-1(e), and may be exercised during the lifetime of Participant only by Participant or in the event of Participant’s incapacity, by Participant’s legal representative. The terms of the Option and the Plan shall be binding upon the executors, administrators, successors and assigns of Participant.
8. COMPANY’S RIGHT OF FIRST REFUSAL. Before any Vested Shares held by Participant or any transferee of such Vested Shares may be sold or otherwise transferred (including without limitation a transfer by gift or operation of law), the Company and/or its assignee(s) shall have an assignable right of first refusal to purchase the Vested Shares to be sold or transferred on the terms and conditions set forth in the Exercise Agreement (the “Right of First Refusal”). The Company’s Right of First Refusal will terminate when the Company’s securities become publicly traded. Unvested Shares may not be sold or otherwise transferred without the Company’s prior written consent.
9. TAX CONSEQUENCES. Set forth below is a brief summary as of the Effective Date of the Plan of some of the federal and California tax consequences of exercise of the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.
9.1 Exercise of ISO. If the Option qualifies as an ISO, there will be no regular federal or California income tax liability upon the exercise of the Option, although the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price will be treated as a tax preference item for federal alternative minimum tax purposes and may subject the Participant to the alternative minimum tax in the year of exercise.
9.2 Exercise of Nonqualified Stock Option. If the Option does not qualify as an ISO, there may be regular federal and California income tax liability upon the exercise of the Option. Participant shall be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If Participant is a current or former employee of the Company, the Company may be required to withhold from Participant’s compensation or collect from Participant and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise.
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9.3 Disposition of Shares. The following tax consequences may apply upon disposition of the Shares:
(a) Incentive Stock Options. If the Shares are held for more than twelve (12) months after the date of purchase of the Shares pursuant to the exercise of an ISO and are disposed of more than two (2) years after the Date of Grant, any gain realized on disposition of the Shares will be treated as long term capital gain for federal and California income tax purposes. If Shares purchased under an ISO are disposed of within the applicable one (1) year or two (2) year period, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates in the year of the disposition) to the extent of the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price.
(b) Nonqualified Stock Options. If the Shares are held for more than twelve (12) months after the date of purchase of the Shares pursuant to the exercise of an NQSO, any gain realized on disposition of the Shares will be treated as long term capital gain.
(c) Withholding. The Company may be required to withhold from the Participant’s compensation or collect from the Participant and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income.
10. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any of the rights of a stockholder with respect to any Shares until the Shares are issued to Participant.
11. GENERAL PROVISIONS.
11.1 Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by Participant or the Company to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on the Company and Participant.
11.2 Entire Agreement. The Plan is incorporated herein by reference. This Agreement and the Plan constitute the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, and supersede all prior understandings and agreements, whether oral or written, between or among the parties hereto with respect to the specific subject matter hereof.
11.3 Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Corporate Secretary of the Company at its principal corporate offices or to its facsimile or telecopier number specified below. Any notice required to be given or delivered to Participant shall be in writing and addressed to Participant at the address, facsimile or telecopier indicated below or to such other address, facsimile or telecopier as such party may designate in writing from time to time to the Company. All notices shall be deemed to have been given or delivered upon: (i) personal delivery; (ii) three (3) days after deposit in the United States mail by certified or registered mail (return receipt requested); (iii) one (1) business day after deposit with any return receipt express courier (prepaid); or (iv) one (1) business day after transmission by facsimile or telecopier.
11.4 Successors and Assigns. The Company may assign any of its rights under this Agreement including its rights to purchase Shares under the Right of First Refusal. No other party to this Agreement may assign, whether voluntarily or by operation of law, any of its rights and obligations under this Agreement, except with the prior written consent of the Company. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement shall be binding upon Participant and Participant’s heirs, executors, administrators, legal representatives, successors and assigns.
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11.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within California.
11.6 Acceptance. Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. Participant has read and understands the terms and provisions thereof, and accepts the Option subject to all the terms and conditions of the Plan and this Agreement. Participant acknowledges that there may be adverse tax consequences upon exercise of the Option or disposition of the Shares and agrees that Participant shall consult a tax adviser prior to such exercise or disposition.
11.7 Further Assurances. The parties agree to execute such further documents and instruments and to take such further actions as may be reasonably necessary to carry out the purposes and intent of this Agreement.
11.8 Titles and Headings. The titles, captions and headings of this Agreement are included for ease of reference only and shall be disregarded in interpreting or construing this Agreement. Unless otherwise specifically stated, all references herein to “sections” and “exhibits” will mean “sections” and “exhibits” to this Agreement.
11.9 Severability. If any provision of this Agreement is determined by any court or arbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such provision shall be enforced to the maximum extent possible given the intent of the parties hereto. If such clause or provision cannot be so enforced, such provision shall be stricken from this Agreement and the remainder of this Agreement shall be enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not enforceable) never been contained in this Agreement. Notwithstanding the foregoing, if the value of this Agreement based upon the substantial benefit of the bargain for any party is materially impaired, which determination as made by the presiding court or arbitrator of competent jurisdiction shall be binding, then both parties agree to substitute such provision(s) through good faith negotiations.
11.10 Counterparts. This Agreement may be entered into in two or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same agreement.
11.11 Facsimile Signatures. This Agreement may be executed and delivered by facsimile or electronically in portable document format (.pdf) and upon such delivery the facsimile or portable document format (.pdf) signature will be deemed to have the same effect as if the original signature had been delivered to the other party.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the Company has caused this Stock Option Agreement to be executed by its duly authorized representative and Participant has executed this Stock Option Agreement effective as of the Date of Grant.
REVIVA PHARMACEUTICALS, INC.: | PARTICIPANT: |
By: | By: | |||
President and Chief Executive Officer | ||||
(Please print title) |
Address: 3900 Freedom Circle, Suite 101 | Address: | ||
Santa Clara, CA 95054 | |||
Fax No.: (408) 904-6270 | Fax No.: | ||
Phone No.: (408) 816-1454 | Phone No.: |
EXHIBIT A
FORM OF STOCK OPTION EXERCISE AGREEMENT
REVIVA PHARMACEUTICALS, INC.
2006 EQUITY INCENTIVE PLAN STOCK OPTION EXERCISE AGREEMENT
This Stock Option Exercise Agreement (the “Exercise Agreement”) is made and entered into as of ___________________, __________ (the “Effective Date”) by and between Reviva Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and the purchaser named below (the “Purchaser”). Capitalized terms not defined herein shall have the meanings ascribed to them in the Company’s 2006 Equity Incentive Plan (the “Plan”) or that certain Stock Option Agreement entered into by and between Purchaser and the Company dated as of the Date of Grant set forth below (the “Stock Option Agreement”).
Purchaser: | ||
Purchaser’s Address: | ||
Social Security Number: | ||
Total Number of Shares: | ||
Exercise Price Per Share: | ||
Date of Grant: | ||
First Vesting Date: | ||
Expiration Date: | ||
(unless earlier terminated under Section 5.6 of the Plan) |
Type of Stock Option: | [ ] Incentive Stock Option | [ ] Nonqualified Stock Option |
1. Exercise of Option.
1.1 Exercise. Pursuant to exercise of that certain option granted to Purchaser under the Plan and the Stock Option Agreement (the “Option”) and subject to the terms and conditions of this Exercise Agreement, Purchaser hereby purchases from the Company, and the Company hereby sells to Purchaser, the Total Number of Shares set forth above (the “Shares”) of the Company’s Common Stock, $0.0001 par value per share, at the Exercise Price Per Share set forth above (the “Exercise Price”). As used in this Exercise Agreement, the term “Shares” refers to the Shares purchased under this Exercise Agreement and includes all securities received (i) in replacement of the Shares, (ii) as a result of stock dividends or stock splits with respect to the Shares and (iii) all securities received in replacement of the Shares in a merger, recapitalization, reorganization or similar corporate transaction.
1.2 Title to Shares. The exact spelling of the name(s) under which Purchaser will take title to the Shares is:
__________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________
Purchaser desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[ ] Joint Tenants; please state name of other tenant:
[ ] Other; please specify:
1.3 Payment. Purchaser hereby delivers payment of the Exercise Price in the manner permitted in the Stock Option Agreement as follows (check and complete as appropriate):
[ ] in cash (by check) in the amount of $ ___ , receipt of which is acknowledged by the Company;
[ ] subject to prior approval by the Committee, by cancellation of indebtedness of the Company owed to Purchaser in the amount of $ __ ;
[ ] subject to prior approval by the Committee, by delivery of fully-paid, nonassessable and vested shares of the Common Stock of the Company that (i) either have been (A) owned by Purchaser for more than six (6) months and for which the Company has received “full payment of the purchase price” within the meaning of SEC Rule 144 (and, if purchased by use of a promissory note, such note has been fully paid with respect to such vested shares) or (B) obtained by Purchaser in the open public market, and (ii) are owned by Purchaser free and clear of all liens, claims, encumbrances or security interests, valued at the current Fair Market Value of $_______ per share; or
[ ] subject to prior approval by the Committee, by the waiver hereby of compensation due or accrued for services rendered in the amount of $____ .
2. Delivery.
2.1 Deliveries by Purchaser. Purchaser hereby delivers to the Company (i) an executed copy of this Exercise Agreement, (ii) two (2) copies of a blank Stock Power and Assignment Separate from Stock Certificate in the form of Exhibit 1 attached hereto (the “Stock Powers”), both executed by Purchaser (and Purchaser’s spouse, if any), (iii) if Purchaser is married, a Consent of Spouse in the form of Exhibit 2 attached hereto (the “Spouse Consent”) executed by Purchaser’s spouse and (iv) the Exercise Price and payment or other provision for any applicable tax obligations in a form of payment permitted by this Exercise Agreement for the payment of taxes, proof of which payments are attached hereto as Exhibit 3.
2.2 Deliveries by the Company. Upon its receipt of the Exercise Price, payment or other provision for any applicable tax obligations and all the documents to be executed and delivered by Purchaser to the Company under Section 2.1, the Company will issue a duly executed stock certificate evidencing the Shares in the name of Purchaser to be placed in escrow as provided in Section 10 until expiration or termination of the Company’s Right of First Refusal described in Sections 8, 9 and 10.
3. Representations and Warranties of Purchaser. Purchaser represents and warrants to the Company as follows.
3.1 Agrees to Terms of the Plan. Purchaser has received a copy of the Plan and the Stock Option Agreement, has read and understands the terms of the Plan, the Stock Option Agreement and this Exercise Agreement, and agrees to be bound by their terms and conditions. Purchaser acknowledges that there may be adverse tax consequences upon exercise of the Option or disposition of the Shares, and agrees that Purchaser shall consult a tax adviser prior to such exercise or disposition.
3.2 Purchase for Own Account for Investment. Purchaser is purchasing the Shares for Purchaser’s own account for investment purposes only and not with a view to, or for sale in connection with, a distribution of the Shares within the meaning of the Securities Act. Purchaser has no present intention of selling or otherwise disposing of all or any portion of the Shares and no one other than Purchaser has any beneficial ownership of any of the Shares.
3.3 Access to Information. Purchaser has had access to all information regarding the Company and its present and prospective business, assets, liabilities and financial condition that Purchaser reasonably considers important in making the decision to purchase the Shares, and Purchaser has had ample opportunity to ask questions of the Company’s representatives concerning such matters and this investment.
3.4 Understanding of Risks. Purchaser is fully aware of: (i) the highly speculative nature of the investment in the Shares; (ii) the financial hazards involved; (iii) the lack of liquidity of the Shares and the restrictions on transferability of the Shares (e.g., that Purchaser may not be able to sell or dispose of the Shares or use them as collateral for loans); (iv) the qualifications and backgrounds of the management of the Company; and (v) the tax consequences of investment in the Shares. Purchaser is capable of evaluating the merits and risks of this investment, has the ability to protect Purchaser’s own interests in this transaction and is financially capable of bearing a total loss of this investment.
3.5 No General Solicitation. At no time was Purchaser presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and purchase of the Shares.
4. Compliance with Securities Laws.
4.1 Compliance with U.S. Federal Securities Laws. Purchaser understands and acknowledges that the Shares have not been registered with the SEC under the Securities Act and that, notwithstanding any other provision of the Stock Option Agreement to the contrary, the exercise of any rights to purchase any Shares is expressly conditioned upon compliance with the Securities Act and all applicable state securities laws. Purchaser agrees to cooperate with the Company to ensure compliance with such laws.
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4.2 Compliance with California Securities Laws. THE PLAN, THE STOCK OPTION AGREEMENT AND THIS EXERCISE AGREEMENT ARE INTENDED TO COMPLY WITH SECTION 25102(o) OF THE CALIFORNIA CORPORATIONS CODE AND ANY RULES (INCLUDING COMMISSIONER RULES, IF APPLICABLE) OR REGULATIONS PROMULGATED THEREUNDER BY THE CALIFORNIA DEPARTMENT OF CORPORATIONS (THE “REGULATIONS”). ANY PROVISION OF THIS EXERCISE AGREEMENT THAT IS INCONSISTENT WITH SECTION 25102(o) SHALL, WITHOUT FURTHER ACT OR AMENDMENT BY THE COMPANY OR THE BOARD, BE REFORMED TO COMPLY WITH THE REQUIREMENTS OF SECTION 25102(o). THE SALE OF THE SECURITIES THAT ARE THE SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET QUALIFIED WITH THE CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION, IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS EXERCISE AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION BEING AVAILABLE.
5. Restricted Securities.
5.1 No Transfer Unless Registered or Exempt. Purchaser understands that Purchaser may not transfer any Shares unless such Shares are registered under the Securities Act or qualified under applicable state securities laws or unless, in the opinion of counsel to the Company, exemptions from such registration and qualification requirements are available. Purchaser understands that only the Company may file a registration statement with the SEC and that the Company is under no obligation to do so with respect to the Shares. Purchaser has also been advised that exemptions from registration and qualification may not be available or may not permit Purchaser to transfer all or any of the Shares in the amounts or at the times proposed by Purchaser.
5.2 SEC Rule 144. In addition, Purchaser has been advised that SEC Rule 144 promulgated under the Securities Act, which permits certain limited sales of unregistered securities, is not presently available with respect to the Shares and, in any event, requires that the Shares be held for a minimum of six (6) months, and in certain cases one (1) year, after they have been purchased and paid for (within the meaning of Rule 144). Purchaser understands that Rule 144 may indefinitely restrict transfer of the Shares so long as Purchaser remains an “affiliate” of the Company or if “current public information” about the Company (as defined in Rule 144) is not publicly available.
6. Restrictions on Transfers.
6.1 Disposition of Shares. Purchaser hereby agrees that Purchaser shall make no disposition of the Shares (other than as permitted by this Exercise Agreement) unless and until:
(a) Purchaser shall have notified the Company of the proposed disposition and provided a written summary of the terms and conditions of the proposed disposition;
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(b) Purchaser shall have complied with all requirements of this Exercise Agreement applicable to the disposition of the Shares;
(c) Purchaser shall have provided the Company with written assurances, in form and substance satisfactory to counsel for the Company, that (i) the proposed disposition does not require registration of the Shares under the Securities Act or (ii) all appropriate actions necessary for compliance with the registration requirements of the Securities Act or of any exemption from registration available under the Securities Act (including Rule 144) have been taken; and
(d) Purchaser shall have provided the Company with written assurances, in form and substance satisfactory to the Company, that the proposed disposition will not result in the contravention of any transfer restrictions applicable to the Shares pursuant to the provisions of the Regulations referred to in Section 4.2 hereof.
6.2 Restriction on Transfer. Purchaser shall not transfer, assign, grant a lien or security interest in, pledge, hypothecate, encumber or otherwise dispose of any of the Shares that are subject to the Company’s Right of First Refusal described below, except as permitted by this Exercise Agreement.
6.3 Transferee Obligations. Each person (other than the Company) to whom the Shares are transferred by means of one of the permitted transfers specified in this Exercise Agreement must, as a condition precedent to the validity of such transfer, acknowledge in writing to the Company that such person is bound by the provisions of this Exercise Agreement and the Plan and that the transferred Shares are subject to (i) the Company’s Right of First Refusal granted hereunder and (ii) the market stand-off provisions of Section 7 hereof, to the same extent such Shares would be so subject if retained by the Purchaser.
7. Market Standoff Agreement. Purchaser agrees in connection with any registration of the Company’s securities under the Securities Act or other public offering that, upon the request of the Company or the underwriters managing any public offering of the Company’s securities, Purchaser will not sell or otherwise dispose of any Shares without the prior written consent of the Company or such managing underwriters, as the case may be, for a period of time (not to exceed one hundred eighty (180) days) after the effective date of such registration and during such restricted period the Shares shall remain subject to all restrictions as the Company or the managing underwriters may specify for employee-stockholders generally; provided, however, that if during the last seventeen (17) days of such restricted period the Company issues an earnings release or material news or a material event relating to the Company occurs, or prior to the expiration of the restricted period the Company announces that it will release earnings results during the 16-day period beginning on the last day of the restricted period, then if required by the underwriters or the Company the restrictions imposed by this Section 7 shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. In no event shall the restricted period extend beyond two hundred fifteen (215) days after the effective date of the applicable registration statement. For purposes of this Section 7, the term “Company” shall include any wholly-owned subsidiary of the Company into which the Company merges or consolidates. In order to enforce the foregoing covenant, the Company shall have the right to place restrictive legends on the certificates representing the shares subject to this Section 7 and to impose stop transfer instructions with respect to the Shares until the end of such period. Purchaser further agrees to enter into any agreement reasonably required by the underwriters to implement the foregoing within any reasonable timeframe so requested.
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8. Company’s Right of First Refusal. Unvested Shares may not be sold or otherwise transferred by Purchaser without the Company’s prior written consent. Before any Vested Shares held by Purchaser or any permitted transferee of such Vested Shares (either sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including, without limitation, a transfer by gift or operation of law), the Company and/or its assignee(s) will have a right of first refusal to purchase the Vested Shares to be sold or transferred (the “Offered Shares”) on the terms and conditions set forth in this Section (the “Right of First Refusal”).
8.1 Notice of Proposed Transfer. The Holder of the Offered Shares will deliver to the Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or otherwise transfer the Offered Shares; (ii) the name and address of each proposed purchaser or other transferee (the “Proposed Transferee”); (iii) the number of Offered Shares to be transferred to each Proposed Transferee; (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Offered Shares (the “Offered Price”); and (v) that the Holder acknowledges this Notice is an offer to sell the Offered Shares to the Company and/or its assignee(s) pursuant to the Company’s Right of First Refusal at the Offered Price as provided for in this Exercise Agreement.
8.2 Exercise of Right of First Refusal. At any time within thirty (30) days after the Company’s effective receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all or less than all of the Offered Shares proposed to be transferred to any one or more of the Proposed Transferees named in the Notice, at the purchase price, determined as specified below.
8.3 Purchase Price. The purchase price for the Offered Shares purchased under this Section will be the Offered Price, provided that if the Offered Price consists of no legal consideration (as, for example, in the case of a transfer by gift) the purchase price will be the fair market value of the Offered Shares as determined in good faith by the Company’s Board of Directors. If the Offered Price includes consideration other than cash, then the value of the non- cash consideration, as determined in good faith by the Company’s Board of Directors, will conclusively be deemed to be the cash equivalent value of such non-cash consideration.
8.4 Payment. Payment of the purchase price for the Offered Shares will be payable, at the option of the Company and/or its assignee(s) (as applicable), by check, wire transfer or by cancellation of all or a portion of any outstanding purchase money indebtedness owed by the Holder to the Company (or to such assignee, in the case of a purchase of Offered Shares by such assignee) or by any combination thereof. The purchase price will be paid without interest within sixty (60) days after the Company’s effective receipt of the Notice, or, at the option of the Company and/or its assignee(s), in the manner and at the time(s) set forth in the Notice.
8.5 Holder’s Right to Transfer. If all of the Offered Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Offered Shares to such Proposed Transferee at the Offered Price or at a higher price, provided that (i) such sale or other transfer is consummated within one hundred twenty (120) days after the effective date of the Notice, (ii) any such sale or other transfer is effected in compliance with all applicable securities laws and (iii) such Proposed Transferee agrees in writing that the provisions of this Exercise Agreement and the Plan will continue to apply to the Offered Shares in the hands of such Proposed Transferee. If the Offered Shares described in the Notice are not transferred to a Proposed Transferee within such one hundred twenty (120) day period, then a new Notice must be given to the Company pursuant to which the Company will again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
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8.6 Exempt Transfers. Notwithstanding anything to the contrary in this Section, the following transfers of Vested Shares will be exempt from the Right of First Refusal: (i) the transfer of any or all of the Vested Shares during Purchaser’s lifetime by gift or on Purchaser’s death by will or intestacy to Purchaser’s “Immediate Family” (as defined below) or to a trust for the benefit of Purchaser or Purchaser’s Immediate Family, provided that each transferee or other recipient agrees in a writing satisfactory to the Company that the provisions of this Exercise Agreement and the Plan will continue to apply to the transferred Vested Shares in the hands of such transferee or other recipient; (ii) any transfer of Vested Shares made pursuant to a statutory merger or statutory consolidation of the Company with or into another corporation or corporations except that the Right of First Refusal will continue to apply thereafter to such Vested Shares, in which case the surviving corporation of such merger or consolidation shall succeed to the rights of the Company under this Section unless the agreement of merger or consolidation expressly otherwise provides; or (iii) any transfer of Vested Shares pursuant to the winding up and dissolution of the Company. As used herein, the term “Immediate Family” will mean Purchaser’s spouse, the lineal descendant or antecedent, father, mother, brother or sister, child, adopted child, grandchild or adopted grandchild of the Purchaser or the Purchaser’s spouse, or the spouse of any of the above.
8.7 Termination of Right of First Refusal. The Right of First Refusal will terminate as to all Shares on the effective date of the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the SEC under the Securities Act (other than a registration statement relating solely to the issuance of Common Stock pursuant to a business combination or an employee incentive or benefit plan).
8.8 Encumbrances on Vested Shares. Purchaser may grant a lien or security interest in, or pledge, hypothecate or encumber Vested Shares only if each party to whom such lien or security interest is granted, or to whom such pledge, hypothecation or other encumbrance is made, agrees in a writing satisfactory to the Company that: (i) such lien, security interest, pledge, hypothecation or encumbrance will not apply to such Vested Shares after they are acquired by the Company and/or its assignees under this Section; and (ii) the provisions of this Exercise Agreement and the Plan will continue to apply to such Vested Shares in the hands of such party and any transferee of such party. Purchaser may not grant a lien or security interest in, or pledge, hypothecate or encumber, any Unvested Shares.
9. Rights as a Stockholder. Subject to the terms and conditions of this Exercise Agreement, Purchaser will have all of the rights of a stockholder of the Company with respect to the Shares from and after the date that Shares are issued to Purchaser until such time as Purchaser disposes of the Shares or the Company and/or its assignee(s) exercise(s) the Right of First Refusal. Upon an exercise of the Right of First Refusal, Purchaser will have no further rights as a holder of the Shares so purchased upon such exercise, other than the right to receive payment for the Shares so purchased in accordance with the provisions of this Exercise Agreement, and, if applicable, Purchaser will promptly surrender the stock certificate(s) evidencing the Shares so purchased to the Company for transfer or cancellation.
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10. Escrow. As security for Purchaser’s faithful performance of this Exercise Agreement, Purchaser agrees, immediately upon receipt of the stock certificate(s) evidencing the Shares, to deliver such certificate(s), together with the Stock Powers executed by Purchaser and by Purchaser’s spouse, if any (with the transferee, certificate number, date and number of Shares left blank), to the Secretary of the Company or other designee of the Company (the “Escrow Holder”), who is hereby appointed to hold such certificate(s) and Stock Powers in escrow and to take all such actions and to effectuate all such transfers and/or releases of such Shares as are in accordance with the terms of this Exercise Agreement. Purchaser and the Company agree that Escrow Holder will not be liable to any party to this Exercise Agreement (or to any other party) for any actions or omissions unless Escrow Holder is grossly negligent or intentionally fraudulent in carrying out the duties of Escrow Holder under this Exercise Agreement. Escrow Holder may rely upon any letter, notice or other document executed with any signature purported to be genuine and may rely on the advice of counsel and obey any order of any court with respect to the transactions contemplated by this Exercise Agreement. The Shares will be released from escrow upon termination of the Right of First Refusal.
11. Restrictive Legends and Stop-Transfer Orders.
11.1 Legends. Purchaser understands and agrees that the Company will place the legends set forth below or similar legends on any stock certificate(s) evidencing the Shares, together with any other legends that may be required by state or U.S. Federal securities laws, the Company’s Certificate of Incorporation or Bylaws, any other agreement between Purchaser and the Company or any agreement between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
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THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON PUBLIC RESALE AND TRANSFER, INCLUDING THE RIGHT OF FIRST REFUSAL HELD BY THE ISSUER AND/OR ITS ASSIGNEE(S) AS SET FORTH IN A STOCK OPTION EXERCISE AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH PUBLIC SALE AND TRANSFER RESTRICTIONS, INCLUDING THE RIGHT OF FIRST REFUSAL, ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A 180 DAY MARKET STANDOFF RESTRICTION AS SET FORTH IN A CERTAIN STOCK OPTION EXERCISE AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. AS A RESULT OF SUCH AGREEMENT, THESE SHARES MAY NOT BE TRADED PRIOR TO 180 DAYS AFTER THE EFFECTIVE DATE OF ANY PUBLIC OFFERING OF THE COMMON STOCK OF THE ISSUER HEREOF. SUCH RESTRICTION IS BINDING ON TRANSFEREES OF THESE SHARES.
11.2 Stop-Transfer Instructions. Purchaser agrees that, to ensure compliance with the restrictions imposed by this Exercise Agreement, the Company may issue appropriate “stop-transfer” instructions to its transfer agent, if any, and if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
11.3 Refusal to Transfer. The Company will not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Agreement or (ii) to treat as owner of such Shares, or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares have been so transferred.
12. Tax Consequences. PURCHASER UNDERSTANDS THAT PURCHASER MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER’S PURCHASE OR DISPOSITION OF THE SHARES. PURCHASER REPRESENTS: (i) THAT PURCHASER HAS CONSULTED WITH ANY TAX ADVISER THAT PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND (ii) THAT PURCHASER IS NOT RELYING ON THE COMPANY NOR ITS REPRESENTATIVES FOR ANY TAX ADVICE. Set forth below is a brief summary as of the date the Plan was adopted by the Board of some of the U.S. Federal and California tax consequences of exercise of the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PURCHASER SHOULD CONSULT HIS OR HER OWN TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.
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12.1 Exercise of Incentive Stock Option. If the Option qualifies as an ISO, there will be no regular U.S. Federal income tax liability or California income tax liability upon the exercise of the Option, although the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price will be treated as a tax preference item for U.S. Federal alternative minimum tax purposes and may subject Purchaser to the alternative minimum tax in the year of exercise.
12.2 Exercise of Nonqualified Stock Option. If the Option does not qualify as an ISO, there may be regular U.S. Federal income tax liability and California income tax liability upon the exercise of the Option. Purchaser will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If Purchaser is or was an employee of the Company, the Company may be required to withhold from Purchaser’s compensation or collect from Purchaser and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise.
12.3 Disposition of Shares. The following tax consequences may apply upon disposition of the Shares.
(a) Incentive Stock Options. If the Shares are held for more than twelve (12) months after the date of purchase of the Shares pursuant to the exercise of an ISO and are disposed of more than two (2) years after the Date of Grant, any gain realized on disposition of the Shares will be treated as long term capital gain for federal and California income tax purposes. If Shares purchased under an ISO are disposed of within the applicable one (1) year or two (2) year period, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price.
(b) Nonqualified Stock Options. If the Shares are held for more than twelve (12) months after the date of purchase of the Shares pursuant to the exercise of an NQSO, any gain realized on disposition of the Shares will be treated as long term capital gain.
(c) Withholding. The Company may be required to withhold from the Purchaser’s compensation or collect from the Purchaser and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income.
13. Compliance with Laws and Regulations. The issuance and transfer of the Shares will be subject to and conditioned upon compliance by the Company and Purchaser with all applicable state and U.S. Federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Common Stock may be listed or quoted at the time of such issuance or transfer.
14. Interpretation. Any dispute regarding the interpretation of this Exercise Agreement shall be submitted by Purchaser or the Company to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on the Company and Purchaser.
