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): August 23, 2013
Neurotrope, Inc.
(Exact name of registrant as specified in its charter)
Nevada | 333-172647 | 46-3522381 |
(State or Other Jurisdiction | (Commission File | (I.R.S. Employer |
of Incorporation) | Number) | Identification Number) |
10732 Hawk’s Vista Street
Plantation, FL 33324
(Address of principal executive offices, including zip code)
(945) 632-6630
(Registrant’s telephone number, including area code)
BlueFlash Communications, Inc.
c/o Gottbetter & Partners, LLP
488 Madison Avenue, 12th Floor
New York, NY 10022
(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):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Table of Contents
FORWARD-LOOKING STATEMENTS | 1 | |
EXPLANATORY NOTE | 2 | |
Item 2.01 | Completion of Acquisition or Disposition of Assets | 4 |
The Merger and Related Transactions | 4 | |
Description of Business | 11 | |
Description of Properties | 34 | |
Risk Factors | 35 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 51 | |
Security Ownership of Certain Beneficial Owners and Management | 56 | |
Directors, Executive Officers, Promoters and Control Persons | 58 | |
Executive Compensation | 63 | |
Summary Compensation Table | 63 | |
Certain Relationships and Related Transactions | 64 | |
Market Price of and Dividends on Common Equity and Related Stockholder Matters | 65 | |
Description of Securities | 67 | |
Legal Proceedings | 71 | |
Indemnification of Directors and Officers | 72 | |
Item 3.02 | Unregistered Sales of Equity Securities | 73 |
Item 4.01 | Changes in Registrant’s Certifying Accountant. | 74 |
Item 5.01 | Changes in Control of Registrant. | 74 |
Item 5.02 | Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers. | 75 |
Item 5.06 | Change in Shell Company Status. | 75 |
Item 9.01 | Financial Statements and Exhibits. | 76 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Current Report contains forward-looking statements, including, without limitation, in the sections captioned “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Plan of Operations,” and elsewhere. Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to the development of commercially viable pharmaceuticals, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC, and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.
The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, the significant length of time associated with drug development and related insufficient cash flows and resulting illiquidity, our inability to expand our business, significant government regulation of pharmaceuticals and the healthcare industry, lack of product diversification, volatility in the price of our raw materials, existing or increased competition, results of arbitration and litigation, stock volatility and illiquidity, and our failure to implement our business plans or strategies. A description of some of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this Report appears in the section captioned “Risk Factors” and elsewhere in this Report.
Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events or circumstances or otherwise.
Readers should read this Report in conjunction with the discussion under the caption “Risk Factors,” our financial statements and the related notes thereto in this Report, and other documents which we may file from time to time with the Securities and Exchange Commission (the “SEC”).
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EXPLANATORY NOTE
We were incorporated as BlueFlash Communications, Inc. in Florida on January 11, 2011. Prior to the Merger and Split-Off (each as defined below), our business was to provide software solutions to deliver geo-location targeted coupon advertising to mobile internet devices.
As previously reported, on August 9, 2013, we reincorporated in the State of Nevada by merging into a newly-formed special-purpose subsidiary, Neurotrope, Inc., which was the surviving corporation in the merger. As a result of this reincorporation merger, (i) we changed our name to Neurotrope, Inc., (ii) we changed our jurisdiction of incorporation from Florida to Nevada, (iii) we increased our authorized capital stock from 300,000,000 shares of common stock, par value $0.0001, to 300,000,000 shares of common stock, par value $0.0001, and 50,000,000 shares of “blank check” preferred stock, par value $0.0001, (iv) each share of BlueFlash Communications, Inc., common stock outstanding at the time of the reincorporation merger was automatically converted into 2.242 shares of Neurotrope, Inc., common stock, with the result that the 10,200,000 shares of common stock outstanding immediately prior to the reincorporation merger was converted into 22,868,400 shares of common stock outstanding immediately thereafter. All share and per share numbers in this Report relating to the common stock of Neurotrope, Inc., prior to this reincorporation merger have been adjusted to give effect to this conversion, unless otherwise stated.
In addition, in connection with the reincorporation, we changed our fiscal year from a fiscal year ending on January 31 of each year, which was used in our most recent filing with the SEC, to one ending on December 31 of each year. The report covering the transition period will be filed on Form 10-K.
On August 23, 2013, our wholly owned subsidiary, Neurotrope Acquisition, Inc., a corporation formed in the State of Nevada on August 15, 2013 (“Acquisition Sub”) merged (the “Merger”) with and into Neurotrope BioScience, Inc., a corporation incorporated in the State of Delaware on October 31, 2012 (“Neurotrope BioScience”). Neurotrope BioScience was the surviving corporation in the Merger and became our wholly owned subsidiary. All of the outstanding Neurotrope BioScience common stock was converted into shares of our common stock, par value $0.0001 per share (the “Common Stock”), on a one-for-one basis.
In connection with the Merger and pursuant to the Split-Off Agreement (defined below), we transferred our pre-Merger business to Marissa Watson, our pre-Merger majority stockholder, in exchange for the surrender by her and cancellation of 20,178,000 shares of our Common Stock. See Item 2.01, “Split-Off”, below.
As a result of the Merger and Split-Off, we discontinued our pre-Merger business and acquired the business of Neurotrope BioScience, and will continue the existing business operations of Neurotrope BioScience as a publicly-traded company under the name Neurotrope, Inc.
Also on August 23, 2013, Neurotrope BioScience closed a private placement of 11,533,375 shares of its Series A convertible preferred stock, for a purchase price of $1.00 per share, for aggregate gross proceeds of $11,533,375 (before deducting placement agent fees and expenses of the offering estimated at approximately $1,500,000). Neurotrope BioScience had previously closed between February and May 2013 on private placements of 10,386,625 shares of its Series A convertible preferred stock, for a purchase price of $1.00 per share, for aggregate gross proceeds of $10,386,625 (before deducting placement agent fees and expenses of the offering). These private placement offerings (the “PPO”) were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemptions provided by Regulation D promulgated by the SEC thereunder. The PPO was sold to “accredited investors,” as defined in Regulation D. All of the outstanding Neurotrope BioScience Series A convertible preferred stock was converted into shares of our Series A convertible preferred stock (the “Series A Preferred Stock”) on a one-for-one basis in the Merger. Additional information concerning the PPO and the terms of the Series A Preferred Stock is presented below under “Description of Securities” and Item 3.02, “Unregistered Sales of Equity Securities.”
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In accordance with “reverse merger” accounting treatment, our historical financial statements as of period ends, and for periods ended, prior to the Merger will be replaced with the historical financial statements of Neurotrope BioScience prior to the Merger in all future filings with the SEC.
As used in this Current Report henceforward, unless otherwise stated or the context clearly indicates otherwise, the terms “Neurotrope,” the “Company,” the “Registrant,” “we,” “us,” and “our” refer to Neurotrope, Inc., incorporated in Nevada, after giving effect to the Merger and the Split-Off.
This Current Report contains summaries of the material terms of various agreements executed in connection with the transactions described herein. The summaries of these agreements