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15. Successors and Assigns. The Company may assign any of its rights under this Exercise Agreement, including its rights to purchase Shares under the Right of First Refusal. No other party to this Exercise Agreement may assign, whether voluntarily or by operation of law, any of its rights and obligations under this Exercise Agreement, except with the prior written consent of the Company. This Exercise Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Agreement will be binding upon Purchaser and Purchaser’s heirs, executors, administrators, legal representatives, successors and assigns.
16. Governing Law. This Exercise Agreement shall be governed by and construed in accordance with the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within California.
17. Acceptance. Purchaser hereby acknowledges receipt of a copy of the Plan, the Stock Option Agreement and this Exercise Agreement. Purchaser has read and understands the terms and provisions thereof, and accepts the Shares subject to all the terms and conditions of the Plan, the Stock Option Agreement and this Exercise Agreement. Purchaser acknowledges that there may be adverse tax consequences upon exercise of the Option or disposition of the Shares and agrees that Purchaser shall consult a tax adviser prior to such exercise or disposition.
18. Notices. Any notice required to be given or delivered to the Company under the terms of this Exercise Agreement shall be in writing and addressed to the Corporate Secretary of the Company at its principal corporate offices or to its facsimile or telecopier number specified below. Any notice required to be given or delivered to Purchaser shall be in writing and addressed to Purchaser at the address, facsimile or telecopier indicated below or to such other address, facsimile or telecopier as such party may designate in writing from time to time to the Company. All notices shall be deemed to have been given or delivered upon: (i) personal delivery; (ii) three (3) days after deposit in the United States mail by certified or registered mail (return receipt requested); (iii) one (1) business day after deposit with any return receipt express courier (prepaid); or (iv) one (1) business day after transmission by facsimile or telecopier.
19. Further Assurances. The parties agree to execute such further documents and instruments and to take such further actions as may be reasonably necessary to carry out the purposes and intent of this Exercise Agreement.
20. Titles and Headings. The titles, captions and headings of this Exercise Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Exercise Agreement. Unless otherwise specifically stated, all references herein to “sections” and “exhibits” will mean “sections” and “exhibits” to this Exercise Agreement.
21. Entire Agreement. The Plan is incorporated herein by reference. The Plan, the Stock Option Agreement and this Exercise Agreement, together with all Exhibits thereto, constitute the entire agreement and understanding of the parties with respect to the subject matter of this Exercise Agreement, and supersede all prior understandings and agreements, whether oral or written, between or among the parties hereto with respect to the specific subject matter hereof.
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22. Counterparts. This Exercise Agreement may be executed in any number of counterparts, each of which when so executed and delivered will be deemed an original, and all of which together shall constitute one and the same agreement.
23. Facsimile Signatures. This Exercise Agreement may be executed and delivered by facsimile or electronically in portable document format (.pdf) and upon such delivery the facsimile or portable document format (.pdf) signature will be deemed to have the same effect as if the original signature had been delivered to the other party.
24. Severability. If any provision of this Exercise Agreement is determined by any court or arbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximum extent possible given the intent of the parties hereto. If such clause or provision cannot be so enforced, such provision shall be stricken from this Exercise Agreement and the remainder of this Exercise Agreement shall be enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not enforceable) never been contained in this Exercise Agreement. Notwithstanding the foregoing, if the value of this Exercise Agreement based upon the substantial benefit of the bargain for any party is materially impaired, which determination as made by the presiding court or arbitrator of competent jurisdiction shall be binding, then both parties agree to substitute such provision(s) through good faith negotiations.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the Company has caused this Stock Option Exercise Agreement to be executed by its duly authorized representative and Purchaser has executed this Stock Option Exercise Agreement as of the Effective Date indicated above.
REVIVA PHARMACEUTICALS, INC.: | PURCHASER: | |
By: | ||
Signature | ||
(Please print name) | (Please print name) | |
(Please print title) | ||
Address: | Address: | |
Fax No.: | Fax No.: | |
Phone No.: | Phone No.: |
List of Exhibits:
Exhibit 1: | Stock Power and Assignment Separate from Stock Certificate |
Exhibit 2: | Spouse Consent |
Exhibit 3: | Proof of Payment of Exercise Price and Applicable Tax Obligations |
[SIGNATURE PAGE TO STOCK OPTION EXERCISE AGREEMENT]
EXHIBIT 1
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
Stock Power and Assignment
Separate from Stock Certificate
FOR VALUE RECEIVED and pursuant to that certain Stock Option Exercise Agreement dated as of ______, ____ , (the “Agreement”), the undersigned hereby sells, assigns and transfers unto_________________ shares of the Common Stock, $0.0001 par value per share, of Reviva Pharmaceuticals, Inc., a Delaware corporation (the “Company”), standing in the undersigned’s name on the books of the Company represented by Certificate No(s)._____ delivered herewith, and does hereby irrevocably constitute and appoint the Secretary of the Company as the undersigned’s attorney-in-fact, with full power of substitution, to transfer said stock on the books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS THERETO.
Dated:________________ | |
PURCHASER: | |
(Signature) | |
(Please Print Name) | |
(Spouse’s Signature, if any) | |
(Please Print Spouse’s Name) |
Instructions to Purchaser: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINES. The purpose of this Stock Power and Assignment is to enable the Company to exercise its “Right of First Refusal” set forth in the Agreement without requiring additional signatures on the part of the Purchaser or Purchaser’s Spouse.
Stock Power and Assignment Separate from Stock Certificate
FOR VALUE RECEIVED and pursuant to that certain Stock Option Exercise Agreement dated as of_______, ____, (the “Agreement”), the undersigned hereby sells, assigns and transfers unto___________________ shares of the Common Stock, $0.0001 par value per share, of Reviva Pharmaceuticals, Inc., a Delaware corporation (the “Company”), standing in the undersigned’s name on the books of the Company represented by Certificate No(s)._ delivered herewith, and does hereby irrevocably constitute and appoint the Secretary of the Company as the undersigned’s attorney-in-fact, with full power of substitution, to transfer said stock on the books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS THERETO.
Dated:________________ | |
PURCHASER: | |
(Signature) | |
(Please Print Name) | |
(Spouse’s Signature, if any) | |
(Please Print Spouse’s Name) |
Instructions to Purchaser: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINES. The purpose of this Stock Power and Assignment is to enable the Company to exercise its “Right of First Refusal” set forth in the Agreement without requiring additional signatures on the part of the Purchaser or Purchaser’s Spouse.
EXHIBIT 2
SPOUSE CONSENT
Spouse Consent
The undersigned spouse of ______________ (the “Purchaser”) has read, understands, and hereby approves the Stock Option Exercise Agreement between Purchaser and the Company (the “Agreement”). In consideration of the Company’s granting my spouse the right to purchase the Shares as set forth in the Agreement, the undersigned hereby agrees to be irrevocably bound by the Agreement and further agrees that any community property interest I may have in the Shares shall similarly be bound by the Agreement. The undersigned hereby appoints Purchaser as my attorney-in-fact with respect to any amendment or exercise of any rights under the Agreement.
Dated:________________ | |
PURCHASER: | |
Print Name of Purchaser’s Spouse | |
Signature of Purchaser’s Spouse |
Address: | ||
EXHIBIT 3
PROOF OF PAYMENT OF EXERISE PRICE AND APPLICABLE TAX
OBLIGATIONS
Exhibit 10.19
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (this “Agreement”) is made and entered into as of August 17, 2020, by and among Reviva Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and the parties identified on the signature pages hereto (each individually an “Investor” and collectively the “Investors”), and shall become effective upon the consummation of the SPAC Merger (as defined herein).
RECITALS
Whereas, the Company has entered into an Agreement and Plan of Merger, dated as of July 20, 2020 (as it may be amended, the “Merger Agreement”), among Tenzing Acquisition Corp, a company incorporated in the British Virgin Islands (together with its successors, the “SPAC Purchaser”), Tenzing Merger Subsidiary Inc., a Delaware corporation and a wholly-owned subsidiary of the Purchaser (“SPAC Merger Sub”), the Company, and the other parties named therein, pursuant to which Merger Sub would merge with and into the Company, with the Company continuing as the surviving entity, and the stockholders of the Company will receive equity securities of SPAC Purchaser (the “SPAC Shares”) in exchange for their shares of capital stock of the Company (the “SPAC Merger”) in accordance with the terms of the Merger Agreement; and
Whereas, the Company currently requires funds to help finance its operations prior to the closing of the SPAC Merger; and
Whereas, the Investors are willing to advance funds to the Company, in an aggregate principal amount not to exceed Five Hundred Thousand Dollars ($500,000.00), for the purpose of financing the Company’s operations in exchange for the issuance to them of certain convertible promissory notes evidencing the Company’s obligation to repay the Investors’ loans of the advanced funds as provided in this Agreement.
Now, Therefore, the parties hereby agree as follows:
1. PURCHASE AND SALE OF NOTES.
1.1 Note Purchase. Subject to the terms and conditions of this Agreement, the Company agrees to sell to each Investor, and each Investor severally agrees to purchase from the Company, a Convertible Promissory Note, in a principal amount of not less than Fifty Thousand Dollars ($50,000.00), in the form attached to this Agreement as Exhibit A (each individually a “Note” and collectively the “Notes”) in the principal amount set forth on such Investor’s signature page hereto. This Agreement, all of the Notes and any document entered into, executed or delivered under or in connection with, or for the purpose of amending, any of such documents are collectively hereinafter referred to as the “Financing Documents.”
1.2 [Intentionally Omitted.]
1.3 [Intentionally Omitted.]
2. CLOSING.
2.1 The Closing. The purchase and sale of the Notes will take place at the offices of Lowenstein Sandler LLP, One Lowenstein Drive, Roseland, New Jersey 07068, at 10:00 a.m. Eastern time, on [●], 2020, or at such other time and place as the Company and the Investors who have agreed to purchase a majority of the aggregate principal amount of the Notes mutually agree upon (which time and place are referred to as the “Closing”). At the Closing, each Investor will deliver to the Company as payment in full for the Note to be purchased by such Investor at the Closing the amount set forth on such Investor’s signature page hereto by (i) a check payable to the Company’s order, (ii) wire transfer of funds to the Company or (iii) any combination of the foregoing. At the Closing, the Company will deliver to each Investor a duly executed Note in the principal amount set forth on such Investor’s signature page hereto.
2.2 Additional Closing(s).
(a) Conditions of Additional Closing(s). Subject to the terms and conditions of this Agreement, at any time and from time to time after the Closing the Company may, at one or more additional closings (each an “Additional Closing”), without obtaining the signature, consent or permission of any of the Investors, offer and sell to other investors (the “New Investors”), Notes pursuant to this Agreement under terms no more favorable to such New Investors than the terms and conditions set forth in this Agreement, having an aggregate principal amount of no more than the difference of (i) Five Hundred Thousand Dollars ($500,000.00) minus (ii) the aggregate principal amount of all Notes previously sold hereunder. New Investors may include persons or entities who are already Investors under this Agreement.
(b) Additional Closing Procedures. Each New Investor purchasing one or more Notes at an Additional Closing will execute counterpart signature pages to this Agreement, and each New Investor will, upon delivery by such New Investor to the Company of such signature pages, and the payment by such New Investor and the purchase price for the Notes to be acquired by such New Investor to the Company of the principal amount of the Note(s) become a party to, and bound by, this Agreement to the same extent as if such New Investor had been an Investor at the Closing. Notwithstanding anything to the contrary contained herein, (i) the representations and warranties of the Company set forth in Section 3 hereof and the Schedule of Exceptions (as defined below) shall speak only as of the Closing and the Company shall have no obligation to update the Schedule of Exceptions for any Additional Closing, (ii) the Company will have no obligation to update any certificates or other documents referred to in Section 5 hereof in connection with any Additional Closing and (iii) the representations and warranties of each New Investor participating in an Additional Closing that are set forth in Section 4 hereof shall speak as of the date of such New Investor’s Additional Closing.
(c) Status of New Investors. Upon the completion of each Additional Closing as provided in this Section 2, each New Investor will be deemed to be an “Investor” for all purposes of this Agreement.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to each Investor that, except as set forth in the Schedule of Exceptions (the “Schedule of Exceptions”) attached to this Agreement as Exhibit B, the statements in the following paragraphs of this Section 3 are all true and complete as of immediately prior to the Closing:
3.1 Organization, Good Standing and Qualification. The Company has been duly incorporated and organized, and is validly existing in good standing, under the laws of the State of Delaware. The Company has the corporate power and authority to own and operate its properties and assets and to carry on its business as currently conducted and as presently proposed to be conducted.
3.2 Due Authorization. All corporate action on the part of the Company’s board of directors and stockholders necessary for the authorization, execution, delivery of, and the performance of all obligations of the Company under, the Financing Documents has been taken or will be taken prior to the Closing. This Agreement constitutes, and the other Financing Documents that constitute agreements of the Company when executed and delivered by the Company will constitute, valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (ii) the effect of rules of law governing the availability of equitable remedies.
3.3 Corporate Power. The Company has the corporate power and authority to execute and deliver the Financing Documents to which it is a signatory, to issue to the Investors the Notes to be purchased by the Investors hereunder and to carry out and perform all its obligations under the Financing Documents. No direct or indirect consent, approval, authorization or similar item is required to be obtained by the Company to enter into the Financing Documents to which it is a party and to perform or undertake any of the transactions contemplated pursuant to the Financing Documents to which it is a party.
3.4 Valid Issuance.
(a) The Notes and the Common Stock issuable upon conversion of the Notes, when issued, sold and delivered in accordance with the terms of this Agreement and the Notes, for the consideration provided for herein and therein, will be duly and validly issued, fully paid and nonassessable.
(b) Based in part on the representations made by the Investors in Section 4 hereof, the offer and sale of the Notes solely to the Investors in accordance with this Agreement (assuming no change in currently applicable law or in the Company’s Certificate of Incorporation in effect as of immediately prior to the Closing, no transfer of Notes by any Investor and no commission or other remuneration is paid or given, directly or indirectly, for soliciting the issuance of Common Stock upon conversion of the Notes), and the issuance of the Common Stock will be exempt from the registration and prospectus delivery requirements of the U.S. Securities Act of 1933, as amended (the “Securities Act”), and the securities registration and qualification requirements of the currently effective provisions of the securities laws of the states in which the Investors are resident based upon their addresses as set forth on their respective signature pages hereto.
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3.5 Capitalization. The capitalization of the Company immediately prior to the Closing consists of the following:
(a) Common Stock. A total of Thirty Five Million (35,000,000) authorized shares of the Company’s Common Stock, par value $0.0001 per share (the “Common Stock”), of which Eighteen Million One Hundred Eighty Thousand Seven Hundred Forty-Eight (18,180,748) shares are issued and outstanding.
(b) Preferred Stock. A total of Thirteen Million Six Hundred Twenty Five Thousand Two Hundred Thirty Seven (13,625,237) authorized shares of Preferred Stock, of which Six Hundred Twenty Five Thousand Two Hundred Thirty-Seven (625,237) shares are designated as Series 1 Preferred Stock, $0.0001 par value per share, all of which are issued and outstanding; One Million Two Hundred Forty-Five Thousand Eight Hundred Eighty-Nine (1,245,889) shares are designated as Series 2 Preferred Stock, $0.0001 par value per share, all of which are issued and outstanding; Nine Hundred Fifty-One Thousand Seven Hundred Sixty-One (951,761) shares are designated as Series 3 Preferred Stock, all of which are issued and outstanding; Five Million (5,000,000) shares are designated as Series 4 Preferred Stock, $0.0001 par value per share, One Million Twenty Nine Thousand Nine Hundred Ninety Four (1,029,994) of which are issued and outstanding; and Five Million Eight Hundred Two Thousand Three Hundred Fifty (5,802,350) shares are undesignated.
(c) Reserved Shares. Except for (i) the Three Million (3,000,000) shares of Common Stock reserved for issuance under the Company’s 2006 Equity Incentive Plan (the “Plan”) pursuant to which Four Hundred and Thirty Thousand (430,000) shares are outstanding; (ii) Thirty Eight Thousand One Hundred and Ninety Nine (38,199) shares of Common Stock issuable upon the exercise of outstanding warrants; (iii) conversion rights of the Series 1 Preferred Stock, Series 2 Preferred Stock, Series 3 Preferred Stock, and Series 4 Preferred Stock, (iv) conversion rights in connection the Company’s outstanding 2016 8% Convertible Promissory Notes with an aggregate principal balance of $3,490,088.00, inclusive of certain note conversion shares issuable upon a conversion event, (v) conversion and stock issuance rights in connection with the Company’s outstanding 2018 8% Convertible Promissory Notes with an aggregate principal balance of $275,000.00, inclusive of certain note conversion shares issuable upon a conversion event, certain warrant issuances upon a conversion event, and the issuance of Eighty Two Thousand Five Hundred (82,500) shares of Common Stock upon a conversion event, (vi) conversion and stock issuance rights in connection with the Company’s outstanding 2020 8% Convertible Promissory Notes with an aggregate principal balance of $610,000.00, inclusive of certain note conversion shares issuable upon a conversion event, certain warrant issuances upon a conversion event, and the issuance of One Hundred and Ten Thousand (110,000) shares of Common Stock upon a conversion event and (vii) the rights of first refusal held by the Company to repurchase any shares of its stock that may be issued under the Plan or under that certain Founder’s Restricted Stock Purchase Agreement by and between the Company and Laxminarayan Bhat dated as of May 2, 2006, there are no outstanding options, warrants, conversion rights, preemptive rights, rights of first refusal or agreements for the purchase or acquisition of any shares of the Company’s capital stock or any securities convertible into or ultimately exchangeable or exercisable for any shares of the Company’s capital stock.
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(d) The outstanding shares of the capital stock of the Company are duly authorized and validly issued, fully paid and nonassessable.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF INVESTORS. Each Investor hereby, severally and not jointly, represents and warrants to, and agrees with the Company that:
4.1 Authorization. This Agreement constitutes, and the other Financing Documents that constitute agreements of the Investor when executed and delivered by the Investor will constitute, such Investor’s valid and legally binding obligations, enforceable against such Investor in accordance with their terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (ii) the effect of rules of law governing the availability of equitable remedies. Each Investor represents and warrants to the Company that such Investor has full power and authority to enter into this Agreement and acquire such Investor’s Note. There are no actions, suits, proceedings or investigations pending against such Investor or such Investor's assets before any court or governmental agency (nor is there any threat thereof) that would impair in any way such Investor's ability to enter into and fully perform its commitments and obligations under this Agreement or the transactions contemplated hereby.
4.2 Purchase for Own Account. The Notes and Common Stock issuable upon conversion of the Notes (collectively, the “Securities”) will be acquired for investment for such Investor’s own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof within the meaning of the Securities Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same.
4.3 No Solicitation. At no time was such Investor presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and purchase of the Securities.
4.4 Reliance on Exemptions. Such Investor understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Investor set forth herein in order to determine the availability of such exemptions and the eligibility of such Investor to acquire the Securities.
4.5 Disclosure of Information. Such Investor has received or has had full access to all the information such Investor considers necessary or appropriate to make an informed investment decision with respect to the Securities. Such Investor further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to such Investor or to which such Investor had access. The foregoing, however, does not in any way limit or modify the representations and warranties made by the Company in Section 3.
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4.6 Investment Experience. Such Investor understands that the purchase of the Securities involves substantial risk. Such Investor (i) has experience as an investor in securities of companies in the development stage and acknowledges that such Investor is able to fend for itself, can bear the economic risk of such Investor’s investment in the Securities and has such knowledge and experience in financial or business matters that such Investor is capable of evaluating the merits and risks of this investment in the Securities and protecting such Investor’s own interests in connection with this investment in the Securities or (ii) has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables such Investor to be aware of the character, business acumen and financial circumstances of such persons. Such Investor has sought such accounting and legal advice as it has considered necessary to make an informed investment decision with respect to its acquisition of its Securities. The Investor is relying solely on their own accounting and legal advisors, and not on any statements of the Company or any of its agents or representatives, for such accounting and legal advice with respect to its acquisition of the Securities.
4.7 No Governmental Review. Such Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities, or the fairness or suitability of the investment in the Securities, nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
4.8 Organization and Standing. Such Investor is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was formed.
4.9 Accredited Investor Status. Such Investor is an “accredited investor” within the meaning of Regulation D promulgated under the Securities Act. “Accredited investor” includes, without limitation, (a) a person or entity who is a director or executive officer of the Company, (b) a natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his or her purchase exceeds $1,000,000 after subtracting the value of such Investor’s primary residence and excluding the related amount of indebtedness secured by the primary resident up to its fair market value, (c) a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those two years and has a reasonable expectation of reaching the same income level in the current year, (d) a corporation, limited liability company or partnership having total assets in excess of $5,000,000 that was not formed for the purpose of acquiring the Securities and (e) a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, whose acquisition is directed by a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluated the merits and risks of acquiring the Securities.
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4.10 Restricted Securities. Such Investor understands that the Securities are characterized as “restricted securities” under the Securities Act and Rule 144 promulgated thereunder (“Rule 144”) since they are being acquired from the Company in a transaction not involving a public offering, and that under the Securities Act and applicable regulations thereunder the Securities may be resold without registration under the Securities Act only in certain limited circumstances. Investor further understands that the Company is under no obligation to register the Securities and the Company has no present plans to do so. Furthermore, such Investor is familiar with Rule 144, as presently in effect, and understands the limitations imposed thereby and by the Securities Act on resale of the Securities without such registration. Such Investor understands that, whether or not the Securities may be resold in the future without registration under the Securities Act, no public market now exists for any of the Securities and that it is uncertain whether a public market will ever exist for the Securities.
4.11 Further Limitations on Disposition. Without in any way limiting the representations set forth above, such Investor further agrees not to make any disposition of all or any portion of the Securities unless and until:
(a) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such effective registration statement; or
(b) such Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition and, at the expense of such Investor or its transferee, with an opinion of counsel reasonably satisfactory in form and substance to the Company that such disposition will not require registration of such Securities under the Securities Act.
Notwithstanding the provisions of paragraphs (a) and (b) of this Section 4.11, no such registration statement or opinion of counsel shall be required for any transfer: (i) of any Securities in compliance with Rule 144 or Rule 144A promulgated under the Securities Act when the Company is promptly provided evidence of such compliance; (ii) of any Securities by an Investor that is a partnership or a corporation to (A) a partner of such partnership or stockholder of such corporation, (B) a retired partner of such partnership who retires after the date hereof, (C) the estate of any deceased partner of such partnership or deceased stockholder of such corporation; or (iii) by gift, will or intestate succession by any Investor to his or her spouse or lineal descendants or ancestors or any trust for any of the foregoing; provided that in each of the foregoing cases the transferee agrees in writing to be subject to the terms of this Agreement and the Notes to the same extent as if the transferee had been an original Investor hereunder.
4.12 Legends. Such Investor understands and agrees that the certificates evidencing the Securities will bear legends substantially similar to those set forth below in addition to any other legend that may be required by applicable law, the Company’s Certificate of Incorporation or Bylaws, Section 4.13 of this Agreement or any other agreement between the Company and such Investor:
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(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION UNDER SUCH LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS.
(b) Any legend required by the laws of the State of California, including any legend required by the California Department of Corporations, or any other state securities laws.
The legend set forth in (a) above shall be removed by the Company from any certificate evidencing the Securities upon delivery to the Company of an opinion of counsel, reasonably satisfactory in form and substance to the Company, that either (i) a registration statement under the Securities Act is at that time in effect with respect to the legended security or (ii) such security can be freely transferred in a public sale (other than pursuant to Rule 144, Rule 144A or Rule 145 promulgated under the Securities Act) without such a registration statement being in effect and that such transfer will not jeopardize the exemption or exemptions from registration pursuant to which the Company issued the Securities.
4.13 [Intentionally Omitted.]
4.14 Reliance on Business Plan. Investor understands that the oral and visual components of any live presentation, executive summary, investment opportunity summary, product development and revenue projections, business model, investor updates and/or similar documentation previously delivered by the Company and reviewed by Investor were incomplete and were intended only to give Investor a general idea of the Company’s future intentions. Investor acknowledges that the Company reserves the right to deviate from the plans set forth in such materials and that the Company is in the early stages of development and therefore its future plans are highly speculative. Investor acknowledges that any projections contained in the materials delivered to Investor: (a) were based on various assumptions by management that may have changed or that may prove to be incorrect and that such assumptions are inherently subject to significant economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company and its management, and (b) were based upon assumptions with respect to future business decisions that are subject to change. Investor acknowledges that Investor was encouraged to consult with the management of the Company at greater length and in more depth concerning the Company’s future business plans and has done so to the extent desired.
4.15 Tax Liability. Investor has reviewed with its own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement and the Notes. Investor relies solely on such advisors and not on any statements or representations of the Company, the Company’s counsel, or any of the Company’s agents. Investor understands that it (and not the Company) shall be responsible for its own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement and the Notes.
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5. CONDITIONS TO CLOSING.
5.1 Conditions to Investors’ Obligations. The obligations of each Investor under Section 2 of this Agreement are subject to the fulfillment or waiver, on or before the Closing, of each of the following conditions, the waiver of which shall not be effective against any Investor who does not consent to such waiver, which consent may be given by written, oral or telephone communication to the Company or its counsel:
(a) each of the representations and warranties of the Company contained in Section 3 shall be true and correct in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing;
(b) the Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein; and
(c) the Company shall have executed and delivered to each Investor a Note, in the form attached hereto as Exhibit A, evidencing the Company’s indebtedness to such Investor in the amount set forth on such Investor’s signature page hereto.
5.2 Condition to Company’s Obligations. The obligations of the Company to each Investor under this Agreement are subject to the fulfillment or waiver on or before the Closing or an Additional Closing, as applicable, of each of the following conditions by such Investor:
(a) Each of the representations and warranties of such Investor contained in Section 4 shall be true and correct at the Closing (and with regard to a New Investor at each Additional Closing at which such New Investor acquires Securities under this Agreement) with the same effect as though such representations and warranties had been made on and as of the Closing or Additional Closing, as applicable; and
(b) such Investor shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing (and with regard to a New Investor on or before each Additional Closing at which such New Investor acquires Securities under this Agreement) and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein.
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6. REGISTRATION RIGHTS.
6.1 Registration Rights. The Company agrees that, as promptly as practicable (but in any event within ninety (90) calendar days after the consummation of the SPAC Merger), the SPAC Purchaser will file with the U.S. Securities and Exchange Commission (the “SEC”) (at its sole cost and expense) a registration statement registering the resale of the SPAC Shares issued to the holder of this Note (the “Registration Statement”), and it shall use its commercially reasonable efforts to have the Registration Statement declared effective as soon as practicable after the filing thereof. The Company agrees that the SPAC Purchaser will cause such Registration Statement or another registration statement (which may be a “shelf” registration statement) to remain effective until the earliest of (i) two years from the issuance of the SPAC Shares, (ii) the date on which Holder ceases to hold the SPAC Shares covered by such Registration Statement and (iii) the first date on which Holder can sell all of its SPAC Shares under Rule 144 of the Securities Act without limitation as to the manner of sale or the amount of such securities that may be sold. Holder agrees to disclose its beneficial ownership, as determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended, of the SPAC Shares to the SPAC Purchaser upon request to assist the SPAC Purchaser in making the determination described above. The SPAC Purchaser’s obligations to include the SPAC Shares in the Registration Statement are contingent upon Holder furnishing in writing to the SPAC Purchaser such information regarding Holder, the securities of the SPAC Purchaser held by Holder and the intended method of disposition of the SPAC Shares as shall be reasonably requested by the SPAC Purchaser to effect the registration of the SPAC Shares, and shall execute such documents in connection with such registration as the SPAC Purchaser may reasonably request that are customary of a selling stockholder in similar situations. The SPAC Purchaser may delay filing or suspend the use of any such registration statement if it determines that in order for the registration statement to not contain a material misstatement or omission, an amendment thereto would be needed, or if such filing or use could materially affect a bona fide business or financing transaction of the SPAC Purchaser or would require premature disclosure of information that could materially adversely affect the SPAC Purchaser (each such circumstance, a “Suspension Event”); provided, that the SPAC Purchaser shall use commercially reasonable efforts to make such registration statement available for the sale by Holder of such securities as soon as practicable thereafter. Upon receipt of any written notice from the SPAC Purchaser of the happening of any Suspension Event during the period that the Registration Statement is effective or if as a result of a Suspension Event the Registration Statement or related prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the prospectus) not misleading, Holder agrees that it will (i) immediately discontinue offers and sales of the SPAC Shares under the Registration Statement until Holder receives (A) (x) copies of a supplemental or amended prospectus that corrects the misstatement(s) or omission(s) referred to above and (y) notice that any post-effective amendment has become effective or (B) notice from the SPAC Purchaser that it may resume such offers and sales, and (ii) maintain the confidentiality of any information included in such written notice delivered by the SPAC Purchaser unless otherwise required by applicable law. If so directed by the SPAC Purchaser, Holder will deliver to the SPAC Purchaser or destroy all copies of the prospectus covering the SPAC Shares in Holder’s possession; provided, however, that this obligation to deliver or destroy all copies of the prospectus covering the SPAC Shares shall not apply to (i) the extent that Holder is required to retain a copy of such prospectus (A) in order to comply with applicable legal, regulatory, self-regulatory or professional requirements or (B) in accordance with a bona fide pre-existing document retention policy or (ii) copies stored electronically on archival servers as a result of automatic data back-up.
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7. GENERAL PROVISIONS.
7.1 Survival of Warranties. The representations, warranties and covenants of the Company and the Investors contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement, the Closing and each Additional Closing, and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of any of the Investors or the Company, as the case may be.
7.2 Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties, provided, however, that nothing in this Section 7.2 shall permit any of the Investors to transfer or assign any of the Securities acquired under this Agreement except as provided in Section 4 and in the Notes.
7.3 Governing Law. This Agreement shall be governed by and construed under the internal laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California, without reference to principles of conflict of laws or choice of laws.
7.4 Counterparts; Facsimile Signatures. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed and delivered by facsimile, or by email in portable document format (.pdf) and delivery of the signature page by such method will be deemed to have the same effect as if the original signature had been delivered to the other parties hereto.
7.5 Headings; Interpretation. In this Agreement, (i) the meaning of defined terms shall be equally applicable to both the singular and plural forms of the terms defined; (ii) the captions and headings are used only for convenience and are not to be considered in construing or interpreting this Agreement and (iii) the words “including,” “includes” and “include” shall be deemed to be followed by the words “without limitation”. All references in this Agreement to sections, paragraphs, exhibits and schedules shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all of which exhibits and schedules are incorporated herein by this reference.
7.6 Notices. Unless otherwise provided herein, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given (i) at the time of personal delivery, if delivered in person; (ii) when sent, if sent by electronic mail or by facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the next business day; (iii) one (1) business day after deposit with an express overnight courier for United States deliveries, or three (3) business days after deposit with an express courier for deliveries outside of the United States, in each case with proof of delivery from the courier requested; or (iv) four (4) business days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries when addressed to an Investor at the address set forth on such Investor’s signature page hereto or, in the case of the Company, at 19925 Stevens Creek Blvd., Suite 100, Cupertino, California, 95014, or at such other address as any party or the Company may designate for itself to receive notices by giving ten (10) days’ advance written notice to all required parties in accordance with the provisions of this Section, with copies to (which shall not constitute notice) Lowenstein Sandler LLP, One Lowenstein Drive, Roseland, New Jersey 07068, Attention: Steven M. Skolnick, Esq.
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7.7 No Finder’s Fees. Each party represents that it neither is nor will be obligated for any finder’s or broker’s fee or commission in connection with the transactions contemplated by this Agreement. Each Investor agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s or broker’s fee (and any asserted liability) for which the Investor or any of its directors, officers, partners, members, employees or representatives is responsible. The Company agrees to indemnify and hold harmless each Investor from any liability for any commission or compensation in the nature of a finder’s or broker’s fee (and any asserted liability) for which the Company or any of its officers, employees or representatives is responsible.
7.8 Amendments and Waivers. Any term of this Agreement and the Notes may be amended and the observance of any term of this Agreement and the Notes may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of Notes representing at least a majority of the aggregate Principal Balances (as defined in the Notes) of all the Notes then outstanding (the “Majority Holders”). Any amendment or waiver effected in accordance with this Section 7.8 shall be binding upon each holder of Notes then outstanding, each future holder of such securities, and the Company; provided, however, that New Investors may become parties to this Agreement in accordance with Section 2.2 without any amendment of this Agreement or any consent or approval of any Investor; provided, further, that without such Investor’s written consent, no amendment or waiver of any term of this Agreement shall be effective against an Investor that materially and adversely affects such Investor’s rights hereunder in a manner that is materially different from and disproportionate to the effect on other Investors. Notwithstanding anything to the contrary contained herein or in the Notes, from the date of this Agreement until the earlier of (i) the consummation of the transactions contemplated by the SPAC Merger Agreement or (ii) the termination of the SPAC Merger Agreement in accordance with its terms, neither this Agreement, nor any of the Notes, may be amended, supplemented or modified, nor may any provision of this Agreement or the Notes be waived, in each case without the prior written consent of SPAC Purchaser (such consent not to be unreasonably withheld, delayed or conditioned). SPAC Purchaser is an express intended third party beneficiary of this Section 7.8 and shall have the right to enforce the terms hereof as if it were a direct party hereto.
7.9 Severability. If any provision of this Agreement is determined by any court or arbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximum extent possible given the intent of the parties hereto. If such clause or provision cannot be so enforced, such provision shall be stricken from this Agreement and the remainder of this Agreement shall be enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not enforceable) never been contained in this Agreement. Notwithstanding the foregoing, if the value of this Agreement based upon the substantial benefit of the bargain for any party is materially impaired, which determination as made by the presiding court or arbitrator of competent jurisdiction shall be binding, then both parties agree to substitute such provision(s) through good faith negotiations.
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7.10 Entire Agreement. This Agreement, together with all exhibits and schedules hereto and the other Financing Documents, constitute the entire agreement and understanding of the parties with respect to the subject matter hereof and supersede any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties with respect to the subject matter hereof.
7.11 Further Assurances. From and after the date of this Agreement, upon the request of any Investor or the Company, the Company and the Investors shall execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement effective as of the date first written above.
REVIVA PHARMACEUTICALS, INC.:
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Signature: |
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Name: | Laxminarayan Bhat, Ph.D. | ||
Title: | President and Chief Executive Officer | ||
Phone: | (408) 960.2209 | ||
Fax: | (408) 904.6270 | ||
E-mail: | LBhat@Revivapharma.com |
Attachments:
Exhibit A | – | Form of Note |
Exhibit B | – | Schedule of Exceptions |
[Signature Page to Reviva Note Purchase Agreement (2020 Working Capital)]
IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement effective as of the date first written above.
INVESTOR: | |||
Signature: | |||
Print Name: | |||
Signature | |||
Print Name | |||
Title (if applicable): | |||
Dollar Amount Invested (Notes): | |||
Address: | |||
Phone No: | |||
Fax No.: | |||
E-mail: | |||
Date of Investment: | |||
Attachments:
Exhibit A | – | Form of Note |
Exhibit B | – | Schedule of Exceptions |
[Signature Page to Reviva Note Purchase Agreement (2020 Working Capital)]
EXHIBIT A
FORM OF NOTE
EXHIBIT B
SCHEDULE OF EXCEPTIONS
Exhibit 10.20
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (this “Agreement”) is made and entered into as of August 29, 2020, by and among Reviva Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and the parties identified on the signature pages hereto (each individually an “Investor” and collectively the “Investors”), and shall become effective upon the consummation of the SPAC Merger (as defined herein).
RECITALS
Whereas, the Company has entered into an Agreement and Plan of Merger, dated as of July 20, 2020 (as it may be amended, the “Merger Agreement”), among Tenzing Acquisition Corp, a company incorporated in the British Virgin Islands (together with its successors, the “SPAC Purchaser”), Tenzing Merger Subsidiary Inc., a Delaware corporation and a wholly-owned subsidiary of the Purchaser (“SPAC Merger Sub”), the Company, and the other parties named therein, pursuant to which Merger Sub would merge with and into the Company, with the Company continuing as the surviving entity, and the stockholders of the Company will receive equity securities of SPAC Purchaser (the “SPAC Shares”) in exchange for their shares of capital stock of the Company (the “SPAC Merger”) in accordance with the terms of the Merger Agreement; and
Whereas, the closing of the SPAC Merger is conditioned upon the satisfaction of that certain Agreed Judgment, issued in the District Court for the 190th Judicial District, Harris County, Texas, and signed January 3, 2020, in favor of Ramachandra Malya against the Company (the “Judgment”); and
Whereas, the Company currently requires funds to satisfy the Judgment and to help finance its operations; and
Whereas, the Investors are willing to advance funds to the Company, in an aggregate principal amount not to exceed Two Million Dollars ($2,000,000.00), for the purpose of satisfying the Judgment and financing the Company’s operations in exchange for the issuance to them of certain convertible promissory notes evidencing the Company’s obligation to repay the Investors’ loans of the advanced funds, as provided in this Agreement.
Now, Therefore, the parties hereby agree as follows:
1. PURCHASE AND SALE OF NOTES.
1.1 Note Purchase. Subject to the terms and conditions of this Agreement, the Company agrees to sell to each Investor, and each Investor severally agrees to purchase from the Company, a Convertible Promissory Note, in a principal amount of not less than Fifty Thousand Dollars ($50,000.00), in the form attached to this Agreement as Exhibit A (each individually a “Note” and collectively the “Notes”) in the principal amount set forth on such Investor’s signature page hereto. This Agreement, all of the Notes and any document entered into, executed or delivered under or in connection with, or for the purpose of amending, any of such documents are collectively hereinafter referred to as the “Financing Documents.”
1.2 [Intentionally Omitted.]
1.3 [Intentionally Omitted.]
2. CLOSING.
2.1 The Closing. The purchase and sale of the Notes will take place at the offices of Lowenstein Sandler LLP, One Lowenstein Drive, Roseland, New Jersey 07068, on the date of, and immediately prior to, the SPAC Merger (which time and place are referred to as the “Closing”); provided, however, that the Closing must occur prior to the Outside Date (as defined in the Merger Agreement). The Closing is contingent upon the substantially concurrent consummation of the SPAC Merger. Upon not less than five (5) Business Days’ written notice from (or on behalf of) the Company to the undersigned (the “Closing Notice”), which Closing Notice shall contain the Company’s wire instructions for the Company’s bank account in which the funds shall be escrowed, that the Company reasonably expects all conditions to the closing of the SPAC Merger to be satisfied on a date that is not less than five (5) business days from the date of the Closing Notice, the undersigned shall deliver to the Company, at least two (2) business days prior to the anticipated closing date specified in the Closing Notice (the “Closing Date”), the amount set forth on such Investor’s signature page hereto by wire transfer of United States dollars in immediately available funds to the account specified by the Company in the Closing Notice. Immediately prior to the Closing, the escrowed funds shall automatically be released to the Company. At the Closing, the Company will deliver to each Investor a duly executed Note in the principal amount set forth on such Investor’s signature page hereto. In the event the Closing does not occur on or prior to the Outside Date, any escrowed funds delivered by the Investor to the Company shall be returned to the Investor within five (5) Business Days of the Outside Date.
2.2 [Intentionally Omitted.]
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to each Investor that, except as set forth in the Schedule of Exceptions (the “Schedule of Exceptions”) attached to this Agreement as Exhibit B, the statements in the following paragraphs of this Section 3 are all true and complete as of immediately prior to the Closing:
3.1 Organization, Good Standing and Qualification. The Company has been duly incorporated and organized, and is validly existing in good standing, under the laws of the State of Delaware. The Company has the corporate power and authority to own and operate its properties and assets and to carry on its business as currently conducted and as presently proposed to be conducted.
3.2 Due Authorization. All corporate action on the part of the Company’s board of directors and stockholders necessary for the authorization, execution, delivery of, and the performance of all obligations of the Company under, the Financing Documents has been taken or will be taken prior to the Closing. This Agreement constitutes, and the other Financing Documents that constitute agreements of the Company when executed and delivered by the Company will constitute, valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (ii) the effect of rules of law governing the availability of equitable remedies.
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3.3 Corporate Power. The Company has the corporate power and authority to execute and deliver the Financing Documents to which it is a signatory, to issue to the Investors the Notes to be purchased by the Investors hereunder and to carry out and perform all its obligations under the Financing Documents. No direct or indirect consent, approval, authorization or similar item is required to be obtained by the Company to enter into the Financing Documents to which it is a party and to perform or undertake any of the transactions contemplated pursuant to the Financing Documents to which it is a party.
3.4 Valid Issuance.
(a) The Notes and the Common Stock issuable upon conversion of the Notes, when issued, sold and delivered in accordance with the terms of this Agreement and the Notes, for the consideration provided for herein and therein, will be duly and validly issued, fully paid and nonassessable.
(b) Based in part on the representations made by the Investors in Section 4 hereof, the offer and sale of the Notes solely to the Investors in accordance with this Agreement (assuming no change in currently applicable law or in the Company’s Certificate of Incorporation in effect as of immediately prior to the Closing, no transfer of Notes by any Investor and no commission or other remuneration is paid or given, directly or indirectly, for soliciting the issuance of Common Stock upon conversion of the Notes), and the issuance of the Common Stock will be exempt from the registration and prospectus delivery requirements of the U.S. Securities Act of 1933, as amended (the “Securities Act”), and the securities registration and qualification requirements of the currently effective provisions of the securities laws of the states in which the Investors are resident based upon their addresses as set forth on their respective signature pages hereto.
3.5 Capitalization. The capitalization of the Company immediately prior to the Closing consists of the following:
(a) Common Stock. A total of Thirty Five Million (35,000,000) authorized shares of the Company’s Common Stock, par value $0.0001 per share (the “Common Stock”), of which Eighteen Million One Hundred Eighty Thousand Seven Hundred Forty-Eight (18,180,748) shares are issued and outstanding.
(b) Preferred Stock. A total of Thirteen Million Six Hundred Twenty Five Thousand Two Hundred Thirty Seven (13,625,237) authorized shares of Preferred Stock, of which Six Hundred Twenty Five Thousand Two Hundred Thirty-Seven (625,237) shares are designated as Series 1 Preferred Stock, $0.0001 par value per share, all of which are issued and outstanding; One Million Two Hundred Forty-Five Thousand Eight Hundred Eighty-Nine (1,245,889) shares are designated as Series 2 Preferred Stock, $0.0001 par value per share, all of which are issued and outstanding; Nine Hundred Fifty-One Thousand Seven Hundred Sixty-One (951,761) shares are designated as Series 3 Preferred Stock, all of which are issued and outstanding; Five Million (5,000,000) shares are designated as Series 4 Preferred Stock, $0.0001 par value per share, One Million Twenty Nine Thousand Nine Hundred Ninety Four (1,029,994) of which are issued and outstanding; and Five Million Eight Hundred Two Thousand Three Hundred Fifty (5,802,350) shares are undesignated.
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(c) Reserved Shares. Except for (i) the Three Million (3,000,000) shares of Common Stock reserved for issuance under the Company’s 2006 Equity Incentive Plan (the “Plan”) pursuant to which Four Hundred and Thirty Thousand (430,000) shares are outstanding; (ii) Thirty Eight Thousand One Hundred and Ninety Nine (38,199) shares of Common Stock issuable upon the exercise of outstanding warrants; (iii) conversion rights of the Series 1 Preferred Stock, Series 2 Preferred Stock, Series 3 Preferred Stock, and Series 4 Preferred Stock, (iv) conversion rights in connection the Company’s outstanding 2016 8% Convertible Promissory Notes with an aggregate principal balance of $3,490,088.00, inclusive of certain note conversion shares issuable upon a conversion event, (v) conversion and stock issuance rights in connection with the Company’s outstanding 2018 8% Convertible Promissory Notes with an aggregate principal balance of $275,000.00, inclusive of certain note conversion shares issuable upon a conversion event, certain warrant issuances upon a conversion event, and the issuance of Eighty Two Thousand Five Hundred (82,500) shares of Common Stock upon a conversion event, (vi) conversion and stock issuance rights in connection with the Company’s outstanding 2020 8% Convertible Promissory Notes with an aggregate principal balance of $610,000.00, inclusive of certain note conversion shares issuable upon a conversion event, certain warrant issuances upon a conversion event, and the issuance of One Hundred and Ten Thousand (110,000) shares of Common Stock upon a conversion event and (vii) the rights of first refusal held by the Company to repurchase any shares of its stock that may be issued under the Plan or under that certain Founder’s Restricted Stock Purchase Agreement by and between the Company and Laxminarayan Bhat dated as of May 2, 2006, there are no outstanding options, warrants, conversion rights, preemptive rights, rights of first refusal or agreements for the purchase or acquisition of any shares of the Company’s capital stock or any securities convertible into or ultimately exchangeable or exercisable for any shares of the Company’s capital stock.
(d) The outstanding shares of the capital stock of the Company are duly authorized and validly issued, fully paid and nonassessable.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF INVESTORS. Each Investor hereby, severally and not jointly, represents and warrants to, and agrees with the Company that:
4.1 Authorization. This Agreement constitutes, and the other Financing Documents that constitute agreements of the Investor when executed and delivered by the Investor will constitute, such Investor’s valid and legally binding obligations, enforceable against such Investor in accordance with their terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (ii) the effect of rules of law governing the availability of equitable remedies. Each Investor represents and warrants to the Company that such Investor has full power and authority to enter into this Agreement and acquire such Investor’s Note. There are no actions, suits, proceedings or investigations pending against such Investor or such Investor's assets before any court or governmental agency (nor is there any threat thereof) that would impair in any way such Investor's ability to enter into and fully perform its commitments and obligations under this Agreement or the transactions contemplated hereby.
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4.2 Purchase for Own Account. The Notes and Common Stock issuable upon conversion of the Notes (collectively, the “Securities”) will be acquired for investment for such Investor’s own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof within the meaning of the Securities Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same.
4.3 No Solicitation. At no time was such Investor presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and purchase of the Securities.
4.4 Reliance on Exemptions. Such Investor understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Investor set forth herein in order to determine the availability of such exemptions and the eligibility of such Investor to acquire the Securities.
4.5 Disclosure of Information. Such Investor has received or has had full access to all the information such Investor considers necessary or appropriate to make an informed investment decision with respect to the Securities. Such Investor further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to such Investor or to which such Investor had access. The foregoing, however, does not in any way limit or modify the representations and warranties made by the Company in Section 3.
4.6 Investment Experience. Such Investor understands that the purchase of the Securities involves substantial risk. Such Investor (i) has experience as an investor in securities of companies in the development stage and acknowledges that such Investor is able to fend for itself, can bear the economic risk of such Investor’s investment in the Securities and has such knowledge and experience in financial or business matters that such Investor is capable of evaluating the merits and risks of this investment in the Securities and protecting such Investor’s own interests in connection with this investment in the Securities or (ii) has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables such Investor to be aware of the character, business acumen and financial circumstances of such persons. Such Investor has sought such accounting and legal advice as it has considered necessary to make an informed investment decision with respect to its acquisition of its Securities. The Investor is relying solely on their own accounting and legal advisors, and not on any statements of the Company or any of its agents or representatives, for such accounting and legal advice with respect to its acquisition of the Securities.
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4.7 No Governmental Review. Such Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities, or the fairness or suitability of the investment in the Securities, nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
4.8 Organization and Standing. Such Investor is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was formed.
4.9 Accredited Investor Status. Such Investor is an “accredited investor” within the meaning of Regulation D promulgated under the Securities Act. “Accredited investor” includes, without limitation, (a) a person or entity who is a director or executive officer of the Company, (b) a natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his or her purchase exceeds $1,000,000 after subtracting the value of such Investor’s primary residence and excluding the related amount of indebtedness secured by the primary resident up to its fair market value, (c) a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those two years and has a reasonable expectation of reaching the same income level in the current year, (d) a corporation, limited liability company or partnership having total assets in excess of $5,000,000 that was not formed for the purpose of acquiring the Securities and (e) a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, whose acquisition is directed by a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluated the merits and risks of acquiring the Securities.
4.10 Restricted Securities. Such Investor understands that the Securities are characterized as “restricted securities” under the Securities Act and Rule 144 promulgated thereunder (“Rule 144”) since they are being acquired from the Company in a transaction not involving a public offering, and that under the Securities Act and applicable regulations thereunder the Securities may be resold without registration under the Securities Act only in certain limited circumstances. Investor further understands that the Company is under no obligation to register the Securities and the Company has no present plans to do so. Furthermore, such Investor is familiar with Rule 144, as presently in effect, and understands the limitations imposed thereby and by the Securities Act on resale of the Securities without such registration. Such Investor understands that, whether or not the Securities may be resold in the future without registration under the Securities Act, no public market now exists for any of the Securities and that it is uncertain whether a public market will ever exist for the Securities.
4.11 Further Limitations on Disposition. Without in any way limiting the representations set forth above, such Investor further agrees not to make any disposition of all or any portion of the Securities unless and until:
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(a) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such effective registration statement; or
(b) such Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition and, at the expense of such Investor or its transferee, with an opinion of counsel reasonably satisfactory in form and substance to the Company that such disposition will not require registration of such Securities under the Securities Act.
Notwithstanding the provisions of paragraphs (a) and (b) of this Section 4.11, no such registration statement or opinion of counsel shall be required for any transfer: (i) of any Securities in compliance with Rule 144 or Rule 144A promulgated under the Securities Act when the Company is promptly provided evidence of such compliance; (ii) of any Securities by an Investor that is a partnership or a corporation to (A) a partner of such partnership or stockholder of such corporation, (B) a retired partner of such partnership who retires after the date hereof, (C) the estate of any deceased partner of such partnership or deceased stockholder of such corporation; or (iii) by gift, will or intestate succession by any Investor to his or her spouse or lineal descendants or ancestors or any trust for any of the foregoing; provided that in each of the foregoing cases the transferee agrees in writing to be subject to the terms of this Agreement and the Notes to the same extent as if the transferee had been an original Investor hereunder.
4.12 Legends. Such Investor understands and agrees that the certificates evidencing the Securities will bear legends substantially similar to those set forth below in addition to any other legend that may be required by applicable law, the Company’s Certificate of Incorporation or Bylaws, Section 4.13 of this Agreement or any other agreement between the Company and such Investor:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION UNDER SUCH LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS.
(b) Any legend required by the laws of the State of California, including any legend required by the California Department of Corporations, or any other state securities laws.
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The legend set forth in (a) above shall be removed by the Company from any certificate evidencing the Securities upon delivery to the Company of an opinion of counsel, reasonably satisfactory in form and substance to the Company, that either (i) a registration statement under the Securities Act is at that time in effect with respect to the legended security or (ii) such security can be freely transferred in a public sale (other than pursuant to Rule 144, Rule 144A or Rule 145 promulgated under the Securities Act) without such a registration statement being in effect and that such transfer will not jeopardize the exemption or exemptions from registration pursuant to which the Company issued the Securities.
4.13 [Intentionally Omitted.]
4.14 Reliance on Business Plan. Investor understands that the oral and visual components of any live presentation, executive summary, investment opportunity summary, product development and revenue projections, business model, investor updates and/or similar documentation previously delivered by the Company and reviewed by Investor were incomplete and were intended only to give Investor a general idea of the Company’s future intentions. Investor acknowledges that the Company reserves the right to deviate from the plans set forth in such materials and that the Company is in the early stages of development and therefore its future plans are highly speculative. Investor acknowledges that any projections contained in the materials delivered to Investor: (a) were based on various assumptions by management that may have changed or that may prove to be incorrect and that such assumptions are inherently subject to significant economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company and its management, and (b) were based upon assumptions with respect to future business decisions that are subject to change. Investor acknowledges that Investor was encouraged to consult with the management of the Company at greater length and in more depth concerning the Company’s future business plans and has done so to the extent desired.
4.15 Tax Liability. Investor has reviewed with its own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement and the Notes. Investor relies solely on such advisors and not on any statements or representations of the Company, the Company’s counsel, or any of the Company’s agents. Investor understands that it (and not the Company) shall be responsible for its own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement and the Notes.
5. CONDITIONS TO CLOSING.
5.1 Conditions to Investors’ Obligations. The obligations of each Investor under Section 2 of this Agreement are subject to the fulfillment or waiver, on or before the Closing, of each of the following conditions, the waiver of which shall not be effective against any Investor who does not consent to such waiver, which consent may be given by written, oral or telephone communication to the Company or its counsel:
(a) each of the representations and warranties of the Company contained in Section 3 shall be true and correct in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing;
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(b) the Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein;
(c) the Company shall have executed and delivered to each Investor a Note, in the form attached hereto as Exhibit A, evidencing the Company’s indebtedness to such Investor in the amount set forth on such Investor’s signature page hereto; and
(d) the SPAC Merger shall be consummated pursuant to the terms of the Merger Agreement substantially concurrently with the Closing.
5.2 Condition to Company’s Obligations. The obligations of the Company to each Investor under this Agreement are subject to the fulfillment or waiver on or before the Closing of each of the following conditions by such Investor:
(a) Each of the representations and warranties of such Investor contained in Section 4 shall be true and correct at the Closing with the same effect as though such representations and warranties had been made on and as of the Closing; and
(b) such Investor shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein; and
(c) the SPAC Merger shall be consummated pursuant to the terms of the Merger Agreement substantially concurrently with the Closing.
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6. REGISTRATION RIGHTS.
6.1 Registration Rights. The Company agrees that, as promptly as practicable (but in any event within ninety (90) calendar days after the consummation of the SPAC Merger), the SPAC Purchaser will file with the U.S. Securities and Exchange Commission (the “SEC”) (at its sole cost and expense) a registration statement registering the resale of the SPAC Shares issued to the holder of this Note (the “Registration Statement”), and it shall use its commercially reasonable efforts to have the Registration Statement declared effective as soon as practicable after the filing thereof. The Company agrees that the SPAC Purchaser will cause such Registration Statement or another registration statement (which may be a “shelf” registration statement) to remain effective until the earliest of (i) two years from the issuance of the SPAC Shares, (ii) the date on which Holder ceases to hold the SPAC Shares covered by such Registration Statement and (iii) the first date on which Holder can sell all of its SPAC Shares under Rule 144 of the Securities Act without limitation as to the manner of sale or the amount of such securities that may be sold. Holder agrees to disclose its beneficial ownership, as determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended, of the SPAC Shares to the SPAC Purchaser upon request to assist the SPAC Purchaser in making the determination described above. The SPAC Purchaser’s obligations to include the SPAC Shares in the Registration Statement are contingent upon Holder furnishing in writing to the SPAC Purchaser such information regarding Holder, the securities of the SPAC Purchaser held by Holder and the intended method of disposition of the SPAC Shares as shall be reasonably requested by the SPAC Purchaser to effect the registration of the SPAC Shares, and shall execute such documents in connection with such registration as the SPAC Purchaser may reasonably request that are customary of a selling stockholder in similar situations. The SPAC Purchaser may delay filing or suspend the use of any such registration statement if it determines that in order for the registration statement to not contain a material misstatement or omission, an amendment thereto would be needed, or if such filing or use could materially affect a bona fide business or financing transaction of the SPAC Purchaser or would require premature disclosure of information that could materially adversely affect the SPAC Purchaser (each such circumstance, a “Suspension Event”); provided, that the SPAC Purchaser shall use commercially reasonable efforts to make such registration statement available for the sale by Holder of such securities as soon as practicable thereafter. Upon receipt of any written notice from the SPAC Purchaser of the happening of any Suspension Event during the period that the Registration Statement is effective or if as a result of a Suspension Event the Registration Statement or related prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the prospectus) not misleading, Holder agrees that it will (i) immediately discontinue offers and sales of the SPAC Shares under the Registration Statement until Holder receives (A) (x) copies of a supplemental or amended prospectus that corrects the misstatement(s) or omission(s) referred to above and (y) notice that any post-effective amendment has become effective or (B) notice from the SPAC Purchaser that it may resume such offers and sales, and (ii) maintain the confidentiality of any information included in such written notice delivered by the SPAC Purchaser unless otherwise required by applicable law. If so directed by the SPAC Purchaser, Holder will deliver to the SPAC Purchaser or destroy all copies of the prospectus covering the SPAC Shares in Holder’s possession; provided, however, that this obligation to deliver or destroy all copies of the prospectus covering the SPAC Shares shall not apply to (i) the extent that Holder is required to retain a copy of such prospectus (A) in order to comply with applicable legal, regulatory, self-regulatory or professional requirements or (B) in accordance with a bona fide pre-existing document retention policy or (ii) copies stored electronically on archival servers as a result of automatic data back-up.
7. GENERAL PROVISIONS.
7.1 Survival of Warranties. The representations, warranties and covenants of the Company and the Investors contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement, the Closing, and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of any of the Investors or the Company, as the case may be.
7.2 Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties, provided, however, that nothing in this Section 7.2 shall permit any of the Investors to transfer or assign any of the Securities acquired under this Agreement except as provided in Section 4 and in the Notes.
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7.3 Governing Law. This Agreement shall be governed by and construed under the internal laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California, without reference to principles of conflict of laws or choice of laws.
7.4 Counterparts; Facsimile Signatures. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed and delivered by facsimile, or by email in portable document format (.pdf) and delivery of the signature page by such method will be deemed to have the same effect as if the original signature had been delivered to the other parties hereto.
7.5 Headings; Interpretation. In this Agreement, (i) the meaning of defined terms shall be equally applicable to both the singular and plural forms of the terms defined; (ii) the captions and headings are used only for convenience and are not to be considered in construing or interpreting this Agreement and (iii) the words “including,” “includes” and “include” shall be deemed to be followed by the words “without limitation”. All references in this Agreement to sections, paragraphs, exhibits and schedules shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all of which exhibits and schedules are incorporated herein by this reference.
7.6 Notices. Unless otherwise provided herein, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given (i) at the time of personal delivery, if delivered in person; (ii) when sent, if sent by electronic mail or by facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the next business day; (iii) one (1) business day after deposit with an express overnight courier for United States deliveries, or three (3) business days after deposit with an express courier for deliveries outside of the United States, in each case with proof of delivery from the courier requested; or (iv) four (4) business days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries when addressed to an Investor at the address set forth on such Investor’s signature page hereto or, in the case of the Company, at 19925 Stevens Creek Blvd., Suite 100, Cupertino, California, 95014, or at such other address as any party or the Company may designate for itself to receive notices by giving ten (10) days’ advance written notice to all required parties in accordance with the provisions of this Section, with copies to (which shall not constitute notice) Lowenstein Sandler LLP, One Lowenstein Drive, Roseland, New Jersey 07068, Attention: Steven M. Skolnick, Esq.
7.7 No Finder’s Fees. Each party represents that it neither is nor will be obligated for any finder’s or broker’s fee or commission in connection with the transactions contemplated by this Agreement. Each Investor agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s or broker’s fee (and any asserted liability) for which the Investor or any of its directors, officers, partners, members, employees or representatives is responsible. The Company agrees to indemnify and hold harmless each Investor from any liability for any commission or compensation in the nature of a finder’s or broker’s fee (and any asserted liability) for which the Company or any of its officers, employees or representatives is responsible.
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7.8 Amendments and Waivers. Any term of this Agreement and the Notes may be amended and the observance of any term of this Agreement and the Notes may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of Notes representing at least a majority of the aggregate Principal Balances (as defined in the Notes) of all the Notes then outstanding (the “Majority Holders”). Any amendment or waiver effected in accordance with this Section 7.8 shall be binding upon each holder of Notes then outstanding, each future holder of such securities, and the Company; provided, however, that without such Investor’s written consent, no amendment or waiver of any term of this Agreement shall be effective against an Investor that materially and adversely affects such Investor’s rights hereunder in a manner that is materially different from and disproportionate to the effect on other Investors. Notwithstanding anything to the contrary contained herein or in the Notes, from the date of this Agreement until the earlier of (i) the consummation of the transactions contemplated by the SPAC Merger Agreement or (ii) the termination of the SPAC Merger Agreement in accordance with its terms, neither this Agreement, nor any of the Notes, may be amended, supplemented or modified, nor may any provision of this Agreement or the Notes be waived, in each case without the prior written consent of SPAC Purchaser (such consent not to be unreasonably withheld, delayed or conditioned). SPAC Purchaser is an express intended third party beneficiary of this Section 7.8 and shall have the right to enforce the terms hereof as if it were a direct party hereto.
7.9 Severability. If any provision of this Agreement is determined by any court or arbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximum extent possible given the intent of the parties hereto. If such clause or provision cannot be so enforced, such provision shall be stricken from this Agreement and the remainder of this Agreement shall be enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not enforceable) never been contained in this Agreement. Notwithstanding the foregoing, if the value of this Agreement based upon the substantial benefit of the bargain for any party is materially impaired, which determination as made by the presiding court or arbitrator of competent jurisdiction shall be binding, then both parties agree to substitute such provision(s) through good faith negotiations.
7.10 Entire Agreement. This Agreement, together with all exhibits and schedules hereto and the other Financing Documents, constitute the entire agreement and understanding of the parties with respect to the subject matter hereof and supersede any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties with respect to the subject matter hereof.
7.11 Further Assurances. From and after the date of this Agreement, upon the request of any Investor or the Company, the Company and the Investors shall execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement effective as of the date first written above.
REVIVA PHARMACEUTICALS, INC.: | |||
Signature: | |||
Name: | Laxminarayan Bhat, Ph.D. | ||
Title: | President and Chief Executive Officer | ||
Phone: | (408) 960.2209 | ||
Fax: | (408) 904.6270 | ||
E-mail: | LBhat@Revivapharma.com |
Attachments:
Exhibit A | – | Form of Note |
Exhibit B | – | Schedule of Exceptions |
[Signature Page to Reviva Note Purchase Agreement (2020 Judgement Notes)]
IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement effective as of the date first written above.
INVESTOR: | |||
Signature: | |||
Print Name: | |||
Signature | |||
Print Name | |||
Title (if applicable): | |||
Dollar Amount Invested (Notes): | |||
Address: | |||
Phone No: | |||
Fax No.: | |||
E-mail: | |||
Date of Investment: | |||
Attachments:
Exhibit A | – | Form of Note |
Exhibit B | – | Schedule of Exceptions |
[Signature Page to Reviva Note Purchase Agreement (2020 Judgement and Working Cap Notes)]
IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement effective as of the date first written above.
INVESTOR: | |||
Signature: | |||
Print Name: | |||
Signature | |||
Print Name | |||
Title (if applicable): | |||
Dollar Amount Invested (Notes): | |||
Address: | |||
Phone No: | |||
Fax No.: | |||
E-mail: | |||
Date of Investment: | |||
Attachments:
Exhibit A | – | Form of Note |
Exhibit B | – | Schedule of Exceptions |
[Signature Page to Reviva Note Purchase Agreement (2020 Judgement and Working Cap Notes)]
EXHIBIT A
FORM OF NOTE
EXHIBIT B
SCHEDULE OF EXCEPTIONS
Exhibit 10.21
REVIVA PHARMACEUTICALS HOLDINGS, INC.
(f/k/a Tenzing Acquisition Corp.)
250 West 55th Street, Suite 13D
New York, New York 10019
December 14, 2020
MAXIM GROUP LLC
405 Lexington Avenue
New York, NY 10174
Attention: Head of Investment Banking
Re: Payment of Deferred Underwriting Commission
Ladies and Gentlemen:
Reference is hereby made to that certain underwriting agreement, dated as of August 20, 2018 (the “Underwriting Agreement”), by and between Tenzing Acquisition Corp., a company incorporated in the British Virgin Islands (which has since been converted into Reviva Pharmaceuticals Holdings, Inc., a Delaware corporation through a statutory re-domestication (the “Conversion”)) (together with any successor thereto, the “Company”), and Maxim Group LLC (“Maxim Group”), pursuant to which Maxim Group acted as the representative of several underwriters in connection with the Company’s initial public offering of units. Capitalized terms used but not defined in this letter agreement (this “Letter”) shall have the meanings given to such terms in the Underwriting Agreement.
1. Pursuant to Section 1.3 of the Underwriting Agreement, 3.5% of the gross proceeds from the sale of the Firm Units ($1,925,000) and 3.5% of the gross proceeds from the sale of the Option Units ($288,750), for an aggregate of $2,213,750 (the “Deferred Underwriting Commission”), were deposited in and held in the Trust Account and will be payable directly from the Trust Account, without accrued interest, to Maxim Group for its own account upon consummation of the Business Combination. Each of the Company and Maxim Group hereby agree that with respect to the Company’s proposed Business Combination with Reviva Pharmaceuticals, Inc., a Delaware corporation (the “Reviva Business Combination”), in lieu of the payment of $2,113,750 of the Deferred Underwriting Commission in cash, the Company shall, at the closing of the Reviva Business Combination (the ”Closing”), issue to Maxim Group’s affiliate, Maxim Partners, LLC (“Maxim Partners” and together with Maxim Group, “Maxim”), an aggregate of 300,000 shares of common stock (the “Shares”), par value $0.0001 per share, of the Company after giving effect to the Conversion, with the remaining $100,000 of the Deferred Underwriting Commission being paid in cash upon the Closing.
2. The Company agrees that, within ninety (90) days after the Closing, it will file with the Securities and Exchange Commission (at its sole cost and expense) a registration statement registering the resale of the Shares (the “Registration Statement”), and it shall use its commercially reasonable efforts to have the Registration Statement declared effective as soon as practicable after the filing thereof. The Company acknowledges and agrees that it will include the Shares for resale registration in the registration statement (the “Non-Redemption Registration Statement”) to be filed by the Company after the Closing under the Registration Rights Agreement to be entered into by the Company at the Closing pursuant to the Non-Redemption Agreement, dated as of December 8, 2020 (the “Non-Redemption Agreement”), by and among the Company, Sponsor and the Company’s shareholder named therein (the “Shareholder”) for the resale of the shares of the Company issued to the Shareholder under the Non-Redemption Agreement and the Company warrants (and underlying shares of Common Stock upon exercise of such warrants) transferred from the Sponsor to the Shareholder thereunder (together with such shares, the “Shareholder Securities”); provided, that Maxim acknowledges that the Shareholder Securities will take priority over the Shares with respect to any registration, and if all of the securities to be registered under the Non-Redemption Registration Statement cannot for any reason be registered thereunder, the Shares will not be included in the final Non-Redemption Registration Statement unless all of the Shareholder Securities are included and registered thereunder, and in such case, the Company will file another resale registration statement for the resale of the Shares as promptly thereafter as practicable. The Company agrees that it will cause such Registration Statement or another registration statement (which may be a “shelf” registration statement) to remain effective until the earliest of (i) two years from the issuance of the Shares, (ii) the date on which Maxim ceases to hold the Shares covered by such Registration Statement and (iii) the first date on which Maxim can sell all of its Shares under Rule 144 of the Act, without limitation as to the manner of sale or the amount of such securities that may be sold. Maxim agrees to disclose its beneficial ownership, as determined in accordance with Rule 13d-3 of the Exchange Act, of the Shares to the Company upon request to assist the Company in making the determination described above. The Company’s obligations to include the Shares in the Registration Statement are contingent upon Maxim furnishing in writing to the Company such information regarding Maxim, the securities of the Company held by Maxim and the intended method of disposition of the Shares as shall be reasonably requested by the Company to effect the registration of the Shares, and shall execute such documents in connection with such registration as the Company may reasonably request that are customary of a selling stockholder in similar situations. The Company may delay filing or suspend the use of any such registration statement if it determines that in order for the registration statement to not contain a material misstatement or omission, an amendment thereto would be needed, or if such filing or use could materially affect a bona fide business or financing transaction of the Company or would require premature disclosure of information that could materially adversely affect the Company (each such circumstance, a “Suspension Event”); provided, that the Company shall use commercially reasonable efforts to make such registration statement available for the sale by Maxim of such securities as soon as practicable thereafter. Upon receipt of any written notice from the Company of the happening of any Suspension Event during the period that the Registration Statement is effective or if as a result of a Suspension Event the Registration Statement or related prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the prospectus) not misleading, Maxim agrees that it will (i) immediately discontinue offers and sales of the Shares under the Registration Statement until Maxim receives (A) (x) copies of a supplemental or amended prospectus that corrects the misstatement(s) or omission(s) referred to above and (y) notice that any post-effective amendment has become effective or (B) notice from the Company that it may resume such offers and sales, and (ii) maintain the confidentiality of any information included in such written notice delivered by the Company unless otherwise required by applicable law. If so directed by the Company, Maxim will deliver to the Company or destroy all copies of the prospectus covering the Shares in Maxim’s possession; provided, however, that this obligation to deliver or destroy all copies of the prospectus covering the Shares shall not apply to (i) the extent that Maxim is required to retain a copy of such prospectus (A) in order to comply with applicable legal, regulatory, self-regulatory or professional requirements or (B) in accordance with a bona fide pre-existing document retention policy or (ii) copies stored electronically on archival servers as a result of automatic data back-up.
3. Maxim hereby represents, warrants and covenants to the Company as follows:
(a) Maxim will be acquiring the Shares for its own account, not as a nominee or agent. Maxim will not sell, assign or transfer any Shares at any time in violation of the Act, or applicable state securities laws. Maxim acknowledges that the Shares cannot be sold unless subsequently registered under the Act and applicable state securities laws or an exemption from such registration is available. Maxim understands that the Shares (i) have not been (and upon their sale will not be) registered under the Act or any state securities laws, (ii) have been offered and will be sold in reliance upon an exemption from the registration and prospectus delivery requirements of the Act, and (iii) will be issued in reliance upon exemptions from the registration and prospectus delivery requirements of state securities laws which relate to private offerings. Pursuant to the foregoing, Maxim acknowledges that until such time as the resale of the Shares have been registered under the Act or may otherwise may be sold pursuant to an exemption from registration, any certificates representing any Shares acquired by Maxim shall bear a customary restrictive legend (and a stop-transfer order may be placed against transfer of any certificates evidencing such Shares) reflecting such limitations in form and substance reasonably acceptable to the Company.
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(b) Maxim has knowledge, skill and experience in financial, business and investment matters relating to an investment of this type and is capable of evaluating the merits and risks of such investment and protecting its interest in connection with the acquisition of the Shares. Maxim understands that the acquisition of the Shares is a speculative investment and involves substantial risks and that Maxim could lose its entire investment. Further, Maxim has (i) carefully read and considered the risks identified in the Disclosure Documents (as defined below) and (ii) carefully considered and understands all of the risks related to the Company, the Shares and this Letter. Acknowledging the very significant tax impact analysis and other analyses that is warranted in determining the consequences to it of purchasing and owning the Shares, to the extent deemed necessary by Maxim, Maxim has had the opportunity to retain, at its own expense, and relied upon, appropriate professional advice regarding the investment, tax and legal merits and consequences of the foregoing, including without limitation purchasing and owning the Shares. Maxim has the ability to bear the economic risks of its investment in the Company, including without limitation a complete loss of the investment, and Maxim has no need for liquidity in such investment.
(c) Maxim has been furnished by or on behalf of the Company all information (or provided access to all information it reasonably requested) regarding the business and financial condition of the Company, the expected plans for future business activities, and the merits and risks of an investment in the Shares which Maxim has reasonably requested or otherwise needs to evaluate the investment in the Shares. Maxim is in receipt of and has carefully read and understands the following items (collectively, the “Disclosure Documents”): (i) the final prospectus of the Company, dated as of August 20, 2018, and filed with the Commission on August 22, 2018 (File Nos. 333-226263 and 333-226952) (the “IPO Prospectus”); (ii) the final prospectus/proxy statement, dated as of November 10, 2020, relating to the Reviva Business Combination, filed by the Company with the Commission on November 12, 2020 and (iii) each other filing made by the Company with the Commission following the filing of the IPO Prospectus through the date of this Letter. Maxim acknowledges that neither the Company, nor any of its agents or representatives has made or makes any representation or warranty to Maxim in respect of the Company, the Shares, the Reviva Business Combination or this Letter, other than the representations and warranties contained in this Letter. In making its investment decision to acquire the Shares, Maxim is relying solely on investigations made by Maxim and its agents and representatives.
(d) Maxim acknowledges that it has been advised that: (i) the Shares have not been approved or disapproved by the Commission or any state securities commission nor has the Commission or any state securities commission passed upon the accuracy or adequacy of any representations by the Company, and any representation to the contrary is a criminal offense; (ii) in making an investment decision, Maxim must rely on its own examination of the Company and the Shares, including without limitation the merits and risks involved, the Shares have not been recommended by any federal or state securities commission or regulatory authority, and the foregoing authorities have not confirmed the accuracy or determined the adequacy of any representation (and any representation to the contrary is a criminal offense); (iii) any Shares will be “restricted securities” within the meaning of Rule 144 under the Act, are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Act and applicable state securities laws, pursuant to registration or exemption therefrom. Maxim is aware of the provisions of Rule 144 are not currently available and, in the future, may not become available for resale of any of the Shares and that the Company is an issuer subject to Rule 144(i) under the Act.
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(e) Maxim further represents and warrants that it is a “qualified institutional buyer” within the meaning of Rule 144A under the Act. As of the date of this Letter, Maxim and its Affiliates do not have, and during the thirty (30) day period prior to the date of this Letter, Maxim and its Affiliates have not, in a seller, transferor or other similar capacity, entered into, any “put equivalent position” as such term is defined in Rule 16a-1 of the Exchange Act or short sale positions with respect to the securities of the Company. In addition, Maxim shall comply with all applicable provisions of Regulation M promulgated under the Act. For purpose of this Letter, “Affiliate” means affiliate as such term is defined in Rule 12b-2 under the Exchange Act.
(f) Maxim has the full legal right and power and all authority and approval required (i) to execute and deliver, or authorize execution and delivery of, this Letter and all other instruments executed and delivered by or on behalf of Maxim in connection with the acquisition of the Shares, (ii) to delegate authority pursuant to power of attorney and (iii) to acquire and hold the Shares. The signature of the person signing on behalf of Maxim is binding upon Maxim. This Letter has been duly authorized, executed and delivered by Maxim and constitutes a legal, valid and binding obligation of Maxim enforceable against Maxim in accordance with its terms, except as such enforceability may be limited by: (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws in effect that limit creditors’ rights generally; (ii) equitable limitations on the availability of specific remedies; (iii) principles of equity (regardless of whether such enforcement is considered in a proceeding in law or in equity); and (iv) to the extent rights to indemnification and contribution may be limited by federal securities laws or the public policy underlying such laws.
(g) Maxim understands and confirms that the Company will rely on the representations and covenants contained herein in effecting the transactions contemplated by this Letter. Maxim agrees to notify the Company immediately upon the occurrence of any event that would cause any representation, warranty, covenant or other statement contained in this Letter to be false or incorrect or of any change in any statement made herein.
(h) Neither Maxim nor, to the extent it has them, any of its shareholders, members, managers, general or limited partners, directors, Affiliates or executive officers (collectively with Maxim, the “Covered Persons”), are subject to any of the “Bad Actor” disqualifications described in Rule 506(d) under the Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). Maxim has exercised reasonable care to determine whether any Covered Person is subject to a Disqualification Event. The acquisition of Shares by Maxim will not subject the Company to any Disqualification Event.
(i) Neither Maxim nor any of its directors, managers, officers or owners are the subject of any U.S. Sanctions Laws, including but not limited to any laws, regulations, executive orders, or other restrictions or prohibitions administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). Neither Maxim nor any of its directors, managers, officers or owners are: (i) designated on any list of restricted parties maintained by the U.S. Government including, but not limited to, OFAC’s Specially Designated Nationals and Blocked Persons List, the list of Foreign Sanctions Evaders, or the Sectoral Sanctions Identifications List; the U.S. Department of Commerce’s Denied Persons List or Entity List; or the U.S. Department of State’s Debarred List; or (ii) located, organized, resident, or doing business in any country or territory that is, or whose government is, the subject of comprehensive territorial U.S. Sanctions Laws, including, without limitation Crimea, Cuba, Iran, North Korea, and Syria. To the extent required, Maxim maintains policies and procedures reasonably designed for the screening of its investors against U.S. Government restricted party lists, including without limitation the lists herein referenced.
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4. The Company hereby represents, warrants and covenants to Maxim as follows:
(a) The Company has been duly formed or incorporated and is validly existing in good standing under the laws of its jurisdiction of incorporation or formation. The Company has the full legal right and power and all authority and approval required (i) to execute and deliver, or authorize execution and delivery of, this Letter and all other instruments executed and delivered by or on behalf of the Company in connection with the issuance of the Shares, and (ii) to perform its obligations under this Letter. The signature of the person signing on behalf of the Company is binding upon the Company. This Letter has been duly authorized, executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by: (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws in effect that limit creditors’ rights generally; (ii) equitable limitations on the availability of specific remedies; (iii) principles of equity (regardless of whether such enforcement is considered in a proceeding in law or in equity); and (iv) to the extent rights to indemnification and contribution may be limited by federal securities laws or the public policy underlying such laws.
(b) The Shares have been duly authorized and, when issued and delivered to Maxim Partners in accordance with the terms of this Letter, the Shares will be validly issued, fully paid and non-assessable and will not have been issued in violation of or subject to any preemptive or similar rights created under the Company’s organizational documents or under the laws of the State of Delaware.
(c) Assuming the accuracy of Maxim’s representations and warranties set forth in Section 3, in connection with the offer, sale and delivery of the Shares in the manner contemplated by this Letter, it is not necessary to register the issuance of the Shares under the Act.
(d) The issuance of the Shares and the compliance by the Company with all of the provisions of this Letter and the consummation of the transactions herein will be done in accordance with the NASDAQ marketplace rules and will not conflict with or result in a material breach or material violation of any of the terms or provisions of, or constitute a material default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of the Company or any of its subsidiaries pursuant to the terms of (i) any indenture, mortgage, deed of trust, loan agreement, license, lease or any other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company is subject, which would have a material adverse effect on the business, properties, financial condition, stockholders' equity or results of operations of the Company and its subsidiaries, taken as a whole (a “Material Adverse Effect”), or materially affect the validity of the Shares or the legal authority of the Company to comply in all material respects with the terms of this Letter; (ii) result in any material violation of the provisions of the organizational documents of the Company; or (iii) result in any violation of any statute or any judgment, order, rule or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over the Company or any of its properties that would have a Material Adverse Effect or materially affect the validity of the Shares or the legal authority of the Company to comply with this Letter; subject, in the case of the foregoing clauses (i) and (iii) with respect to the consummation of the transactions therein contemplated.
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5. The terms of this Letter shall be interpreted, enforced, governed by and construed in a manner consistent with the provisions of the Underwriting Agreement. Except as expressly provided in this Letter, all of the terms and provisions in the Underwriting Agreement are and shall remain in full force and effect, on the terms and subject to the conditions set forth therein. This Letter does not constitute, directly or by implication, an amendment, modification or waiver of any provision of the Underwriting Agreement, or any other right, remedy, power or privilege of any party to the Underwriting Agreement, except as expressly set forth herein. Any reference to the Underwriting Agreement or any other agreement, document, instrument or certificate entered into or issued in connection therewith shall hereinafter mean the Underwriting Agreement, as amended or modified by this Letter (or as the Underwriting Agreement may be further amended or modified after the date hereof in accordance with the terms thereof).
[Remainder of page intentionally left blank; Signature page follows.]
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Please acknowledge your agreement and acceptance to the foregoing by signing below and returning it to the undersigned at your earliest convenience.
Very truly yours, | ||
REVIVA PHARMACEUTICALS HOLDINGS, INC. | ||
By: | /s/ Rahul Nayar |
Name: Rahul Nayar | |
Title: Chief Executive Officer |
Accepted and agreed to as of the date first set forth above:
MAXIM GROUP LLC
By: | /s/ Cliff Teller | |
Name: Cliff Teller | ||
Title: Head of Banking | ||
MAXIM PARTNERS LLC | ||
By: | /s/ Cliff Teller | |
Name: Cliff Teller | ||
Title: Head of Banking |
{Signature Page to Maxim Side Letter}
Exhibit 10.24
EXECUTION COPY
CONFIDENTIAL
ESCROW AGREEMENT
This ESCROW AGREEMENT (this “Agreement”) is made and entered into as of December 14, 2020, by and among: (i) Tenzing Acquisition Corp., a British Virgin Islands corporation, which will be known after the consummation of the transactions contemplated by the Merger Agreement (as defined below) as “Reviva Pharmaceuticals Holdings, Inc.” (including any successor entity thereto, including the Successor after the Conversion (as such terms are defined in the Merger Agreement), the “Purchaser”), (ii) Tenzing LLC, in its capacity under the Merger Agreement as the Purchaser Representative (including any successor Purchaser Representative appointed in accordance therewith, the “Purchaser Representative”), (iii) Laxminarayan Bhat, in his capacity as the Seller Representative under the Merger Agreement (including any successor Seller Representative appointed in accordance therewith, the “Seller Representative”); and (iv) Continental Stock Transfer & Trust Company, as escrow agent (the “Escrow Agent”). Capitalized terms used herein but not otherwise defined herein shall have the meaning given to such terms in the Merger Agreement.
WHEREAS, on July 20, 2020, Purchaser, Tenzing Merger Subsidiary Inc., a Delaware corporation and a wholly-owned subsidiary of the Purchaser (“Merger Sub”), the Purchaser Representative, the Seller Representative and Reviva Pharmaceuticals, Inc., a Delaware corporation (the “Company”), entered into that certain Agreement and Plan of Merger (as amended from time to time in accordance with the terms thereof, the “Merger Agreement”), pursuant to which, subject to the terms and conditions thereof, upon the consummation of the transactions contemplated thereby (the “Closing”), Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity and with stockholders holders of the Company receiving shares of common stock of Purchaser, subject to the withholding of the Escrow Shares (as defined below) being deposited into the Escrow Account (as defined below) in accordance with the terms and conditions of the Merger Agreement and this Agreement and the applicable provisions of the DGCL;
WHEREAS, pursuant to the Merger Agreement, Purchaser, the Purchaser Representative, their respective Affiliates and each of their respective officers, directors, managers, employees, successors and permitted assigns (the “Indemnified Parties”) are entitled to be indemnified in certain respects by the Company Stockholders and their respective successors and assigns (the “Indemnifying Parties”);
WHEREAS, in accordance with the Merger Agreement and this Agreement, at the Closing, Purchaser shall issue to the Escrow Agent ten percent (10%) of the Merger Consideration otherwise issuable to the Company Stockholders at the Closing (together with any equity securities paid as dividends or distributions with respect to such shares or into which such shares are exchanged or converted, the “Escrow Shares”) to be held, along with any other Escrow Property (as defined below), by the Escrow Agent in a segregated escrow account (the “Escrow Account”) and disbursed therefrom in accordance with the terms of Article VI of the Merger Agreement and this Agreement;
WHEREAS, pursuant to the Merger Agreement and the Letter of Transmittals to be submitted by Company Stockholders, the Seller Representative has been designated as each Company Stockholder’s representative and agent to represent all of the Company Stockholders, and to act on their behalf for purposes of this Agreement;
WHEREAS, pursuant to the Merger Agreement, the Purchaser Representative has been exclusively designated to act on behalf of Purchaser to take all necessary actions and make all decisions pursuant to this Agreement; and
WHEREAS, the Escrow Agent is willing to administer the escrow under the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:
Section 1. Appointment. The Purchaser Representative (on behalf of Purchaser) and the Seller Representative (on behalf of the Company Stockholders) hereby appoint the Escrow Agent as their escrow agent for the purposes set forth herein, and the Escrow Agent hereby agrees to perform the duties as escrow agent under this Agreement. The escrow services to be rendered by the Escrow Agent under this Agreement will not begin until the Escrow Agent has received the documentation necessary to establish the Escrow Account on its books and has received the Escrow Shares in accordance with this Agreement.
Section 2. Delivery of Escrow Shares. Pursuant to Section 1.17 of the Merger Agreement, after the Closing, Purchaser shall deposit stock certificates for the Escrow Shares (“Escrowed Stock Certificates”) with the Escrow Agent, with each such Escrowed Stock Certificate being issued in the name of the Escrow Agent; provided, that Purchaser may alternatively have the Escrow Agent and Purchaser’s transfer agent account for the Escrow Shares in book entry form.
Section 3. Maintenance of the Escrow Shares and other Escrow Property. So long as any Escrow Shares are being held in the Escrow Account and are not disbursed in accordance with this Agreement, any dividends, distributions or other income paid on or otherwise accruing to such Escrow Shares (the foregoing, together with the Escrow Shares, and as reduced by any disbursements of such Escrow Shares or dividends, distributions or other income from the Escrow Account by the Escrow Agent in accordance with the terms of this Agreement and the Merger Agreement, the “Escrow Property”) shall be held by the Escrow Agent in the Escrow Account in accordance with the terms of this Agreement. During the term of this Agreement, the Escrow Agent shall hold the Escrow Property in the Escrow Account and shall not sell, transfer, dispose of, lend or otherwise subject to a Lien any of the Escrow Property except until and to the extent that they are disbursed in accordance with Section 4. Except as the Purchaser Representative (on behalf of Purchaser) and the Seller Representative (on behalf of the Company Stockholders) may otherwise agree in joint written instructions executed and delivered to the Escrow Agent, no part of the Escrow Property may be withdrawn except as expressly provided in this Agreement. While the Escrow Shares are held in the Escrow Account, the Escrow Agent, as the record holder of the Escrow Shares, shall grant each of the Company Stockholders a proxy to vote such Company Stockholder’s Pro Rata Share of the Escrow Shares and, until and unless the Escrow Shares are forfeited in satisfaction of an indemnification claim pursuant to Article VI of the Merger Agreement, each Company Stockholder shall control the voting power with respect to such Company Stockholder’s Pro Rata Share of the Escrow Shares during the time such Escrow Shares are held in the Escrow Account.
Section 4. Delivery of the Escrow Property. The Escrow Agent shall hold the Escrow Property and shall deliver the Escrow Property to either Purchaser or the Company Stockholders that have previously delivered the Transmittal Documents in accordance with Section 1.11 of the Merger Agreement, with each such Company Stockholder receiving its Pro Rata Share of such Escrow Property, as applicable, in accordance with the following procedures:
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(a) Purchaser (with the Purchaser Representative acting on its behalf) may assert a claim for indemnification on behalf of an Indemnified Party pursuant to the Merger Agreement (an “Indemnification Claim”) by providing written notice (a “Claim Notice”) of such claim to the Seller Representative and the Escrow Agent, which Claim Notice shall include (i) a reasonable description of the facts and circumstances which relate to the subject matter of such Indemnification Claim to the extent then known, (ii) the amount of Losses suffered by the Indemnified Party in connection with the claim to the extent known or reasonably estimable (provided, that the Purchaser Representative on behalf of Purchaser may thereafter in good faith adjust the amount of Losses with respect to the claim by providing a revised Claim Notice to the Seller Representative and the Escrow Agent (such amount, as it may be adjusted, the “Claim Amount”)) and (iii) whether the Indemnification Claim results from a Third Party Claim; provided, that the copy of any Claim Notice provided to the Escrow Agent shall be redacted for any confidential or proprietary information of the Indemnifying Party or the Indemnified Party described in clause (i).
(b) Unless the Seller Representative provides to the Purchaser Representative and the Escrow Agent a written notice objecting to such Indemnification Claim (an “Objection Notice”) (with any Objection Notice provided to the Purchaser Representative, but not the Escrow Agent, including an attachment with a description, in reasonable detail, of the facts upon which such objection is based) by 11:59 p.m. New York City time on the thirtieth (30th) day after the delivery of the Claim Notice (the date of the delivery of the Claim Notice through such time, the “Objection Period”), the Seller Representative on will be deemed to have accepted responsibility for the Losses set forth in such Claim Notice subject to the limitations on indemnification set forth in Article VI of the Merger Agreement and will have no further right to contest the validity of such Claim Notice, and, subject to Section 4(d), the Escrow Agent shall promptly (in any event within five (5) Business Days) after the expiration of the Objection Period (or, if during the Objection Period, the Seller Representative provides affirmative written instructions to the Escrow Agent to release such Escrow Property from the Escrow Account, promptly (in any event within five (5) Business Days) after the Escrow Agent’s receipt of such instructions from the Seller Representative), disburse to the Purchaser Escrow Property from the Escrow Account in an amount equal to the Claim Amount. If the Seller Representative provides an Objection Notice during the Objection Period that disputes only a portion of the Claim Amount, subject to Section 4(d), the Escrow Agent shall promptly (in any event within five (5) Business Days) after the expiration of the Objection Period (or, if during the Objection Period, the Seller Representative provides affirmative written instructions to the Escrow Agent to release such Escrow Property from the Escrow Account, promptly (in any event within five (5) Business Days) after the Escrow Agent’s receipt of such instructions from the Seller Representative), disburse to the Purchaser Escrow Property from the Escrow Account in an amount equal to the undisputed portion of the Claim Amount.
(c) If the Seller Representative timely disputes an Indemnification Claim, by providing an Objection Notice to the Purchaser Representative and the Escrow Agent during the Objection Period, the Purchaser Representative and the Seller Representative shall resolve the dispute in accordance with the terms of the Merger Agreement. If an Indemnification Claim is disputed by the Seller Representative, the Escrow Agent shall not distribute to the Company Stockholders any portion of the Escrow Property with respect to the disputed portion of the Claim Amount, until receipt of (i) joint written instructions executed and delivered by the Seller Representative and the Purchaser Representative on behalf of Purchaser stating that the dispute has been resolved and that the Indemnified Party has the right to the Claim Amount (or some portion thereof) (“Joint Instructions”) or (ii) a copy of an arbitration award issued pursuant to Section 10.4 of the Merger Agreement or a court order from a court of competent jurisdiction establishing the Indemnified Party’s right to the Claim Amount (or some portion thereof) pursuant to the Merger Agreement (a “Binding Award”). Upon receipt of such Joint Instructions or Binding Award, the Escrow Agent shall, without further action on the part of the Seller Representative or the Purchaser Representative, promptly (in any event within five (5) Business Days) disburse to the Purchaser Escrow Property from the Escrow Account in the amount set forth in the Joint Instructions or the Binding Award (less any undisputed amounts already disbursed pursuant to Section 4(b)), as applicable.
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(d) For the avoidance of doubt, with respect to any Third Party Claim, even if the Seller Representative has agreed that the Company Stockholders are required to provide indemnification to the Indemnified Parties for such Third Party Claim, except for attorneys’ fees and other costs and expenses incurred by the Indemnified Party in connection with its participation in the defense of the Third Party Claim during any period in which the Seller Representative on behalf of the Indemnifying Party is not controlling the defense of the Third Party Claim pursuant to Section 6.4 of the Merger Agreement (“Indemnified Third Party Costs”), no payment shall be made by the Escrow Agent with respect to such Third Party Claim until such Third Party Claim has been sustained in whole or in part by a court of competent jurisdiction or other binding legal process (including binding arbitration) or settled in whole or in part in accordance with the provisions of the Merger Agreement (and if any Third Party Claim is decided or settled in part, each part that has not yet been decided or settled shall not be paid until such remaining part is decided or settled). Escrow Property from the Escrow Account in an amount equal to Indemnified Third Party Costs shall be disbursed by the Escrow Agent to Purchaser promptly (but in any event within five (5) Business Days) after the Purchaser Representative provides written notice to the Seller Representative and the Escrow Agent of such Indemnified Third Party Costs.
(e) Payments from the Escrow Account with respect to any Indemnification Claims shall be paid first with the Escrow Shares and then with any remaining Escrow Property in the Escrow Account. For any Escrow Shares to be disbursed with respect to Indemnification Claims, the Escrow Shares shall be valued at the Purchaser Share Price as of the date that an Indemnification Claim is finally determined in accordance with the Merger Agreement and this Agreement (the “Resolution Date”). For the avoidance of doubt, the Resolution Date shall be (i) if no Objection Notice is delivered by the Seller Representative during the Objection Period (other than with respect to a Third Party Claim), the 31st day after the date that the Claim Notice is delivered; (ii) if prior to the date described in clause (i) above, the Seller Representative provides affirmative written instructions to the Escrow Agent to release the Escrow Property for the amount set forth in the Claim Notice, the date that the Escrow Agent receives such written instructions; (iii) if the Seller Representative provides an Objection Notice during the Objection Period that disputes only a portion of the Claim Amount (other than with respect to a Third Party Claim), with respect to the undisputed portion of such Claim Amount, the date that the Escrow Agent receives such Objection Notice; (iv) with respect to any disputed Claim Amount, either the date that the Escrow Agent receives Joint Instructions or a Binding Award; or (v) with respect to any Third Party Claim, that date that such Third Party Claim has been sustained in whole or in part by a court of competent jurisdiction or other binding legal process (including binding arbitration) or settled in whole or in part in accordance with the provisions of the Merger Agreement (and if any Third Party Claim is decided or settled in part, the Resolution Date with respect to each part that has not yet been decided or settled shall be the date that such remaining part is decided or settled); provided, that with respect to Indemnified Third Party Costs, the Resolution Date shall be the date that the Purchaser Representative notifies the Seller Representative and the Escrow Agent in writing of the amount of such Indemnified Third Party Costs.
(f) With respect to any Indemnification Claims made in accordance with the Merger Agreement and this Agreement on or prior to the twelve (12) month anniversary of the Closing (the “Expiration Date”) that remain unresolved at the time of the Expiration Date (“Pending Claims”), all or a portion of the Escrow Property reasonably necessary to satisfy such Pending Claims (as determined based on the Claim Amount included in the Claim Notice (as it may adjusted) provided by the Purchaser Representative and the Purchaser Share Price as of the Expiration Date), shall remain in the Escrow Account until such time as such Pending Claim shall have been finally resolved pursuant to the provisions of the Merger Agreement and this Agreement. After the Expiration Date, any Escrow Property remaining in the Escrow Account that is not subject to Pending Claims, if any, and not subject to resolved but unpaid claims in favor of an Indemnified Party, shall be transferred by the Escrow Agent to the Company Stockholders that have previously delivered the Transmittal Documents in accordance with Section 1.11 of the Merger Agreement, with each such Company Stockholder receiving its Pro Rata Share of such Escrow Property, upon receipt of joint written instructions from the Purchaser Representative and the Seller Representative. Promptly after the final resolution of all Pending Claims and payment of all indemnification obligations in connection therewith, the Escrow Agent shall transfer any Indemnity Escrow Property remaining in the Indemnity Escrow Account to the Company Stockholders that have previously delivered the Transmittal Documents in accordance with Section 1.11 of the Merger Agreement, with each such Company Stockholder receiving its Pro Rata Share of such Escrow Property.
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(g) Any amount of Escrow Property required to be transferred to any Person pursuant to this Section 4 shall be transferred by the Escrow Agent pursuant to such delivery instructions as provided by the Purchaser Representative with respect to Purchaser or the Seller Representative with respect to the Company Stockholders. The Escrow Agent shall rely exclusively on instructions provided by the Seller Representative on behalf of the Company Stockholders and the Purchaser Representative on behalf of Purchaser as to the amount and recipient of any distribution of Escrow Property pursuant to this Section 4, or the relevant order of any court of competent jurisdiction or other award granted pursuant to other binding legal process (including any binding arbitration). The Escrow Agent has no duty or responsibility to calculate any distribution or to confirm the accuracy of any distribution amount so instructed.
(h) Any Escrow Property that remains unclaimed by Company Stockholders two (2) years after the Effective Time shall be returned to the Purchaser, upon demand, and any Company Stockholder who has not exchanged its Company Stock for the applicable portion of the Merger Consideration in accordance with Section 1.11 of the Merger Agreement prior to that time shall thereafter look only to the Purchaser for payment of the portion of the Merger Consideration in respect of such shares of Company Stock.
Section 5. Tax Matters. Purchaser, the Purchaser Representative and the Seller Representative agree and acknowledge that, for all U.S. and foreign tax purposes, except as required by applicable Law, the Company Stockholders shall be the owner of the Escrow Property while held in the Escrow Account, and all interest, earnings or income, if any, earned with respect to the Escrow Property while held by the Escrow Agent shall be treated as earned by the Company Stockholders. The Escrow Agent shall have the right to deduct and withhold taxes from any payments to be made hereunder if such withholding is required by law and to request and receive any necessary tax forms, including Form W-9 or the appropriate series of Form W-8, as applicable, or any similar information, from the applicable recipient of the Escrow Property.
Section 6. Duties. The Escrow Agent’s duties are entirely ministerial and not discretionary, and the Escrow Agent will be under no duty or obligation to do or to omit the doing of any action with respect to the Escrow Property, except to give notice, provide monthly reports, make disbursements, keep an accurate record of all transactions with respect to the Escrow Property, hold the Escrow Property in accordance with the terms of this Agreement and to comply with any other duties expressly set forth in this Agreement. The Escrow Agent shall not have any interest in the Escrow Property but shall serve as escrow holder only and have only possession thereof. Nothing contained herein shall be construed to create any obligation or liability whatsoever on the part of the Escrow Agent to anyone other than the parties to this Agreement. There are no third party beneficiaries to this Agreement.
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Section 7. Determination of the Purchaser Share Price. In the event that the Escrow Agent has any question as to the applicable Purchaser Share Price, the Seller Representative and the Purchaser Representative shall cooperate to promptly provide the Escrow Agent with their good faith determination of the applicable Purchaser Share Price pursuant to Joint Instructions or a Binding Award (and in the event of any dispute as to the Purchaser Share Price, the Escrow Agent shall not disburse the applicable Escrow Property until such dispute has been resolved).
Section 8. Monthly Reports Upon Request. The Escrow Agent shall provide monthly account statements to the Purchaser Representative and the Seller Representative with respect to the Escrow Account. The Purchaser Representative and the Seller Representative have one hundred twenty (120) days to object in writing to such reports. If no written notice detailing a party's objections has been received by the Escrow Agent within this period, an acceptance of such reports shall be deemed to have occurred.
Section 9. Authorized Parties; Reliance. The parties hereby acknowledge that the Purchaser Representative has the sole and exclusive authorization to act on behalf of Purchaser under this Agreement. The Purchaser Representative on behalf of Purchaser and the Seller Representative agree to provide, on Exhibit A (as it may be amended from time to time) to this Agreement, the names and specimen signatures of those persons who are authorized to issue notices and instructions to the Escrow Agent and execute required documents under this Agreement. The Escrow Agent may rely and shall be protected in acting or refraining from acting upon any written notice, instruction or request furnished to it hereunder and believed by it to be genuine and to have been signed or presented by the proper party or parties. The Escrow Agent is entitled to rely on, and shall be fully protected in relying on, the instructions and notices from any one of the authorized signers, as identified on the attached Exhibit A (as it may be amended from time to time) to this Agreement, from each of the Purchaser Representative (on behalf of Purchaser) and the Seller Representative, either acting alone, until such time as their authority is revoked in writing, or until successors have been appointed and identified by notice in the manner described in Section 15 below.
Section 10. Good Faith. The Escrow Agent shall not be liable for any action taken by it in good faith and reasonably believed by it to be authorized or within the rights or powers conferred upon it by this Agreement, except to the extent that Escrow Agent’s gross negligence or willful misconduct was the cause of any direct loss to Purchaser, the Purchaser Representative, the Seller Representative, or the Company Stockholders.
Section 11. Right to Resign. The Escrow Agent may resign and be discharged from its duties or obligations hereunder by giving such notice in writing of such resignation to each of the other parties hereto specifying a date when such resignation shall take effect, which shall be a date not less than sixty (60) days after the date of the notice of such resignation. Similarly, the Escrow Agent may be removed and replaced following the giving of twenty (20) days’ notice to the Escrow Agent by all of the other parties hereto. In either event, the Purchaser Representative and the Seller Representative shall agree upon a successor Escrow Agent. If the Seller Representative and the Purchaser Representative are unable to agree upon a successor or shall have failed to appoint a successor prior to the expiration of sixty (60) days following the date of resignation or twenty (20) days following the date of removal, the then-acting Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor escrow agent or otherwise appropriate relief, and any such resulting appointment shall be binding upon all of the parties hereto. Any successor Escrow Agent shall execute and deliver to the predecessor Escrow Agent, the Purchaser Representative and the Seller Representative an instrument accepting such appointment and the transfer of the Escrow Property and agreeing to the terms of this Agreement.
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Section 12. Compensation. The Escrow Agent shall be entitled to receive the fees as set forth on Exhibit B for the services to be rendered hereunder, and to be paid or reimbursed for all reasonable documented out-of-pocket expenses, disbursements and advances, including reasonable documented out-of-pocket attorneys’ fees, incurred or paid in connection with carrying out its duties hereunder, such amounts to be paid by Purchaser.
Section 13. Indemnification. Purchaser hereby agrees to indemnify the Escrow Agent for, and to hold it harmless against any loss, liability or expense incurred without gross negligence or willful misconduct on the part of the Escrow Agent, arising out of or in connection with its entering into this Agreement and carrying out its duties hereunder.
Section 14. Disputes. If a controversy arises between the parties hereto as to whether or not or to whom the Escrow Agent shall transfer all or any portion of the Escrow Property or as to any other matter arising out of or relating to this Agreement or the Escrow Property, the Escrow Agent shall not be required to determine the same, shall not make any transfer of and shall retain the Escrow Property in dispute without liability to anyone until the rights of the parties to the dispute shall have finally been determined by mutual written agreement of the Purchaser Representative on behalf of Purchaser and the Seller Representative, or by a final non-appealable judgment or order of any state or federal court located in New York County, New York (or in any court in which appeal from such courts may be taken) but the Escrow Agent shall be under no duty whatsoever to institute or defend any such proceedings. The Escrow Agent shall be entitled to assume that no such controversy has arisen unless it has received notice of such controversy or conflicting written notices from the parties to this Agreement. Any disputes arising out of, related to, or in connection with, this Agreement between Purchaser, the Purchaser Representative and/or the Seller Representative, including a dispute arising from a party’s failure or refusal to sign a joint written notice hereunder, shall be determined by arbitration conducted in accordance with the provisions of Section 10.4 of the Merger Agreement (other than applications for a temporary restraining order, preliminary injunction, permanent injunction or other equitable relief or application for enforcement of any arbitration award pursuant to this Section 14 or Section 10.4 of the Merger Agreement).
Section 15. Notices. Except to the extent expressly set forth herein, all notices and communications hereunder shall be in writing and shall be deemed to be given if (a) delivered personally, (b) sent by facsimile or email (with affirmative confirmation of receipt), (c) sent by recognized overnight courier that issues a receipt or other confirmation of delivery or (d) sent by registered or certified mail, return receipt requested, postage prepaid to the parties as follows:
If to Purchaser or the Purchaser Representative, to:
Tenzing LLC
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with a copy (which will not constitute notice) to:
Ellenoff Grossman & Schole LLP
Matthew A. Gray, Esq.
Facsimile No.: (212) 370-7889
mgray@egsllp.com
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or at such other address as any of the above may have furnished to the other parties in a notice duly given as provided herein. Any such notice or communication given in the manner specified in this Section 15 shall be deemed to have been given (i) on the date personally delivered or transmitted by facsimile or email (with affirmative confirmation of receipt), (ii) one (1) Business Day after the date sent by recognized overnight courier that issues a receipt or other confirmation of delivery or (iii) three (3) Business Days after being sent by registered or certified mail, return receipt requested, postage prepaid.
Section 16. Term. This Agreement shall terminate upon the final, proper and complete distribution of the Escrow Property in accordance with the terms hereof; provided, that Purchaser’s obligations under Section 13 hereof shall survive any termination of this Agreement.
Section 17. Entire Agreement. The terms and provisions of this Agreement (including the Exhibits hereto, which are hereby incorporated by reference herein) constitute the entire agreement between the Escrow Agent and the other parties hereto with respect to the subject matter hereof. Notwithstanding the foregoing, as between Purchaser and the Seller Representative, the terms of the Merger Agreement shall control and govern over the terms of this Agreement in the event of any conflict or inconsistency between this Agreement and the Merger Agreement. The actions of the Escrow Agent shall be governed solely by this Agreement.
Section 18. Amendment; Waiver. This Agreement may be amended or modified only by a written instrument duly signed by the parties hereto, and any provision hereof may be waived only by a written instrument duly signed by the party against whom enforcement of such waiver is sought.
Section 19. Severability. In the event that any provision of this Agreement or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other Persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.
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Section 20. Further Assurances. From time to time on and after the date hereof, the Purchaser Representative and the Seller Representative shall deliver or cause to be delivered to the Escrow Agent such further documents and instruments and shall do and cause to be done such further acts as the Escrow Agent shall reasonably request (it being understood that the Escrow Agent shall have no obligation to make any such request) to carry out more effectively the provisions and purposes of this Agreement, to evidence compliance herewith or to assure itself that it is protected in acting hereunder.
Section 21. Accounting. In the event of the resignation or removal of the Escrow Agent, upon the termination of this Agreement or upon demand at any time of either the Purchaser Representative or the Seller Representative under reasonable circumstances, the Escrow Agent shall render to the Purchaser Representative, the Seller Representative and the successor escrow agent (if any) an accounting (free of charge) in writing of the property constituting the Escrow Property.
Section 22. Interpretation. The parties acknowledge and agree that: (a) this Agreement is the result of negotiations between the parties and will not be deemed or construed as having been drafted by any one party, (b) each party and its counsel have reviewed and negotiated the terms and provisions of this Agreement (including any Exhibits attached hereto) and have contributed to its revision and (c) the rule of construction to the effect that any ambiguities are resolved against the drafting party will not be employed in the interpretation of this Agreement. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In this Agreement, unless the context otherwise requires: (i) words of the masculine, feminine or neuter gender will include the masculine, neuter or feminine gender, and words in the singular number or in the plural number will each include, as applicable, the singular number or the plural number; (ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity; (iii) reference to any law means such law as amended, modified codified or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder; (iv) any agreement or instrument defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement or instrument as from time to time amended, modified or supplemented, including by waiver or consent and references to all attachments thereto and instruments incorporated therein; (v) the term “or” means “and/or”; (vi) the words “herein, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; (vii) the words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation”; (viii) any reference herein to “dollars” or “$” shall mean United States dollars; and (ix) reference to any Section or Exhibit means such Section hereof or Exhibit hereto.
Section 23. Successors and Assigns. This Agreement and the rights and obligations hereunder may not be assigned without the prior written consent of each of the parties hereto and any purported assignment without such consent shall be null and void ab initio; provided, however, that (a) if the Seller Representative is replaced in accordance with the terms of the Merger Agreement, the replacement Seller Representative shall automatically become a party to this Agreement as if it were the original Seller Representative hereunder upon providing (i) written notice to the Escrow Agent and Purchaser of such replacement and accepting its rights and obligations under this Agreement and (ii) the Escrow Agent with the documentation referenced in Section 28 hereof from such replacement Seller Representative and any replacement authorized individuals to act on behalf of the Seller Representative for purposes of Exhibit A, and (b) if the Purchaser Representative is replaced in accordance with the terms of the Merger Agreement, the replacement Purchaser Representative shall automatically become a party to this Agreement as if it were the original Purchaser Representative hereunder upon providing (i) written notice to the Escrow Agent and the Seller Representative of such replacement and accepting its rights and obligations under this Agreement and (ii) the Escrow Agent with the documentation referenced in Section 28 hereof from such replacement Purchaser Representative and any replacement authorized individuals to act on behalf of Purchaser or the Purchaser Representative for purposes of Exhibit A This Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.
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Section 24. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the part of any party hereto in the exercise of any right hereunder will impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement herein, nor will any single or partial exercise of any such right preclude any other (or further) exercise thereof or of any other right. All rights and remedies existing under this Agreement are cumulative to, and not exclusive to or exclusive of, any rights or remedies otherwise available to a party hereunder.
Section 25. Governing Law; Venue. The terms and provisions of this Agreement shall be construed and enforced in accordance with the laws of the State of New York without reference to its conflict of law provisions. Subject to Section 14, each of the parties hereto irrevocably consents to the exclusive jurisdiction and venue of any state or federal court located in New York County, New York (or in any court in which appeal from such courts may be taken) in connection with any matter based upon or arising out of this Agreement or the matters contemplated herein, agrees that process may be served upon them in any manner authorized by the laws of the State of New York for such Persons and waives and covenants not to assert or plead any objection which they might otherwise have to such jurisdiction, venue and such process.
Section 26. Waiver of Jury Trial. EACH PARTY HEREBY WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY LITIGATION, CLAIM, CAUSE OF ACTION OR OTHER LEGAL PROCEEDING BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES HERETO AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE PARTIES HERETO EACH AGREE THAT ANY SUCH LITIGATION, CLAIM, CAUSE OF ACTION OR OTHER LEGAL PROCEEDING SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES HERETO FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
Section 27. Counterparts. This Agreement may be executed simultaneously in two or more counterparts (including by facsimile or other electronic transmission), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
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Section 28. U.S. Patriot Act. Purchaser and the Seller Representative agree to provide the Escrow Agent with the information reasonably requested by the Escrow Agent to verify and record Purchaser’s and the Seller Representative’s respective identities pursuant to the Escrow Agent’s procedures for compliance with the U.S. Patriot Act and any other applicable laws.
Section 29. Representations of the Parties. Each of the parties hereto hereby represents and warrants that as of the date hereof: (a) it has the power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and all such actions have been duly and validly authorized by all necessary proceedings; and (b) this Agreement has been duly authorized, executed and delivered by it, and constitutes a legal, valid and binding agreement of it.
{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS}
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first written above.
Purchaser: | ||
TENZING ACQUISITION CORP. | ||
By: | /s/ Rahul Nayar | |
Name: Rahul Nayar | ||
Title: Chief Executive Officer | ||
The Purchaser Representative: | ||
TENZING LLC, solely in the capacity under the Merger Agreement as the Purchaser Representative | ||
By: | /s/ Rahul Nayar | |
Name: Rahul Nayar | ||
Title: Managing Member | ||
The Seller Representative: | ||
/s/ Laxminarayan Bhat | ||
Laxminarayan Bhat, solely in the capacity under the Merger Agreement as the Seller Representative | ||
The Escrow Agent: | ||
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as escrow agent | ||
By: | /s/ Isaac J. Kagan | |
Name: Isaac J. Kagan | ||
Title: Vice President |
[Signature Page to Escrow Agreement]
EXHIBIT A
AUTHORIZED SIGNERS
Purchaser:
Individuals authorized by the Purchaser Representative:
Name | Telephone Number | Specimen Signature | ||
1. | ||||
2. | ||||
3. |
Seller Representative:
Name | Telephone Number | Specimen Signature | ||
1. Laxminarayan Bhat |
EXHIBIT B
FEE INFORMATION
14
Exhibit 21.1
SUSIDIARIES OF REVIVA PHARMACEUTICALS HOLDINGS, INC.
Name of Organization | Jurisdiction | |
Reviva Pharmaceuticals, Inc. | Delaware | |
Reviva Pharmaceuticals India Pvt. Ltd. | India | |
Exhibit 23.1
Armanino LLP | |
12657 Alcosta Boulevard | |
Suite 500 | |
San Ramon, CA 94583-4600 | |
925 790 2600 main | |
925 790 2601 fax | |
armaninoLLP.com |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in the exhibit to Form 8-k of our audit report dated July 23, 2020 relating to the consolidated financial statements of Reviva Pharmaceuticals, Inc. and Subsidiary for the two years ended December 31, 2019, which report appears in the exhibit to Form 8-k.
Our report dated July 23, 2020 contains an explanatory paragraph that states that Reviva Pharmaceuticals, Inc. and Subsidiary has incurred recurring losses and negative cash flows from operations from inception, has a stockholders’ deficit of $54,526,705 as of December 31, 2019, and will require substantial additional financing to continue to fund its research and development activities that raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ ArmaninoLLP | |
ArmaninoLLP | |
December 18, 2020 | San Ramon, California |
Exhibit 99.1
Reviva Pharmaceuticals, Inc.
Consolidated Financial Statements
December 31, 2019 and 2018
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 2 | |
Consolidated Balance Sheets | 4 | |
Consolidated Statements of Operations | 5 | |
Consolidated Statements of Stockholders’ Deficit | 6 | |
Consolidated Statements of Cash Flows | 7 | |
Notes to Consolidated Financial Statements | 8 |
1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of Reviva Pharmaceuticals Inc.
Cupertino, California
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Reviva Pharmaceuticals Inc. and subsidiary (collectively the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the consolidated results of its operations and its cash flows for each of the two years in the two-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
The Company’s ability to continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company’s significant recurring losses and accumulated deficit raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
2 |
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.We believe that our audits provide a reasonable basis for our opinion.
Emphasis of Matter- COVID-19
As described in Note 10 to the consolidated financial statements, the World Health Organization has declared COVID-19 a global pandemic leading to broader global economic uncertainties. The measures taken by government agencies to slow the progression of the disease is uncertain and may adversely affect the Company’s result of operations, cash flow and financial position. Our opinion is not modified with respect to this matter.
We have served as the Company’s auditor since 2016.
/s/ ArmaninoLLP
San Ramon, California
July 23, 2020
3 |
REVIVA PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2019 and 2018
2019 | 2018 | |||||||
ASSETS | ||||||||
Cash | $ | 193 | $ | 118,637 | ||||
Property and equipment, net | 591 | 1,236 | ||||||
Non-current assets | 1,816 | 1,816 | ||||||
Total assets | $ | 2,600 | $ | 121,689 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Liabilities | ||||||||
Accounts payable | $ | 224,543 | $ | 66,371 | ||||
Accrued expenses and other current liabilities | 2,722,875 | 1,046,895 | ||||||
Contingent warrant, net | 101,525 | 107,934 | ||||||
Convertible promissory notes, net | 3,765,087 | 4,865,087 | ||||||
Total liabilities | 6,814,030 | 6,086,287 | ||||||
Stockholders’ deficit | ||||||||
Preferred stock, par value $0.0001, 13,625,237 shares authorized, 5,802,350 undesignated | ||||||||
Series 1 convertible preferred stock, 625,237 shares designated; 625,237 shares issued and outstanding (liquidation preference of $3,069,913) | 3,069,913 | 3,069,913 | ||||||
Series 2 convertible preferred stock, 1,245,889 shares designated; 1,245,889 shares issued and outstanding (liquidation preference of $7,624,841) | 7,624,841 | 7,624,841 | ||||||
Series 3 convertible preferred stock, 951,761 shares designated; 951,761 shares issued and outstanding (liquidation preference of $12,039,777) | 7,973,720 | 7,973,720 | ||||||
Series 4 convertible preferred stock, 5,000,000 shares designated; 1,029,994 shares issued and outstanding (liquidation preference $15,861,892) | 10,401,500 | 10,401,500 | ||||||
Common stock, par value of $0.0001; 35,000,000 shares authorized; 18,180,748 shares issued and outstanding | 618 | 618 | ||||||
Additional paid-in capital | 18,644,683 | 18,644,683 | ||||||
Accumulated deficit | (54,526,705 | ) | (53,679,873 | ) | ||||
Total stockholders’ deficit | (6,811,430 | ) | (5,964,598 | ) | ||||
Total Liabilities and Stockholders’ deficit | $ | 2,600 | $ | 121,689 |
The accompanying notes are an integral part of these consolidated financial statements.
4 |
REVIVA PHARMACEUTICALS, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2019 and 2018
2019 | 2018 | |||||||
Operating expenses | ||||||||
Research and development | $ | 195,744 | $ | 946,301 | ||||
General and administrative | 181,116 | 175,579 | ||||||
Total operating expenses | 376,860 | 1,121,880 | ||||||
Loss from operations | (376,860 | ) | (1,121,880 | ) | ||||
Other income (expense) | ||||||||
Interest income | 201 | 1,365 | ||||||
Interest expense | (469,373 | ) | (559,040 | ) | ||||
Total other income (expense) | (469,172 | ) | (557,675 | ) | ||||
Loss before provision for income taxes | (846,032 | ) | (1,679,555 | ) | ||||
Provision for income taxes | 800 | 800 | ||||||
Net loss | $ | (846,832 | ) | $ | (1,680,355 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
5 |
REVIVA PHARMACEUTICALS, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the Years Ended December 31, 2019 and 2018
Series 1,2,3,4 Convertible Preferred Stock |
Common Stock |
Additional Paid-in Capital
|
Accumulated Deficit
|
Total Stockholders’ Deficit
|
||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance, December 31, 2017 | 3,852,881 | $ | 29,069,974 | 18,180,748 | $ | 618 | $ | 18,623,629 | $ | (51,999,518 | ) | $ | (4,305,297 | ) | ||||||||||||||
Stock-based compensation expense | — | — | — | — | 21,054 | — | 21,054 | |||||||||||||||||||||
Net loss | — | — | — | — | — | (1,680,355 | ) | (1,680,355 | ) | |||||||||||||||||||
Balance, December 31, 2018 | 3,852,881 | 29,069,974 | 18,180,748 | 618 | 18,644,683 | (53,679,873 | ) | (5,964,598 | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | (846,832 | ) | (846,832 | ) | |||||||||||||||||||
Balance, December 31, 2019 | 3,852,881 | $ | 29,069,974 | 18,180,748 | $ | 618 | $ | 18,644,683 | $ | (54,526,705 | ) | $ | (6,811,430 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
6 |
REVIVA PHARMACEUTICALS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2019 and 2018
2019 | 2018 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (846,832 | ) | $ | (1,680,355 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities | ||||||||
Depreciation | 645 | 1,017 | ||||||
Amortization of warrant expenses | — | 34,895 | ||||||
Amortization of debt discount | — | 16,701 | ||||||
Stock-based compensation expense | — | 21,054 | ||||||
Mark-to-market of warrant liability | (6,409 | ) | — | |||||
Changes in operating assets and liabilities | — | — | ||||||
Non-current assets | — | 7,262 | ||||||
Accounts payable | 158,172 | (6,654 | ) | |||||
Accrued interest | 226,312 | 542,339 | ||||||
Accrued expenses and other current liabilities | 249,668 | (7,622 | ) | |||||
Net cash flow provided by (used in) operating activities | (218,444 | ) | (1,071,363 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds from issuance of convertible promissory notes | 100,000 | 175,000 | ||||||
Net cash provided by (used in) financing activities | 100,000 | 175,000 | ||||||
Net decrease in cash | (118,444 | ) | (896,363 | ) | ||||
Cash, beginning of year | 118,637 | 1,015,000 | ||||||
Cash, end of year | $ | 193 | $ | 118,637 | ||||
Supplementary information: | ||||||||
Cash paid for taxes | $ | 800 | $ | 800 | ||||
Non cash transactions: | ||||||||
Conversion of convertible promissory notes into accrued legal liability | $ | 1,200,000 | — | |||||
Discount due to warrants issued with debt | — | $ | 34,895 | |||||
Debt discount on issuance of convertible promissory notes | — | $ | 16,701 |
The accompanying notes are an integral part of these consolidated financial statements.
7 |
REVIVA PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 2019 and 2018
1. NATURE OF OPERATIONS
Reviva Pharmaceuticals, Inc. (the “Parent”) was incorporated in the state of Delaware and registered in California, and commenced operations on May 1, 2006 and its Indian subsidiary, Reviva Pharmaceuticals India Pvt. Ltd., was incorporated in 2014 (referred herein as “the Company”). The Company is an emerging research based pharmaceutical company focused on developing a portfolio of internally discovered next generation safe and effective therapeutic drugs by using an integrated chemical genomics technology platform and proprietary chemistries. The Company is currently focused on developing drugs for the central nervous system (CNS), cardiovascular (CV), metabolic and inflammatory diseases.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes are the representations of Company’s management, who is responsible for their integrity and objectivity.
Principals of consolidation
The accompanying consolidated financial statements include the accounts of the Reviva Pharmaceuticals, Inc. and its wholly owned subsidiary Reviva Pharmaceuticals, India Pvt Ltd. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. All transactions and balances between the parent and its subsidiary have been eliminated in consolidation.
Going concern
The Company has incurred operating losses and negative cash flows since inception. The Company has a limited history of operations and its prospects are subject to risks, expenses, and uncertainties frequently encountered by companies in pharmaceutical industry. These risks include, but are not limited to, the uncertainty of successfully developing its products, availability of additional financing, obtaining regulatory approvals and the uncertainty of achieving future profitability. The Company has a limited operating history and has yet to generate material revenues from commercial operations. To date, the Company has been funded primarily by equity financings and convertible promissory notes. The Company’s ultimate success is dependent upon its ability to raise additional capital, to obtain necessary regulatory approvals for its products, and to successfully develop and market its products.
The accompanying consolidated financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. As of December 31, 2019, the Company had had a cash and cash equivalents of $193. During the year ended December 31, 2019, the Company incurred a net loss of $846,832 and had negative cash flows from operating activities of $218,444, net of accrued legal liability due to settlement of convertible notes with a face value of $1,200,000. In addition, the Company had an accumulated deficit of $54,526,705 at December 31, 2019. Management intends to continue its clinical trials and research efforts and to finance operations of the Company through convertible promissory notes or equity financings. There can be no assurance that the Company will be successful in obtaining additional financing on favorable terms or at all.
These matters raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
8 |
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the reporting periods covered by the financial statements and accompanying notes. Significant areas requiring the use of management estimates include, but are not limited to, valuation of intangible assets, depreciative and amortization useful lives, assumptions used to calculate the fair value of the contingent share consideration, stock based compensation, beneficial conversion features, warrant values, deferred taxes and the assumptions used to calculate derivative liabilities. Actual results could differ materially from such estimates under different assumptions or circumstances.
Concentration of credit risk and other risks and uncertainties
Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash. Substantially, all the Company’s cash are held in demand deposit form by one financial institution. The Company has not experienced any losses on its deposits of cash.
The Company is subject to all of the risks inherent in an early stage company developing new pharmaceutical products. These risks include, but are not limited to, limited management resources, dependence upon medical acceptance of the product in development, regulatory approvals, successful clinical trials, availability and willingness of patients to participate in human trials, and competition in the pharmaceutical industry. The Company’s operating results may be materially affected by the foregoing factors.
Cash
The Company considers all highly liquid investments purchased with an original maturity at the date of purchase of three months or less to be cash equivalents. As of December 31, 2019, and 2018, the Company’s cash was maintained in demand deposit forms at two financial institutions. Deposits in financial institutions may, from time to time, have exceed federally insured limits.
Property and equipment
The Company capitalizes expenditures related to property and equipment, subject to a minimum rule, that have a useful life greater than one year for: (1) assets purchased; (2) existing assets that are replaced, improved or the useful lives have been extended. Acquisitions of new assets, additions, replacements and improvements (other than land) costing less than the minimum rule in addition to maintenance and repair costs are expensed as incurred. Assets classified as property and equipment are stated at cost less accumulated depreciation and are depreciated using the straight-line method over the estimated useful lives of the assets, generally between three and five years, or the lease term of the respective assets, whichever is less. When assets are retired or otherwise disposed, their original cost and related accumulated depreciation are removed from the consolidated balance sheet, and any resulting gain or loss is reflected in related operating expense.
Leases
In February 2016, the FASB issued ASU 2016-2 for leases. The ASU introduces a new lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in the current accounting guidance as well as the FASB’s new revenue recognition standard. However, the ASU eliminates the use of bright-line tests in determining lease classification as required in the current guidance. The ASU also requires additional qualitative disclosures along with specific quantitative disclosures to better enable users of consolidated financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted this standard and determined that there is no material impact that the new accounting guidance will have on its financial statements and related disclosures.
Research and development costs
Research and development costs are charged to operating expenses as incurred. Research and development costs include, but are not limited to, payroll and personnel expenses, laboratory supplies, consulting costs, and allocated overhead, including rent, equipment depreciation, and utilities.
9 |
General and Administrative costs
General and administrative costs are charged to operating expenses as incurred. General and administrative costs include, but are not limited to, payroll and personnel expenses, travel and entertainment, consulting costs, conference and meeting costs, legal expenses and allocated overhead, including rent depreciation, and utilities.
Income taxes
The Company utilizes FASB ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.
The Company accounts for income taxes using the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.
In evaluating the ability recover its deferred income tax assets, the Company considers all available positive and negative evidence, including its opening results, ongoing tax planning, and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. The Company generated a deferred tax asset through net operating loss carry-forward. However, a valuation allowance of 100% has been established due to the uncertainty of the Company’s realization of the net operating loss carry forward prior to its expiration. In the event the Company determines that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount, it would make an adjustment to the valuation allowance that would reduce the provision for income taxes. Conversely, in the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made.
Stock based compensation
Stock-based compensation is calculated based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC Topic 505, subtopic 50,
Equity-Based Payments to Non-Employees based upon the fair-value of the underlying instrument.
The fair value of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. The determination of the fair value of stock-based payment awards on the date of grant is affected by the stock price as well as assumptions regarding a number of complex and subjective variables. These variables include expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rates, and expected dividends as under:
• | Expected term — The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is determined using the simplified method. |
• | Expected volatility — Expected volatility is estimated using comparable public companies’ volatility for similar terms. |
• | Expected dividend — The Black-Scholes-Merton valuation model calls for a single expected dividend yield as an input. The Company has never paid dividends and has no plans to pay dividends. |
10 |
• | Risk-free interest rate — The risk-free interest rate used in the Black-Scholes-Merton valuation method is based on the U.S. Treasury zero-coupon issues in effect at the time of grant for periods corresponding with the expected term of option. |
As of January 1, 2019, the Company adopted ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting of share-based payment awards issued to employees and nonemployees. The adoption did not materially impact our consolidated financial statements. The Company recognizes fair value of stock options granted to non-employees as a stock-based compensation expense over the period in which the related services are received. Non-employee option grants that do not vest immediately upon grant are recorded as an expense over the vesting period. At the end of each financial reporting period, the value of these options, as calculated using the Black-Scholes-Merton option-pricing model, is determined, and compensation expense recognized during the period is adjusted accordingly.
Fair Value of Financial Instruments
Due to their short maturities, the carrying amounts for cash and cash equivalents, accounts payable, and accrued expenses approximate their fair value. Non-current assets are primarily related to certain advances with carrying values that approximate their fair values.
Fair Value Measurements of Warrants
ASC 820 “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The three levels of the fair value hierarchy under ASC 820 are described below:
• | Level 1 — Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. |
• | Level 2 — Directly or indirectly observable inputs as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument. |
• | Level 3 — Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. |
In determining the fair value of warrants, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.
11 |
Beneficial Conversion Features
In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options” the Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt or preferred stock instruments that have conversion features at fixed rates that are in-the-money when issued. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is generally calculated at the commitment date as the difference between the conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. If certain other securities are issued with the convertible security, the proceeds are allocated among the different components. The portion of the proceeds allocated to the convertible security is divided by the contractual number of the conversion shares to determine the effective conversion price, which is used to measure the BCF. The effective conversion price is used to compute the intrinsic value. The value of the BCF is limited to the basis that is initially allocated to the convertible security.
3. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consist of the following:
2019 | 2018 | |||||||
Computer equipment | $ | 32,500 | $ | 32,500 | ||||
Furniture and fixtures | 9,208 | 9,208 | ||||||
Accumulated depreciation | (41,117 | ) | (40,472 | ) | ||||
Property and equipment, net | $ | 591 | $ | 1,236 |
Depreciation expense for the years ended December 31, 2019 and 2018 was $645 and $1,017 respectively.
4. EMPLOYEE BENEFIT PLAN
In 2014, the Company implemented a tax deferred savings plan, commonly referred to as a 401(k) plan. Employee’s contributions are withheld from standard payroll checks and are automatically withdrawn from the Company checking account and deposited into individual employee retirement accounts a few days following each payroll period. Employees can defer or contribute the statutory legal limits. There has been no Company matching of employee contributions to the plan through December 31, 2019.
5. COMMITMENTS AND CONTINGENCIES
Clinical trials
Since 2010, the Company has entered into multiple clinical trial agreements with medical institutions in the United States, Europe and Asia for the purpose of enrolling patients into various clinical trials. The agreements are substantially similar by trial and include a detailed listing of the clinical trial services for which the Company will pay, how much will be paid for each service, a set-up charge (if any), Investigational Review Board fees, contractual term, and other provisions. The clinical trial services provided by each site generally include the screening of prospective patients and, for those patients to be enrolled in the study, administration of the Company’s investigation drug according to the trial protocol, any required hospitalization, ancillary medical supplies, and 2-week patient follow-up. Further, each agreement requires the Company to indemnify each respective clinical site against any and all liability, loss, or damage it may suffer as a result of third-party claims; the Company maintains general product liability insurance of not less than $5 million in conjunction with this indemnification. The agreements may be terminated upon 30 days’ written notice, subject to conditions of paying all liabilities incurred through the date of termination. Additionally, with each screened patient, the Company incurs expense with other entities engaged to provide independent review of patient medical records.
Indemnification
From time to time, in its normal course of business, the Company may indemnify other parties, with whom it enters into contractual relationships, including lessors and parties to other transactions with the Company. The Company may agree to hold other parties harmless against specific losses, such as those that could arise from a breach of representation, covenant or third-party infringement claims. It may not be possible to determine the maximum potential amount of liability under such indemnification obligations due to the unique facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Historically, there have been no such indemnification claims. The Company has also indemnified its directors and executive officers, to the extent legally permissible, against all liabilities reasonably incurred in connection with any action in which such individual may be involved by reason of such individual being or having been a director or executive officer.
12 |
Operating Leases
The Company has adopted ASC 842 to our existing leases. The Company has elected to apply the short-term lease exception to leases of one year or less. Presently, the Company has a single twelve-month lease on its Corporate Office located at 19925 Stevens Creek Blvd., Suite 100, Cupertino, CA 95014. The monthly lease payment is approximately $1,500 and the lease expires on January 31, 2021 at which point the Company will renew for another 12-month term.
6. CONVERTIBLE PROMISSORY NOTES
From June 2016 through April 2017, the Company issued an aggregate of $4,795,088 in convertible promissory notes to various investors (“2016 Notes”). The Company received $4,647,235 net of placement fees of $147,853. Upon next equity financing close of at least $5,000,000, (“Qualified Financing”), the 2016 Notes can be converted if the entire balance has not been paid, at which time the then outstanding balance and accrued interest shall automatically be cancelled and converted into that number of conversion shares at a price equal to the lower of either (i) a 20% discount to the price paid by investors in the qualified financing (“Qualified Financing Event Share Price”), or (ii) an $85,000,000 pre-offering valuation divided by the number of shares of the Company’s common stock outstanding on a fully diluted basis immediately prior to the closing of such a qualified financing event.
Additionally, the Company is obliged to issue a warrant for 38,200 shares of common stock at an exercise price equal to the Qualified Financing Event Share Price and a maturity of 5-years (“2016 Contingent Warrants”) to the broker/placement agent. Placement fees and fair value of the 2016 Contingent Warrants were recognized as a debt discount and amortized over the initial 12-month term of the 2016 Notes.
The interest was initially accrued at 8% per annum and was scheduled to be paid in cash at maturity date. The 2016 Notes were scheduled to mature twelve months from the dates of issue. The 2016 Notes were neither converted nor paid back, and therefore have been in default since 2017 and are accruing interest at a default rate of 12% per annum. As of December 31, 2019, the Company owes $3,490,087 and $1,192,496 as principle and accrued interest, respectively.
The stated conversion term for the 2016 Notes creates a contingent BCF that is not measurable due to a contingency in the conversion mechanics that would allow a conversion to take place at the lower of either a 20% discount to the Qualified Financing Event Share Price or a $85 million valuation. Consequently, the BCF will be recognized as additional interest expense when the conversion takes place.
From November 2018 through January 2019, the Company issued an aggregate of $275,000 in convertible promissory notes to various investors (“2018 notes”). Upon a Qualified Financing, the 2018 Notes can be converted if the entire balance has not been paid. The principal and accrued interest of the 2018 notes shall automatically be converted into that number of shares at a price equal to a 20% discount to the Qualified Financing event price (price paid by investors in the Qualified Financing).
Additionally, the holders of the 2018 notes are also eligible for an equivalent number of warrants (i.e. as the number of converted shares), to purchase common stock (“2018 Contingent Warrants”) with a strike price equal to the Qualified Financing event price with a maturity of 5 years from the date of such a conversion event.
Interest on the 2018 Notes accrues at 8% per annum and was scheduled to be paid in cash at maturity unless converted. The 2018 Notes were scheduled to mature six months from the date of issue with an option to extend the maturity by an additional six months with certain additional conversion privileges. Pursuant to the option, the maturity dates of all 2018 notes were extended an additional six months. The 2018 Notes were neither converted nor paid back and continue to accrue interest at a default rate of 8% per annum.
13 |
The Company is obliged to issue an additional 82,500 shares of common stock (“2019 Contingent stock”) the 2018 note holders when the 2018 notes are converted into preferred shares in a Qualified Financing. As of December 31, 2019, the Company owes $275,000 and $23,293 in principal and accrued interest. The stated conversion term for the 2018 Notes creates a contingent BCF of $68,750 which will be recognized as additional interest expense when the conversion takes place.
A summary table of the convertible notes by year is presented below:
Year | Note Description | Amount | ||||
2016 | 2016 Notes | $ | 2,120,087 | |||
2017 | 2016 Notes | 2,570,000 | ||||
2018 | 2018 Notes | 175,000 | ||||
2019 | 2018 Notes | 100,000 | ||||
2019 | 2016 Notes – reclass to Accrued Legal liability (see Note 10) | (1,200,000 | ) | |||
Total Balance | $ | 3,765,087 |
7. INCOME TAXES
The Company’s provision for income taxes differs from the amount computed by applying the statutory U.S. federal income tax rate to loss before taxes as follows for the years ending December 31, 2019 and December 31, 2018:
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
Statutory federal income tax | $ | (177,562 | ) | $ | (352,548 | ) | ||
State income taxes, net of federal tax benefits | (79,258 | ) | 800 | |||||
Stock based compensation | 27,940 | — | ||||||
Other permanent differences | 474 | 2,280 | ||||||
Valuation allowance | 229,206 | 350,268 | ||||||
Tax provision | $ | 800 | $ | 800 |
Deferred tax assets and liabilities at December 31, 2019 and December 31, 2018 consist of the following:
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
NOL carryforwards | $ | 8,711,765 | $ | 8,479,781 | ||||
Credit carryforwards | — | — | ||||||
Accruals and reserves | 14,402 | 9,800 | ||||||
Stock compensation | 83,472 | 90,581 | ||||||
Fixed assets/capitalized start-up costs | 3,589 | 3,722 | ||||||
Total deferred tax assets | 8,813,228 | 8,583,884 | ||||||
Valuation allowance | (8,813,228 | ) | (8,583,884 | ) | ||||
Net deferred tax assets | — | — |
Realization of the deferred tax asset is dependent upon future taxable income, if any, the amount and time of which are uncertain. Accordingly, a full valuation allowance has been established, as the generation of future taxable income is uncertain.
As of December 31, 2019, and December 31, 2018, the Company had federal net operating loss carryforwards of $37,861,540 and 37,017,700. As of December 31, 2019, and December 31, 2018, the Company had California net operating loss carryforwards of $10,894,690 and $10,110,300. If unused, the federal and state net operating loss carryforwards begin expiring in 2030.
Utilization of the net operating loss carry forward may be subject to an annual limitation due to the ownership percentage change limitations provided by the Section 382 of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of the net operating loss before utilization. As of December 31, 2019, no complete study has been completed.
14 |
The company files US and state income tax returns with varying statues of limitations. The federal statue remains open for three years after a return is filed, however is re-opened if tax attributes from that year are used. The company is not currently under audit.
As of December 31, 2019, the Company had $0 in unrecognized tax benefits and does not anticipate any significant changes to its unrecognized tax benefits within the next 12 months. The company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. There was no interest and penalties accrued as of December 31, 2019 and 2018.
Balance as of December 31, 2018 | $ | 0 | ||
Gross amount of increases in unrecognized tax benefits for tax positions taken in current year | — | |||
Gross amount of decreases in unrecognized tax benefits for tax positions taken in prior year | — | |||
Balance as of December 31, 2019 | $ | 0 |
The Company does not anticipate that its total unrecognized tax benefits will significantly change due to settlement of examination or the expiration of statute of limitations during the next 12 months.
The Company has not provided for U.S. income taxes on undistributed earnings of its foreign subsidiaries, because it intends to permanently re-invest these earnings outside the United States. Undistributed earnings of foreign subsidiaries is immaterial for all periods presented.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law. Certain provisions of the CARES Act impact the 2019 income tax provision computations of the Company and will be reflected in the first quarter of 2020, or the period of enactment. The CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020. The modifications to Section 163(j) increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. As the company is in losses, there is no modification for the current year.
8. STOCKHOLDERS’ DEFICIT
Convertible preferred stock
• | Voting — The holders of each share of the Series 1, 2, 3, and 4 convertible preferred stock are entitled to vote, together with the holders of common stock, on all matters submitted to the shareholders for a vote. Each preferred shareholder is entitled to the number of votes equal to the number of shares of common stock into which each preferred share is convertible at the time of such vote. |
• | Dividends — The holders of shares of the Series 1, 2, 3, and 4 convertible preferred stock are not entitled to receive dividends. |
• | Conversion — Each share of Series 1, 2, 3, and 4 convertible preferred stock is convertible into common stock, at the option of the holder, according to a conversion ratio. The initial conversion price of the Series 1, 2, 3, and 4 convertible preferred stock is $1.57, $1.81, $3.92, and $4.77 per share, respectively, subject to adjustment in accordance with anti-dilution provisions contained in the Company’s certificate of incorporation, as amended. The conversion ratios are 1.0:1.0 for Series 1, 2, 3, and 4. Each share of Series 1, 2, 3, and 4 will automatically convert into shares of common stock at the then-effective conversion price for each such share immediately upon the earlier of (i) the Company’s sale of its common stock in a firm commitment of an underwritten public offering pursuant to a registration statement under the Securities Act of 1933, as amended, the public offering price of which is not less than the public offering price per share of $5.00, and which results in aggregate gross proceeds to the Company of $25,000,000 or (ii) the date specified by the written consent or agreement of at least a majority of the holders of the then- outstanding shares of convertible preferred stock. |
15 |
• | Liquidation preference — In the event of any liquidation, dissolution, or winding up of the Company, either voluntary or involuntary, the holders of Series 1, 2, 3, and 4 are entitled to receive, on a pari-passu basis and prior and in preference to any distribution to the holders of common stock based on the available funds will be distributed ratably to the holders of convertible preferred stock in proportion to the preferential amount each such holder is otherwise entitled to receive. Any remaining assets of the Company will be distributed ratably among the holders of common stock. |
Common stock
Each share of common stock is entitled to one vote. The holders of common stock, voting as a class, are entitled to elect one member to the Company’s board of directors. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when and if declared by the board of directors, subject to the prior rights of holders of all series of preferred stock outstanding.
The Company has 18,180,748 shares of common stock issued and outstanding and has reserved additional shares of common stock for issuance for the following purposes at December 31, 2019:
Conversion of Series 1 convertible preferred stock | 625,237 | |||
Conversion of Series 2 convertible preferred stock | 1,245,889 | |||
Conversion of Series 3 convertible preferred stock | 951,761 | |||
Conversion of Series 4 convertible preferred stock | 1,029,994 | |||
2016 Contingent Warrants | 38,200 | |||
2019 Contingent Stock | 82,500 | |||
Options to purchase common stock | 741,666 | |||
Shares available for grant | 2,258,334 | |||
6,973,581 |
The Company expects to issue preferred stock and contingent warrants on completion of Qualified Financing Event with respect to conversion of 2016 Notes and 2018 Notes. These preferred stock and contingent warrants can be converted to common stock under certain circumstances as detailed above. The Company’s available authorized preferred stock and common stock are sufficient to accommodate these conversions.
Common stock warrants
During 2014, in connection with the 2014 Notes, the Company issued warrants to purchase 138,500 shares of common stock at $5.00 per share to certain investors (“2014 Warrants”). The 2014 Warrants were exercisable immediately and expired in 2019. The Company estimated the fair value of the 2014 Warrants to be $426,383, using the Black-Scholes- Merton option-pricing model with the following assumptions:
Assumptions | ||||
Common stock value | $ | 5.00 | ||
Expected life | 4.5 – 4.7 years | |||
Risk-free interest rate | 1.33 – 1.52 | % | ||
Expected dividend yields | 0 | % | ||
Volatility | 86.5 | % |
16 |
Using the relative fair values allocation, the 2014 Warrants value of $407,578 was recorded as a discount to the 2014 Notes and an increase to additional paid-in capital. Upon conversion of the 2014 Notes into Series 4 Preferred Stock in June 2014, the corresponding debt discount was immediately amortized to interest expense.
Contingent Warrants
During 2017, in connection with the 2016 Notes, the Company was contractually obliged to issue (“2016 Contingent warrants”) to purchase 38,200 shares of common stock and by agreement these warrants expire on May 31, 2022.
The Company analyzed the 2016 Contingent Warrants and determined that they were to be classified as a liability, which are required to be re-measured at fair value (“marked-to-market”) each reporting period.
The Company estimated the fair value of the 2016 Contingent Warrants using the Black-Scholes- Merton option-pricing model with the following assumptions:
2018 | 2019 | |||||||
Common stock value | $ | 3.86 | $ | 3.63 | ||||
Expected life | 3 years | 3 years | ||||||
Risk-free interest rate | 1.76 | % | 1.76 | % | ||||
Expected dividend yields | 0 | % | 0 | % | ||||
Volatility | 126 | % | 126 | % |
The value of the 2016 Contingent Warrants was recognized as a debt discount and amortized over the initial 12-month term of the 2016 Notes.
The following table summarizes fair value measurements by level at December 31, 2019 for assets and liabilities measured at fair value on a recurring basis:
Total
Value |
Level 1 | Level 2 | Level 3 | ||||||||
2016 Contingent Warrants | $ | 101,525 | $ | 101,525 |
The following table summarizes fair value measurements by level at December 31, 2018 for assets and liabilities measured at fair value on a recurring basis:
Total
Value |
Level 1 | Level 2 | Level 3 | ||||||||
2016 Contingent Warrants | $ | 107,934 | $ | 107,934 |
In connection with the 2018 notes, the Company will issue 2018 Contingent Warrants equivalent to the number of converted shares to be determined at the Qualified Financing Event with a strike price equal to the qualified financing event price and with a maturity of 5 years from the date of such a conversion event.
A summary of warrant activity for the periods ended December 31, 2019 and 2018 is as follows:
Number of
Shares |
Range of
Exercise Prices |
Weighted-
Average Exercise Prices |
Weighted-
Average Remaining Life |
|||||||||||||
Outstanding at January 1, 2018 | 186,700 | $ | 3.86 – 5.00 | $ | 4.77 | 1.5 | ||||||||||
Cancelled | (10,000 | ) | 5.00 | 5.00 | — | |||||||||||
Outstanding at December 31, 2018 | 176,700 | $ | 3.86 – 5.00 | $ | 4.75 | 0.5 | ||||||||||
Cancelled | (138,500 | ) | 5.00 | 5.00 | — | |||||||||||
Outstanding at December 31, 2019 | 38,200 | $ | 3.86 | $ | 3.86 | 3.5 |
17 |
9. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION
Option activity
In 2006, the Company established its 2006 Equity Incentive Plan (the “Plan”), which provides for the granting of stock options and stock purchase rights to employees and consultants of the Company. Options granted under the Plan may be either incentive stock options (ISOs) or nonqualified stock options (NSOs). ISOs may be granted only to Company employees (including officers and directors who are also employees). NSO may be granted to Company employees and consultants.
Options under the Plan may be granted for periods of up to 10 years. The exercise price of an ISO and NSO shall not be less than 100% and 85% of the estimated fair value of the shares on the date of grant, respectively, as determined by the board of directors. The exercise price of an ISO and NSO granted to a 10% stockholder shall not be less than 110% of the estimated fair value of the shares on the date of grant, as determined by the board of directors. Options generally vest over four years whereas 25% vest upon the first anniversary of the issuance date and 1/48th per month there-after.
Under the Plan, in the event of the termination of a participant’s employment or the proposed transfer of such shares to a third party, the Company has the right to repurchase the stock under terms specified in the Plan agreement.
Activity under the stock option plan are as follows for the years ended December 31, 2019 and 2018:
Shares
available for Grant |
Number of
Shares Outstanding |
Weighted
average exercise price per share |
||||||||||
Balance, December 31, 2017 | 2,055,834 | 944,166 | $ | 2.24 | ||||||||
Options cancelled | 105,000 | (105,000 | ) | — | ||||||||
Balance, December 31, 2018 | 2,160,834 | 839,166 | $ | 2.34 | ||||||||
Options cancelled | 97,500 | (97,500 | ) | — | ||||||||
Balance, December 31, 2019 | 2,258,334 | 741,666 | $ | 2.34 | ||||||||
Vested, December 31, 2019 | — | 741,666 | $ | 2.43 | ||||||||
Vested and expected to vest, December 31, 2019 | — | 741,666 | $ | 2.43 |
Shares outstanding under the stock option plan are as follows as of December 31, 2019:
Options
Outstanding |
Exercise price
Per Share |
Weighted
average remaining contractual life (years) |
Shares
Exercisable |
Weighted
Average Exercise Prices |
||||||||||||||
190,000 | $ | 1.45 | 0.40 | 190,000 | $ | 1.45 | ||||||||||||
50,000 | $ | 1.57 | 1.67 | 50,000 | $ | 1.57 | ||||||||||||
320,000 | $ | 1.81 | 2.79 | 320,000 | $ | 1.81 | ||||||||||||
181,666 | $ | 4.77 | 4.18 | 181,666 | $ | 4.77 | ||||||||||||
741,666 | 2.44 | 741,666 | $ | 2.43 |
Stock-based compensation associated with awards to employees
During the years ended December 31, 2019 and 2018, the Company granted no stock options to employees.
During the years ended December 31, 2019 and 2018, stock-based employee compensation expense was $0 and $21,054, respectively, which was recorded as general and administrative expense. As of December 31, 2019, the Company had no unrecognized compensation expense, net of estimated forfeitures,related to stock option awards to employees. No income tax benefit has been recognized relating to stock-based compensation expense, and no tax benefits have been realized from exercised stock options.
18 |
10. SUBSEQUENT EVENTS
On January 2, 2020, there was a judgement issued by the District Court of Harris County, Texas, pursuant to an agreement reached between the Company and an investor in the 2016 Notes. Under the terms of the judgements, the Company is obligated to repay an investor of the 2016 Notes, the principal investment of $1,200,000, accrued interest of $242,000, and legal fees of $5,000. The $1,447,000 obligatory payment is currently accruing interest at 5.5% per annum.
Between March and May 2020, the Company received $610,000 in gross and net proceeds via a bridge loan whose terms are similar to the 2018 Notes.
On July 20, 2020, the Company entered into a definitive agreement and plan of merger for a business combination with Tenzing Acquisition Corp., a special purpose acquisition company incorporated in the British Virgin Islands (NASDAQ: TZAC).
As a result of the spread of the COVID-19 coronavirus, economic uncertainties have arisen which may impact operating activities, though such potential impact is unknown at this time. Management has determined that there are no other subsequent events to be reported.
The Company has evaluated subsequent events through July 23, 2020, the date the consolidated financial statements were available for general release, for appropriate accounting and financial statement disclosures.
19 |
Exhibit 99.2
Reviva Pharmaceuticals, Inc.
Condensed Consolidated Financial Statements
As of and for the Three and Nine Months ended
September 30, 2020 and 2019
(Unaudited)
Table of Contents
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) | 1 |
Condensed Consolidated Balance Sheets | 1 |
Condensed Consolidated Statements of Operations | 2 |
Condensed Consolidated Statements of Stockholders’ Deficit | 3 |
Condensed Consolidated Statements of Cash Flows | 4 |
Notes to Condensed Consolidated Financial Statements (UNAUDITED) | 5 |
Reviva Pharmaceuticals, Inc.
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets
September 30, 2020 (unaudited) |
December 31, 2019* | |||||||
ASSETS | ||||||||
Cash | $ | 353,258 | $ | 193 | ||||
Property and equipment, net | 107 | 591 | ||||||
Deferred Cost | 1,680,954 | - | ||||||
Non-current assets | 1,816 | 1,816 | ||||||
Total assets | $ | 2,036,155 | $ | 2,600 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
Liabilities | ||||||||
Accounts payable | $ | 1,461,099 | $ | 224,543 | ||||
Accrued expenses and other current liabilities | 3,170,048 | 2,722,875 | ||||||
Contingent warrant, net | 1,226,714 | 101,525 | ||||||
Convertible promissory notes, net | 4,825,087 | 3,765,087 | ||||||
Total liabilities | $ | 10,682,948 | $ | 6,814,030 | ||||
Stockholders' deficit | ||||||||
Convertible Preferred stock, par value $0.0001, 13,625,237 shares authorized | ||||||||
Series 1 | $ | 3,069,913 | $ | 3,069,913 | ||||
Series 2 | 7,624,841 | 7,624,841 | ||||||
Series 3 | 7,973,720 | 7,973,720 | ||||||
Series 4 | 10,401,500 | 10,401,500 | ||||||
Common stock | 643 | 618 | ||||||
Additional paid-in capital | 19,068,758 | 18,644,683 | ||||||
Accumulated deficit | (56,786,188 | ) | (54,526,705 | ) | ||||
Total stockholders' deficit | (8,646,813 | ) | (6,811,430 | ) | ||||
Total Liabilities and Stockholders' deficit | $ | 2,036,135 | $ | 2,600 |
*Derived from Audited Financial Statements as of December 31, 2019
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
Reviva Pharmaceuticals, Inc.
Condensed Consolidated Statements of Operations
Three Months ended | Nine Months ended | |||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Operating expenses | ||||||||||||||||
Research and development | $ | 955 | $ | 0 | $ | 295,150 | $ | 53,377 | ||||||||
General and administrative | 511,336 | 36,804 | 1,612,803 | 281,769 | ||||||||||||
Total operating expenses | 512,291 | 36,804 | 1,907,953 | 335,146 | ||||||||||||
Loss from operations | (512,291 | ) | (36,804 | ) | (1,907,953 | ) | (335,146 | ) | ||||||||
Other income (expense) | ||||||||||||||||
Interest and Other income | - | 7 | 25,004 | 201 | ||||||||||||
Interest expense | (146,250 | ) | (147,404 | ) | (375,187 | ) | (436,902 | ) | ||||||||
Total other expense | (146,250 | ) | (147,397 | ) | (350,183 | ) | (436,701 | ) | ||||||||
Loss before provision for income taxes | (658,541 | ) | (184,201 | ) | (2,258,136 | ) | (771,847 | ) | ||||||||
Provision for income taxes | 547 | - | 1,347 | 800 | ||||||||||||
Net loss | ( | $ | 659,088 | ) | ( | $ | 184,201 | ) | ( | $ | 2,259,483 | ) | ( | $ | 772,647 | ) |
Basic and Diluted net loss per share attributable to common stockholders | $ | (0.04 | ) | $ | (0.01 | ) | $ | (0.12 | ) | $ | (0.04 | ) | ||||
Weighted-average shares used to compute basic and diluted net loss per share | 18,198,047 | 18,180,748 | 18,186,557 | 18,180,748 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Reviva Pharmaceuticals, Inc.
Condensed Consolidated Statements of Stockholders’ Deficit
Series 1,2,3,4
Convertible Preferred Stock |
Common Stock | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount |
Additional
Paid-in
|
Accumulated
Deficit |
Total
Stockholders’
|
||||||||||||||||||||||
Three months ending September 30 2020 | ||||||||||||||||||||||||||||
Balance June 30, 2020 | 3,852,881 | $ | 29,069,974 | 18,180,748 | $ | 618 | $ | 18,644,683 | ( | $ | 56,127,100 | ) | ( | $ | 8,411,825 | ) | ||||||||||||
Issuance of common stock in lieu of deferred compensation | - | - | 256,078 | 25 | 424,075 | - | 424,100 | |||||||||||||||||||||
Net loss (Unaudited) | - | - | - | - | - | (659,088 | ) | ( | $ | 659,088 | ) | |||||||||||||||||
Balance, September 30, 2020 | 3,852,881 | $ | 29,069,974 | 18,436,826 | $ | 643 | $ | 19,068,758 | ( | $ | 56,786,188 | ) | ( | $ | 8,646,813 | ) | ||||||||||||
Three months ending September 30 2019 | ||||||||||||||||||||||||||||
Balance, June 30, 2019 | 3,852,881 | $ | 29,069,974 | 18,180,748 | $ | 618 | $ | 18,644,683 | ( | $ | 54,268,319 | ) | ( | $ | 6,279,788 | ) | ||||||||||||
Net loss (Unaudited) | - | - | - | - | - | (184,201 | ) | (184,201 | ) | |||||||||||||||||||
Balance, September 30, 2019 | 3,852,881 | $ | 29,069,974 | 18,180,748 | $ | 618 | $ | 18,644,683 | ( | $ | 54,452,520 | ) | ( | $ | 6,737,245 | ) | ||||||||||||
Nine-months ending September 30 2020 | ||||||||||||||||||||||||||||
Balance, December 31, 2019 | 3,852,881 | $ | 29,069,974 | 18,180,748 | $ | 618 | $ | 18,644,683 | ( | $ | 54,526,705 | ) | ( | $ | 6,811,430 | ) | ||||||||||||
Issuance of common stock in lieu of deferred compensation | - | - | 256,078 | 25 | 424,075 | - | 424,100 | |||||||||||||||||||||
Net loss (Unaudited) | - | - | - | - | - | (2,259,483 | ) | ( | $ | 2,259,483 | ) | |||||||||||||||||
Balance, September 30, 2020 | 3,852,881 | $ | 29,069,974 | 18,436,826 | $ | 643 | $ | 19,068,758 | ( | $ | 56,786,188 | ) | ( | $ | 8,646,813 | ) | ||||||||||||
Nine-months ending September 30 2019 | ||||||||||||||||||||||||||||
Balance, December 31, 2018 | 3,852,881 | $ | 29,069,974 | 18,180,748 | $ | 618 | $ | 18,644,683 | ( | $ | 53,679,873 | ) | ( | $ | 5,964,598 | ) | ||||||||||||
Net loss (Unaudited) | - | - | - | - | - | (772,647 | ) | ( | $ | 772,647 | ) | |||||||||||||||||
Balance, September 30, 2019 | 3,852,881 | $ | 29,069,974 | 18,180,748 | $ | 618 | $ | 18,644,683 | ( | $ | 54,452,520 | ) | ( | $ | 6,737,245 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Reviva Pharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flows
Nine Months ended | ||||||||
30 September,
2020 |
30 September
2019 |
|||||||
(unaudited) | ||||||||
Cash flows from operating activities | ||||||||
Net loss | ( | $ | 2,259,483 | ) | ( | $ | 772,647 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities | ||||||||
Depreciation | 484 | 486 | ||||||
Change in fair value of warrant liability | 1,125,189 | - | ||||||
Changes in operating assets and liabilities | ||||||||
Deferred Cost | (1,680,954 | ) | - | |||||
Accounts payable | 1,236,556 | 127,492 | ||||||
Accrued interest | 228,937 | 289,498 | ||||||
Accrued expenses and other current liabilities | 218,236 | 141,068 | ||||||
Cash flow used in operating activities | ( | $ | 1,131,035 | ) | ( | $ | 214,103 | ) |
Cash flows from financing activities | ||||||||
Issuance of common stock in lieu of deferred compensation | 424,100 | - | ||||||
Proceeds from issuance of convertible promissory notes | 1,060,000 | 100,000 | ||||||
Net cash from financing activities | 1,484,100 | 100,000 | ||||||
Net increase (decrease) in cash | 353,065 | (114,103 | ) | |||||
Cash, beginning of period | 193 | 118,637 | ||||||
Cash, end of period | $ | 353,258 | $ | 4,534 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Reviva Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements (UNAUDITED)
(Information as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019)
1. NATURE OF OPERATIONS
Reviva Pharmaceuticals, Inc. (the "Parent") was incorporated in the state of Delaware and registered in California, and commenced operations on May 1, 2006 and its Indian subsidiary, Reviva Pharmaceuticals India Pvt. Ltd., was incorporated in 2014 (referred herein as "the Company"). The Company is an emerging research based pharmaceutical company focused on developing a portfolio of internally discovered next generation safe and effective therapeutic drugs by using an integrated chemical genomics technology platform and proprietary chemistries. The Company is currently focused on developing drugs for the central nervous system (CNS), cardiovascular (CV), metabolic and inflammatory diseases.
On July 20, 2020, the Company entered into a definitive agreement and plan of merger (the “Merger Agreement”) for a business combination (the “Business Combination”) with Tenzing Acquisition Corp. (“Tenzing”), a special purpose acquisition company incorporated in the British Virgin Islands (NASDAQ: TZAC). As part of this Business Combination, Tenzing will reincorporate from the British Virgin Islands to the State of Delaware, change its name to “Reviva Pharmaceuticals Holdings, Inc.”, and a newly formed Delaware subsidiary of Tenzing will merge with and into Reviva Pharmaceuticals, Inc., with Reviva continuing as the surviving corporation and a wholly-owned subsidiary of Tenzing. Following the closing of the Business Combination (“Closing”), Reviva Pharmaceuticals Holdings, Inc. will be led by Reviva’s management team, with Dr. Laxminarayan Bhat as Chief Executive Officer, and Marc Cantillon, MD, as the Chief Medical Officer. Parag Saxena from Tenzing will serve as the Chairman of the Board of Directors of Reviva Pharmaceuticals Holdings, Inc. post-closing. The Board of Directors, subject to shareholder approval, will have a total of five individuals with a majority meeting the requirement of independent directors in accordance with NASDAQ requirements.
2. SIGNIFICANT ACCOUNTING POLICIES
This Quarterly Report should be read in conjunction with the Company’s audited consolidated financial statements which was included in Form S-4 with the Securities and Exchange Commission (“SEC”) on August 12, 2020. The Company’s significant accounting policies are described in Note 2 to its audited 2019 Consolidated Financial Statements. There have been no significant changes to these policies during the nine months ended September 30, 2020.
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3. DEFERRED COST
The Company has incurred certain expenses related to the execution of the Business Combination described in Note 1. These expenses have been deferred until the closing of the Business Combination and will be deducted from Additional Paid-in Capital upon closing
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consist of the following:
As of | ||||||||
September 30, 2020 | December 31, 2019 | |||||||
Computer equipment | $ | 32,500 | $ | 32,500 | ||||
Furniture and fixtures | 9,208 | 9,208 | ||||||
Accumulated depreciation | (41,601 | ) | (41,117 | ) | ||||
Property and equipment, net | $ | 107 | $ | 591 |
Depreciation expense for the nine months ended September 30, 2020 and 2019 was $484 and $486 respectively.
5. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company adopted ASC 842 for its existing operating leases effective January 1, 2019. The Company has elected to apply the short-term lease exception to leases of one year or less. Presently, the Company has a single twelve-month lease on its Corporate Office located at 19925 Stevens Creek Blvd., Suite 100, Cupertino, CA 95014. The monthly lease payment is approximately $1,500 and the lease expires on January 31, 2021 at which point the Company will renew for another 12-month term.
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6. CONVERTIBLE PROMISSORY NOTES
Between August 27, 2020 and September 16, 2020, the Company issued and received an aggregate principal amount of $450,000 in unsecured convertible promissory note to certain investors who agreed to purchase at least $50,000 principal amount of such notes pursuant to a subscription agreement (the “Reviva Interim Period Notes”) to finance its ordinary course of administrative costs and expenses and other expenses incurred in connection with the consummation of the Business Combination and the other transactions contemplated by the Merger Agreement with Tenzing Acquisition Corp. (“Tenzing”), a special purpose acquisition company incorporated in the British Virgin Islands (NASDAQ: TZAC). Each of the Reviva Interim Period Notes ranks equally without preference or priority of any kind over one another, and all other outstanding notes of the Company.
In addition, the Company entered into a contingent capital commitment with certain investors for $2,000,000 (“Reviva Contingent Interim Period Notes”) that shall become effective upon consummation of the Business Combination. The Reviva Contingent Interim Period Notes will be interest free. The closing of, and release from escrow of funds for, the Reviva Contingent Interim Period Notes is contingent upon the substantially concurrent consummation of the closing. The Reviva Contingent Interim Period Notes will provide that the notes will automatically convert, immediately prior to consummation of the Business Combination, into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal under the Reviva Contingent Interim Period Notes on a date that is no more than five (5) days prior to closing by (B) a conversion price equal to $1.163953.
The Reviva Interim Period Notes are scheduled to mature six months from the dates of issuance, with an option to extend the maturity by an additional six months. The Reviva Interim Period Notes bear no interest and have been issued free of interest. The Reviva Interim Period Notes will automatically convert, immediately prior to consummation of the Business
Combination, into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal under the Reviva Interim Period Notes on a date that is no more than five (5) days prior to closing by (B) a conversion price equal to $0.831063. The stated conversion term for the Reviva Interim Period Notes does not create a contingent beneficial conversion feature.
From March through May 2020, the Company issued an aggregate of $610,000 in convertible promissory notes to various investors (“2020 Notes”). Upon a Qualified Financing, the 2020 Notes can be converted if the entire balance has not been paid. The principal and accrued interest of the 2020 notes shall automatically be converted into that number of shares at a price equal to a 20% discount to the Qualified Financing event price (price paid by investors in the Qualified Financing).
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6. CONVERTIBLE PROMISSORY NOTES – Continued
Additionally, the holders of the 2020 Notes are also eligible for an equivalent number of warrants (i.e. as the number of converted shares), to purchase common stock (“2020 contingent warrants”) with a strike price equal to the Qualified Financing event price with a maturity of 5 years from the date of such a conversion event. The holders of the 2020 Notes, for entering into the Notes agreement, are also eligible to receive common stock when the 2020 Notes are converted into preferred shares in a Qualified Financing event (“2020 Contingent Stock”).
Interest on the 2020 Notes accrues at 8% per annum and is scheduled to be paid in cash at maturity unless converted. The 2020 Notes are scheduled to mature six months from the date of issue with an option to extend the maturity by an additional six months. The extension triggers an added conversion privilege wherein the holders of 2018 Notes are eligible to receive additional common stock when the 2020 Notes are converted into preferred shares in a
Qualified Financing event (“2020 Contingent Stock”). The 2020 Notes are still within the initial term of maturity.
The Company is obligated to issue 110,000 shares of common stock (“2020 Contingent stock”) to the 2020 note holders when the 2020 notes are converted into preferred shares in a Qualified Financing. As of September 30, 2020, the Company owes $610,000 and $23,279 in principal and accrued interest respectively. The stated conversion term for the 2020 Notes resulted in the measurement of contingent beneficial conversion feature of $152,500 which will be recognized as additional interest expense when the conversion takes place.
A summary table of the convertible notes by year of issuance is presented below:
Year of
Issuance |
Note Description | Amount | ||||
2016 | 2016 Notes | $ | 2,120,087 | |||
2017 | 2016 Notes | 2,570,000 | ||||
2018 | 2018 Notes | 175,000 | ||||
2019 | 2018 Notes | 100,000 | ||||
2019 | 2016 Notes - reclass to Accrued Legal liability | (1,200,000 | ) | |||
2020 | 2020 Notes | 610,000 | ||||
2020 | Reviva Interim Period Notes | 450,000 | ||||
Total Balance | $ | 4,825,087 |
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7. INCOME TAXES
The Company accounts for income taxes using the asset and liability method as codified in Topic 740. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards.
The Company recorded $1,347 income tax expense for the nine months ended September 30, 2020 and $800 income tax expense for the nine months ended September 30, 2019.
As of September 30, 2020, the Company did not have any unrecognized tax benefits related to uncertain tax positions. The Company does not expect the liability for unrecognized tax benefits to change materially within the next 12 months.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law. Certain provisions of the CARES Act impact the 2019 income tax provision computations of the Company and will be reflected in the first quarter of 2020, or the period of enactment. The CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020. The modifications to Section 163(j) increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. The tax impacts of the CARES Act are not material to the financial statements as a whole.
The Company is not currently under examination by the IRS or other state taxing authorities.
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8. STOCKHOLDERS' DEFICIT
Common stock
Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when and if declared by the board of directors, subject to the prior rights of holders of all series of preferred stock outstanding.
In September 2020, the Company issued 256,078 shares of common stock to current and past employees in lieu of certain dues and obligations. The Company has 18,436,826 shares of common stock issued and outstanding and has reserved additional shares of common stock for issuance for the following purposes at September 30, 2020:
Conversion of Series 1 convertible preferred stock | 625,237 | |||
Conversion of Series 2 convertible preferred stock | 1,245,889 | |||
Conversion of Series 3 convertible preferred stock | 951,761 | |||
Conversion of Series 4 convertible preferred stock | 1,029,994 | |||
Shares issuable upon conversion of Notes | ||||
2016 contingent warrants | 38,200 | |||
2020 warrants | 791,080 | |||
2019 contingent stock | 82,500 | |||
2020 contingent stock | 110,000 | |||
2020 Reviva interim period notes | 541,475 | |||
Options to purchase common stock | 430,000 | |||
Shares available for grant | 2,570,000 | |||
8,416,136 |
The Company expects to issue Common stock, preferred stock and warrants upon completion of a Qualified Financing Event with respect to conversion of 2016 Notes, 2018 Notes, 2020.
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8. STOCKHOLDERS' DEFICIT– Continued
Notes and Reviva Interim Period Notes. A summary of the conversion mechanics is presented in the table below:
Notes Issued | Initial Term | Interest Rate Per Annum | Issue Date | Conversion Price Determination | Conversion Price | Conversion Instruments | Principal Amount |
2016 Notes | 12 months |
8% increasing to 12% |
June 2016 to April 2017 |
Lower of $85 Million enterprise valuation or price per share paid at a Qualified Financing Event (of at least $5 Million) |
20% discount |
Preferred stock & common stock warrants |
$3,490,087 |
2018 Notes |
6 months extendable to 12 months |
8% |
Nov 2018 to Jan 2019 |
Price per share paid at the next equity financing event (of at least $5 Million) |
20% discount |
Preferred stock & common stock warrants |
$275,000 |
2020 Notes |
6 months extendable to 12 months |
8% |
Mar 2020 to May 2020 |
Price per share paid at the next equity financing event (of at least $5 Million) |
20% discount |
Preferred stock, common stock warrants & common stock |
$610,000 |
2020 Reviva Interim Period Notes |
6 months extendable to 12 months |
0% |
Aug 2020 to present |
$0.831063 | - |
Common stock |
$450,000 |
Total | $4,825,087 |
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8. | STOCKHOLDERS' DEFICIT– Continued |
Common stock warrants
In July 2020 the company issued 791,080 warrants with a five-year term to purchase equal number of common stock at $3.50 per share to certain current and past consultants (“2020 warrants”). The 2020 warrants were exercisable immediately. The Company estimated the fair value of the 2020 warrants to be $1,178,182, using the Black-Scholes-Merton option-pricing model with the following assumptions:
Assumptions | ||||
Common stock value | $ | 2.25 | ||
Expected life | 3 years | |||
Risk-free interest rate | 0.28 | % | ||
Expected dividend yields | 0 | % | ||
Volatility | 126 | % |
The 2020 warrants are classified as a liability and re-measured at fair value each reporting period.
During 2014, in connection with the 2014 Notes, the Company issued warrants with a five-year term to purchase 138,500 shares of common stock at $5.00 per share to certain investors ("2014 warrants"). The 2014 warrants were exercisable immediately and were not exercised and consequently expired in 2019. The Company estimated the fair value of the 2014 warrants to be $426,383, using the Black-Scholes-Merton option-pricing model with the following assumptions:
Assumptions | ||||
Common stock value | $ | 5.00 | ||
Expected life | 4.5-4.7 years | |||
Risk-free interest rate | 1.33-1.52% | |||
Expected dividend yields | 0 | % | ||
Volatility | 86.5 | % |
Using the relative fair values allocation, the 2014 warrants value of $407,578 was recorded as a discount to the 2014 Notes and an increase to additional paid-in capital. Upon conversion of the 2014 Notes into Series 4 Preferred Stock in June 2014, the corresponding debt discount was immediately amortized to interest expense.
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8. | STOCKHOLDERS' DEFICIT - Continued |
Contingent Warrants
The Company issued 2016 warrants (the “2016 contingent warrants”) in connection with the 2016 Notes to purchase 38,200 shares of its common stock which expire on April 28, 2022.
The Company estimated the fair value of the 2016 contingent warrants using the Black-Scholes-Merton option-pricing model with the following assumptions:
September 30, 2020 | December 31, 2019 | |||||||
Common stock value | $ | 2.25 | $ | 3.63 | ||||
Expected life | 3 years | 3 years | ||||||
Risk-free interest rate | 0.28 | % | 1.76 | % | ||||
Expected dividend yields | 0 | % | 0 | % | ||||
Volatility | 126 | % | 126 | % |
The initial fair value of the 2016 contingent warrants was recognized as a debt discount and amortized over the original 12-month term of the 2016 Notes.
The following table summarizes fair value measurements by level at September 30, 2020 for assets and liabilities measured at fair value on a recurring basis:
Total Value | Level 1 | Level 2 | Level 3 | |||||||||||||
2016 contingent warrants | $ | 48,531 | - | - | $ | 48,531 | ||||||||||
2020 warrants | $ | 1,178,183 | - | - | $ | 1,178,183 | ||||||||||
Total | $ | 1,226,714 | - | - | $ | 1,226,714 |
The following table summarizes fair value measurements by level at December 31, 2019 for assets and liabilities measured at fair value on a recurring basis:
Total Value | Level 1 | Level 2 | Level 3 | |||||||||||||
2016 contingent warrants | $ | 101,525 | - | - | $ | 101,525 |
In connection with the 2018 notes, the Company will issue 2018 contingent warrants equivalent to the number of converted shares to be determined at the Qualified Financing Event with a strike price equal to the qualified financing event price and with a maturity of 5 years from the date of such a conversion event.
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8. | STOCKHOLDERS' DEFICIT- Continued |
A summary of warrant activity for the nine months ended September 30, 2020 is as follows:
Number of
Shares |
Range of
Exercise Prices |
Weighted-
Average Exercise Prices |
Weighted-
Average Remaining Life |
|||||||||||||
Outstanding at December 31, 2019 | 38,200 | $ | 6.44 | $ | 6.44 | 1.6 | ||||||||||
Issued | 791,080 | $ | 3.50 | $ | 3.50 | 4.8 | ||||||||||
Outstanding at September 30, 2020 | 829,280 | $ | 3.76 | $ | 3.76 | 4.7 |
9. | STOCK OPTION PLAN AND STOCK-BASED COMPENSATION |
Activity under the stock option plan for the nine months ended September 30, 2020 is as follows:
Shares available for Grant | Number of Shares Outstanding | Weighted average exercise price per share | ||||||||||
Balance, December 31, 2019 | 2,258,334 | 741,666 | $ | 2.43 | ||||||||
Cancelled | 311,666 | (311,666 | ) | - | ||||||||
Balance, September 30, 2020 | 2,570,000 | 430,000 | $ | 2.57 | ||||||||
Vested, September 30, 2020 | - | 430,000 | $ | 2.57 | ||||||||
Vested and expected to vest, September 30, 2020 | - | 430,000 | $ | 2.57 |
Shares outstanding under the stock option plan as of September 30, 2020 are as follows:
Options Outstanding |
Weighted
average remaining contractual life (years) |
Shares
Exercisable |
Weighted Average
Exercise Price Per Share |
|||||||||||
320,000 | 2.10 | 320,000 | $ | 1.81 | ||||||||||
110,000 | 4.18 | 110,000 | $ | 4.77 |
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9. | STOCK OPTION PLAN AND STOCK-BASED COMPENSATION - Continued |
During the nine months ended September 30, 2020 and 2019, the Company granted no stock options to employees.
During the nine months ended September 30, 2020 and 2019, no stock-based employee compensation expense was recorded. As of September 30, 2020, the Company had no unrecognized compensation expense, net of estimated forfeitures, related to stock option awards to employees. No income tax benefit has been recognized relating to stock-based compensation expense, and no tax benefits have been realized from exercised stock options.
10. | NET LOSS PER SHARE |
The Company computes net loss per share attributable to common stockholders using the two-class method required for participating securities. The Company considers its convertible preferred stock to be participating securities. In accordance with the two-class method, earnings allocated to these participating securities, which include participation rights in undistributed earnings, are subtracted from net income to determine total undistributed earnings to be allocated to common stockholders.
Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. All participating securities are excluded from basic weighted-average common shares outstanding. Diluted net loss per share attributable to common stockholders excludes any dilutive effect from outstanding stock options and warrants using the treasury stock method.
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10. | NET LOSS PER SHARE - Continued |
The following table details the shares excluded in the calculation of net loss per share:
September 30, 2020 | September 30, 2019 | |||||||
Convertible Preferred Stock | ||||||||
Series 1 | 625,237 | 625,237 | ||||||
Series 2 | 1,245,889 | 1,245,889 | ||||||
Series 3 | 951,761 | 951,761 | ||||||
Series 4 | 1,029,994 | 1,029,994 | ||||||
2016 contingent warrants | 38,200 | 38,200 | ||||||
2020 warrants | 791,080 | - | ||||||
2020 Reviva interim period notes | 541,475 | - | ||||||
Options outstanding | 430,000 | 769,166 | ||||||
Total | 5,653,636 | 4,660,247 |
11. | SUBSEQUENT EVENTS |
In October 2020, the Company issued and received an aggregate principal amount of $50,000 from its 2020 Reviva Interim Period Notes.
On October 20, 2020, Reviva executed an offer letter with an individual to start as CFO of the surviving entity post transaction, conditioned upon the closing of the Business Combination.
On October 21, 2020, Tenzing entered into backstop agreements (each, a “Backstop Agreement”) with Reviva and certain investors (the “Backstop Investors”) in connection with the Business Combination.
Under the Backstop Agreements, the Backstop Investors agreed to purchase in the aggregate, among all Backstop Investors, a total of 417,518 of Tenzing’s ordinary shares in open market or private transactions (the “Backstop Shares”) and to hold, not transfer, not grant any proxies or power of attorney, not to incur any liens with respect to the shares through the closing of the business combination. In exchange, Tenzing agreed to issue to the Backstop Investors for each ten Backstop shares that they purchase on or prior to October 23, 2020 and hold without transfer, do not redeem and otherwise act in material compliance with the terms of the Backstop
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11. | SUBSEQUENT EVENTS – Continued |
Agreement one share (each, an “Additional Share”) of its common stock after Tenzing’s conversion from a British Virgin Islands company to a Delaware corporation, as contemplated by the Merger Agreement.
On October 22, 2020, Tenzing entered into an additional backstop agreement (the “Additional Backstop Agreement”) with Reviva, and additional investors in connection with the Business Combination, pursuant to which such investor agreed to purchase 23,148 of the Tenzing’s ordinary shares in open market or private transactions, and Tenzing agreed to issue up to 2,314 of its ordinary shares of in connection therewith. The Additional Backstop Agreement is the same form and subject to the same terms and conditions as the backstop agreements that were signed on October 21, 2020.
On October 26, 2020, Tenzing and Reviva granted waiver letters (each, a “Waiver Letter”) to certain investors under the backstop agreements (including the investors under the Additional Backstop Agreement as described above) representing investors obligated to purchase an aggregate of 394,370 backstop shares, waiving such investors’ failure to purchase the required backstop shares on or prior to October 23, 2020 and agreeing to extend the date by which such investors must purchase their required backstop shares in order to be eligible to receive the additional shares of Tenzing under the backstop agreements to November 13, 2020.
Subsequent to September 30, 2020, Reviva executed an amendment to the 2016 Notes with the holders representing at least a majority of the aggregate principal balances of the 2016 Notes pursuant to which, subject to and immediately prior to the closing of the Business Combination, all of the issued and outstanding 2016 Notes will automatically convert into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal and accrued but unpaid interest under the 2016 Notes on a date that is no more than five (5) days prior to closing by (B) a conversion price equal to $1.329698.
Subsequent to September 30, 2020, Reviva has executed an amendment to the 2018 Notes with the holders representing at least a majority of the aggregate principal balances of the 2018 Notes pursuant to which, subject to and immediately prior to the closing of the Business Combination, all of the issued and outstanding 2018 Notes will automatically convert into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal and accrued but unpaid interest under the 2018 Notes on a date that is no more than five (5) days prior to closing by (B) a conversion price equal to (i) $0.831018 for each holder of 2018 Notes who purchased at least $50,000 in aggregate principal amount of 2018 Notes or (ii) $1.330045 for each holder of 2018 Notes who purchased less than $50,000 in aggregate principal amount of 2018 Notes.
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11. | SUBSEQUENT EVENTS – Continued |
Subsequent to September 30, 2020, Reviva has executed an amendment to the 2020 Notes with the holders representing at least a majority of the aggregate principal balances of the 2020 Notes (“2020 Notes Majority Holders”) pursuant to which, subject to and immediately prior to the closing of the Business Combination, all of the issued and outstanding 2020 Notes will automatically convert into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal and accrued but unpaid interest under the 2020 Notes on a date that is no more than five (5) days prior to closing by (B) a conversion price equal to (i) $0.831009 for each holder of 2020 Notes who purchased at least $50,000 in aggregate principal amount of 2020 Notes or (ii) $1.329770 for each holder of 2020 Notes who purchased less than $50,000 in aggregate principal amount of 2020 Notes.
Reviva has executed an amendment to the 2020 Notes with the holders representing at least a majority of the aggregate principal balances of the 2020 Notes (“2020 Notes Majority Holders”) pursuant to which, immediately prior to the closing, all of the issued and outstanding 2020 Notes will automatically convert, immediately prior to the consummation of the Business Combination, into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal and accrued but unpaid interest under the 2020 Notes on a date that is no more than five (5) days prior to closing by (B) a conversion price equal to (i) $0.831009 for each holder of 2020 Notes who purchased at least $50,000 in aggregate principal amount of 2020 Notes or (ii) $1.329770 for each holder of 2020 Notes who purchased less than $50,000 in aggregate principal amount of 2020 Notes.
On November 30, 2020, Reviva retained the services of TigerBridge Capital LLC to act as a non-exclusive financial advisor to the Company. TigerBridge Capital LLC would be entitled to a $2.4 Million fee payable in Reviva common stock upon consummation of the Business Combination.
On December 14, 2020, Reviva Pharmaceuticals Holdings, Inc., a Delaware corporation and the successor by re-domiciliation to Tenzing Acquisition Corp., a British Virgin Islands exempted company, and Reviva Pharmaceuticals, Inc., consummated the business combination (the “Closing”) contemplated by the previously announced Agreement and Plan of Merger, dated as of July 20, 2020, by and among Tenzing, Reviva and the other parties named therein.
As a result of the spread of the COVID-19 coronavirus, economic uncertainties have arisen which may impact operating activities, though such potential impact is unknown at this time. Management has determined that there are no other subsequent events to be reported.
The Company has evaluated subsequent events through December 14, 2020, the date the consolidated financial statements were available for general release, for appropriate accounting and financial statement disclosures.
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Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Introduction
Capitalized terms used herein and not otherwise defined in the Current Report on Form 8-K of Reviva Pharmaceuticals Holdings, Inc. (the “Company”) to which this Exhibit 99.3 is attached (the “Current Report”) have the meanings assigned to such terms in the Company’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on November 12, 2020 (the “Proxy Statement”). Tenzing is providing the following unaudited pro forma combined financial information to aid you in your analysis of the financial aspects of the Business Combination.
The unaudited pro forma combined balance sheet as of August 31, 2020 gives pro forma effect to the Business Combination as if it had been consummated as of that date. The unaudited pro forma combined statements of operations for the nine months ended August 31, 2020 and for the year ended February 29, 2020 give pro forma effect to the Business Combination as if it had occurred as of the earliest period presented. This information should be read together with Reviva’s and Tenzing’s respective audited and unaudited financial statements and related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Reviva,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Tenzing” and other financial information included elsewhere in the Proxy Statement and incorporated by reference into the Current Report.
The unaudited pro forma combined balance sheet as of August 31, 2020 has been prepared using the following:
· | Reviva’s unaudited historical condensed consolidated balance sheet as of September 30, 2020, as included elsewhere in this Current Report; and |
· | Tenzing’s unaudited historical condensed balance sheet as of August 31, 2020, as included in the Proxy Statement. |
The unaudited pro forma combined statement of operations for the nine months ended August 31, 2020 has been prepared using the following:
· | Reviva’s unaudited historical condensed consolidated statement of operations for the nine months ended September 30, 2020, as included elsewhere in this Current Report; and |
· | Tenzing’s unaudited historical condensed statement of operations for the six months ended August 31, 2020, as included in the Proxy Statement. |
The unaudited pro forma combined statement of operations for the year ended February 29, 2020 has been prepared using the following:
· | Reviva’s audited historical consolidated statement of operations for the year ended December 31, 2019, as included in the Proxy Statement; and |
· | Tenzing’s audited historical statement of operations for the year ended February 29, 2020, as included in the Proxy Statement. |
Description of the Transactions
On July 20, 2020, Tenzing entered into the Merger Agreement. Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein, (i) prior to the Closing, Tenzing consummated the Domestication, and (ii) upon the Closing, Merger Sub merged with and into Reviva, with Reviva continuing as the surviving corporation in the Merger and a wholly-owned subsidiary of Tenzing (after its domestication to Delaware).
The aggregate merger consideration paid pursuant to the Merger Agreement to Reviva shareholders was an amount equal to the Merger Consideration, plus the additional contingent right to receive the Earnout Shares after the Closing, as described below. The Merger Consideration paid to Reviva stockholders was paid solely by the delivery of new shares of the Company’s common stock, each valued at the Redemption Price.
In addition to the Merger Consideration set forth above, the Reviva Stockholders also have a contingent right to receive the Earnout Shares after the Closing based on the stock price performance of the Company’s common stock and the achievement by Reviva of certain clinical trial milestones during the Earnout Period.
Accounting for the Business Combination
The Business Combination was accounted for as a reverse merger in accordance with U.S. GAAP. Under this method of accounting, Tenzing is treated as the “acquired” company for financial reporting purposes. This determination was primarily based on the holders of Reviva having a majority of the voting power of the post-combination company, Reviva senior management comprising substantially all of the senior management of the post-combination company, the relative size of Reviva compared to Tenzing, and Reviva operations comprising the ongoing operations of the post-combination company. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Reviva issuing stock for the net assets of Tenzing, accompanied by a recapitalization. The net assets of Tenzing are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of Reviva.
Basis of Pro Forma Presentation
The historical financial information has been adjusted to give pro forma effect to events that are related and/or directly attributable to the Business Combination, are factually supportable, and as it relates to the unaudited pro forma combined statement of operations, are expected to have a continuing impact on the results of the post-combination company. The adjustments presented on the unaudited pro forma combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the post-combination company upon consummation of the Business Combination.
The unaudited pro forma combined financial information is for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma combined financial information as being indicative of the historical financial position and results that would have been achieved had the companies always been combined or the future financial position and results that the post-combination company will experience. Reviva and Tenzing have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
There is no historical activity with respect to Merger Sub, and accordingly, no adjustments were required with respect to this entity in the pro forma combined financial statements.
Included in the shares outstanding and weighted average shares outstanding as presented in the pro forma combined financial statements are 5,734,621 shares of common stock issued to Reviva stockholders in connection with the Merger Agreement.
As the issuance of the additional 1,000,000 shares of common stock is contingent on the future performance of the trading price of the common stock and the achievement by Reviva of certain clinical trial milestones, they have been classified as an equity arrangement and therefore have not been recorded in the unaudited pro forma combined financial statements.
PRO FORMA COMBINED BALANCE
SHEET
AS OF AUGUST 31, 2020
(UNAUDITED)
(A)
Reviva |
(B)
Tenzing |
Pro Forma Adjustments | Pro Forma Balance Sheet | ||||||||||||||
Assets | |||||||||||||||||
Current assets: | |||||||||||||||||
Cash | $ | 353,258 | $ | 15,539 | $ | 234,748 | (1) | ||||||||||
34,755,185 | (2) | ||||||||||||||||
(2,105,303 | ) | (4) | |||||||||||||||
(24,168,667 | ) | (5) | |||||||||||||||
522,923 | (6) | $ | 9,607,683 | ||||||||||||||
Prepaid expenses and other current assets | - | 22,568 | - | 22,568 | |||||||||||||
Total Current Assets | 353,258 | 38,107 | 9,238,886 | 9,630,251 | |||||||||||||
Marketable securities held in Trust Account | - | 34,439,933 | 315,252 | (1) | |||||||||||||
(34,755,185 | ) | (2) | - | ||||||||||||||
Property and equipment, net | 107 | - | - | 107 | |||||||||||||
Deferred cost | 1,680,954 | - | (1,680,954 | ) | (7) | - | |||||||||||
Non-current assets | 1,816 | - | - | 1,816 | |||||||||||||
Total Assets | $ | 2,036,135 | $ | 34,478,040 | $ | (26,882,001 | ) | $ | 9,632,174 | ||||||||
Liabilities and Shareholders' Equity | |||||||||||||||||
Current liabilities: | |||||||||||||||||
Accounts payable and accrued expenses | $ | 4,631,147 | $ | 736,437 | $ | (508,314 | ) | (4) | |||||||||
(1,527,077 | ) | (6) | |||||||||||||||
(1,529,017 | ) | (7) | $ | 1,803,176 | |||||||||||||
Contingent warrant, net | 1,226,714 | - | (1,226,714 | ) | (7) | - | |||||||||||
Convertible promissory notes, net | 4,825,087 | - | 2,050,000 | (6) | |||||||||||||
(6,875,087 | ) | (7) | - | ||||||||||||||
Total Current Liabilities | 10,682,948 | 736,437 | (9,616,209 | ) | 1,803,176 | ||||||||||||
Convertible promissory notes - related party | - | 1,425,000 | 550,000 | (1) | |||||||||||||
(1,975,000 | ) | (3) | - | ||||||||||||||
Deferred underwriting fees | - | 2,213,750 | (2,213,750 | ) | (4) | - | |||||||||||
Total Liabilities | 10,682,948 | 4,375,187 | (13,254,959 | ) | 1,803,176 | ||||||||||||
Commitments and Contingencies | |||||||||||||||||
Ordinary shares subject to redemption | - | 25,102,851 | (25,102,851 | ) | (5) | - | |||||||||||
Stockholders’ Equity | |||||||||||||||||
Ordinary shares | - | 4,479,766 | 1,975,000 | (3) | |||||||||||||
2,113,750 | (4) | ||||||||||||||||
934,184 | (5) | ||||||||||||||||
56,609,475 | (7) | ||||||||||||||||
(66,112,175 | ) | (10) | - | ||||||||||||||
Preferred stock | 29,069,974 | - | (29,069,974 | ) | (7) | - | |||||||||||
Common stock | 643 | - | (643 | ) | (7) | ||||||||||||
4 | (8) | ||||||||||||||||
6 | (9) | ||||||||||||||||
913 | (10) | 923 | |||||||||||||||
Additional paid-in capital | 19,068,758 | - | (19,068,758 | ) | (7) | ||||||||||||
(4 | ) | (8) | |||||||||||||||
(6 | ) | (9) | |||||||||||||||
66,111,262 | (10) | 66,111,252 | |||||||||||||||
Retained earnings (Accumulated deficit) | (56,786,188 | ) | 520,236 | (1,496,989 | ) | (4) | |||||||||||
(520,236 | ) | (7) | (58,283,177 | ) | |||||||||||||
Total Stockholders' Equity | (8,646,813 | ) | 5,000,002 | 11,475,809 | 7,828,998 | ||||||||||||
Total Liabilities and Stockholders’ Equity | $ | 2,036,135 | $ | 34,478,040 | $ | (26,882,001 | ) | $ | 9,632,174 |
Pro Forma Adjustments to the Unaudited Combined Balance Sheet
(A) | Derived from the unaudited condensed consolidated balance sheet of Reviva as of September 30, 2020. See Reviva’s financial statements and the related notes appearing elsewhere in this Current Report. |
(B) | Derived from the unaudited condensed balance sheet of Tenzing as of August 31, 2020. See Tenzing’s financial statements and the related notes appearing in the Proxy Statement. |
(1) | Reflects the additional funding from Sponsor of $315,252 received to extend the time by which the Company has to consummate a Business Combination to December 28, 2020 and working capital loans in the amount of $234,748. |
(2) | Reflects the release of cash from marketable securities held in the trust account. |
(3) | Reflects the conversion of promissory notes in the aggregate amount of $1,975,000 due to the Sponsor into 197,500 Private Placement Units at $10.00 per unit. |
(4) | Reflects the payment of fees and expenses related to the Business Combination, including $508,314 of accounts payable and accrued expenses directly attributable to the Business Combination, the deferred underwriting fee of $2,213,750 and legal, financial advisory, accounting and other professional fees of $1,496,989. The deferred underwriting fee of $2,213,750 was partially paid in cash in the amount of $100,000, with the balance settled through the issuance of 300,000 shares of common stock valued at $2,113,750. The direct, incremental costs of the Business Combination related to the legal, financial advisory, accounting and other professional fees of approximately $1,496,989 is reflected as an adjustment to accumulated deficit and is not shown as an adjustment to the statement of operations since it is a nonrecurring charge resulting directly from the Business Combination. |
(5) | Reflects the cancellation of 2,221,128 shares of Common Stock for shareholders who elected cash conversion for payment of $24,168,667 with the remaining $934,184 transferred to permanent equity. |
(6) | Reflects the issuance of convertible notes in the amount of $2,050,000 in connection with the Business Combination, for which such proceeds were used for working capital purposes and the settlement of previously recorded accrued expenses. |
(7) | Reflects the recapitalization of Tenzing through (a) the contribution of all the share capital in Reviva to Tenzing in the amount of $48,139,375, (b) the conversion of convertible promissory notes into common stock in the amount of $6,875,087, (c) the settlement of the contingent warrant liability into equity in the amount of $1,226,714, (d) the conversion of previously recorded accrued expenses into common stock in the amount of $1,529,017, (e) the recording of deferred costs directly attributable to the Business Combination to equity in the amount of $1,680,954 (f) the issuance of 5,734,621 newly issued shares of common stock in connection with the Business Combination and (g) the elimination of the historical retained earnings of Tenzing, the legal acquiree, in the amount of $520,236. |
(8) | In connection with the Backstop Agreements, the Company issued 41,263 shares of common stock to the Backstop Investors. |
(9) | In connection with the Non-Redemption Agreement, the Company issued 55,050 shares of common stock to the Shareholder. |
(10) | Reflects the conversion of ordinary shares into shares of common stock upon the re-domestication of Tenzing from the British Virgin Islands to the State of Delaware. |
PRO FORMA COMBINED STATEMENT
OF OPERATIONS
NINE MONTHS ENDED AUGUST 31, 2020
(UNAUDITED)
(A)
Reviva |
(B)
Tenzing |
Pro Forma Adjustments | Pro Forma Income Statement | ||||||||||||||
Research and development | $ | 295,150 | $ | - | $ | - | $ | 295,150 | |||||||||
General and administrative | 1,612,803 | 1,184,338 | (1,042,433 | ) | (1) | 1,754,708 | |||||||||||
Operating loss | (1,907,953 | ) | (1,184,338 | ) | 1,042,433 | (2,049,858 | ) | ||||||||||
Other income (expense): | |||||||||||||||||
Interest income | 25,004 | 368,814 | (368,814 | ) | (2) | 25,004 | |||||||||||
Unrealized gain on marketable securities | - | 12,075 | (12,075 | ) | (2) | - | |||||||||||
Interest expense | (375,187 | ) | - | - | (375,187 | ) | |||||||||||
Loss before income taxes | (2,258,136 | ) | (803,449 | ) | 661,544 | (2,400,041 | ) | ||||||||||
Provision for income taxes | 1,347 | - | - | (3) | 1,347 | ||||||||||||
Net loss | $ | (2,259,483 | ) | $ | (803,449 | ) | $ | 661,544 | $ | (2,401,388 | ) | ||||||
Weighted average shares outstanding, basic and diluted | 2,723,761 | 6,507,976 | (4) | 9,231,737 | |||||||||||||
Basic and diluted net loss per share | $ | (0.28 | ) | $ | (0.26 | ) |
PRO FORMA COMBINED STATEMENT
OF OPERATIONS
YEAR ENDED FEBRUARY 29, 2020
(UNAUDITED)
(C)
Reviva |
(D)
Tenzing |
Pro Forma Adjustments | Pro Forma Income Statement | ||||||||||||||
Research and development | $ | 195,744 | $ | - | $ | - | $ | 195,744 | |||||||||
General and administrative | 181,116 | 724,740 | - | 905,856 | |||||||||||||
Operating loss | (376,860 | ) | (724,740 | ) | - | (1,101,600 | ) | ||||||||||
Other income (expense): | |||||||||||||||||
Interest income | 201 | 1,323,935 | (1,323,935 | ) | (2) | 201 | |||||||||||
Unrealized gain on marketable securities | - | 18,708 | (18,708 | (2) | - | ||||||||||||
Interest expense | (469,373 | ) | - | - | (469,373 | ) | |||||||||||
Loss before income taxes | (846,032 | ) | 617,903 | (1,342,643 | ) | (1,570,772 | ) | ||||||||||
Provision for income taxes | 800 | - | - | (3) | 800 | ||||||||||||
Net loss | $ | (846,832 | ) | $ | 617,903 | $ | (1,342,643 | ) | $ | (1,571,572 | ) | ||||||
Weighted average shares outstanding, basic and diluted | 2,610,315 | 6,621,422 | (4) | 9,231,737 | |||||||||||||
Basic and diluted net loss per share | $ | (0.21 | ) | $ | (0.17 | ) |
Pro Forma Adjustments to the Unaudited Combined Statements of Operations
(A) | Derived from the unaudited condensed consolidated statement of operations of Reviva for the nine months ended September 30, 2020. See Reviva’s financial statements and the related notes appearing elsewhere in the Current Report. |
(B) | Derived from the unaudited condensed statement of operations of Tenzing for the six months ended August 31, 2020. See Tenzing’s financial statements and the related notes appearing in the Proxy Statement. |
(C) | Derived from the audited consolidated statement of operations of Reviva for the year ended December 31, 2019. See Reviva’s financial statements and the related notes appearing in the Proxy Statement. |
(D) | Derived from the audited statement of operations of Tenzing for the year ended February 29, 2020. See Tenzing’s financial statements and the related notes appearing in the Proxy Statement. |
(1) | Represents an adjustment to eliminate direct, incremental costs of the Business Combination which are reflected in the historical financial statements of Reviva and Tenzing in the amount of $0 and $1,042,433, respectively, for the nine months ended September 30, 2020 and August 31, 2020, respectively. There were no such amounts recorded for the year ended December 31, 2019 for Reviva and February 29, 2020 for Tenzing. |
(2) | Represents an adjustment to eliminate interest income and unrealized gain on marketable securities held in the trust account as of the beginning of the period. |
(3) | To record normalized blended statutory income tax benefit rate of 21% for pro forma financial presentation purposes resulting in the recognition of an income tax benefit, which however, has been offset by a full valuation allowance as the combined company expects to incur continuing losses. |
(4) | The calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that Tenzing’s initial public offering occurred as of the earliest period presented. In addition, as the Business Combination is being reflected as if it had occurred on this date, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares have been outstanding for the entire period presented. This calculation is retroactively adjusted to eliminate the number of shares redeemed in the Business Combination for the entire period. |
The following presents the calculation of basic and diluted weighted average ordinary shares outstanding. The computation of diluted loss per share excludes the effect of 6,881,313 warrants to purchase 6,881,313 shares of common stock, because the inclusion of these securities would be anti-dilutive.
​ | Combined | |||
Weighted average shares calculation, basic and diluted | ​ | |||
Tenzing public shares | 963,240 | |||
Tenzing Sponsor shares | 2,137,563 | |||
Tenzing shares issued to underwriter | 300,000 | |||
Tenzing shares issued to Backstop Investor | 41,263 | |||
Tenzing shares issued to Shareholder | 55,050 | |||
Tenzing shares issued in the Business Combination | 5,734,621 | |||
Weighted average shares outstanding | 9,231,737 | |||
Percent of shares owned by Reviva | 62.1 | % | ||
Percent of shares owned by underwriter | 3.3 | % | ||
Percent of shares owned by Backstop Investor | 0.4 | % | ||
Percent of shares owned by Shareholder | 0.6 | % | ||
Percent of shares owned by Tenzing | 33.6 | % |
COMPARATIVE SHARE INFORMATION
The following table sets forth the historical comparative share information for Reviva and Tenzing on a stand-alone basis and the unaudited pro forma combined per share information after giving effect to the Business Combination.
The historical information should be read in conjunction with the information in the sections entitled “Selected Historical Financial Information of Tenzing” and “Selected Historical Consolidated Financial and Other Data of Reviva” and the historical financial statements of Tenzing and Reviva incorporated by reference in or included elsewhere in this Current Report. The unaudited pro forma condensed combined per share information is derived from, and should be read in conjunction with, the information contained in the section of the Current Report entitled “Unaudited Pro Forma Condensed Combined Financial Information.”
The unaudited pro forma combined share information below does not purport to represent what the actual results of operations or the earnings per share would been had the companies been combined during the periods presented, nor to project the Company’s results of operations or earnings per share for any future date or period. The unaudited pro forma combined shareholders’ equity per share information below does not purport to represent what the value of Tenzing and Reviva would have been had the companies been combined during the periods presented.
​ | Reviva | Tenzing |
Unaudited Combined Pro Forma |
|||||||||
Nine Months Ended September 30, 2020 (Reviva) and Nine Months Ended August 31, 2020 (Tenzing) | ​ | ​ | ​ | |||||||||
Net loss | $ | (2,259,483 | ) | $ | (803,449 | ) | $ | (2,401,388 | ) | |||
Stockholders’ (deficit) equity | (8,646,813 | ) | 5,000,002 | 7,828,998 | ||||||||
Weighted average shares outstanding – basic and diluted | ​ | 2,723,761 | 9,231,737 | |||||||||
Basic and diluted net loss per share | ​ | $ | (0.28 | ) | $ | (0.26 | ) | |||||
Shareholders’ equity per share – basic and diluted | ​ | $ | 1.84 | $ | 0.85 |
​ | Reviva | Tenzing |
Unaudited Combined Pro Forma |
|||||||||
Year Ended December 31, 2019 (Reviva) and Year Ended February 29, 2020 (Tenzing) | ​ | ​ | ​ | |||||||||
Net (loss) income | $ | (846,832 | ) | $ | 617,903 | $ | (1,571,572 | ) | ||||
Weighted average shares outstanding – basic and diluted | ​ | $ | 2,610,315 | $ | 9,231,737 | |||||||
Basic and diluted net (loss) income per share | ​ | $ | (0.21 | ) | $ | (0.17 | ) |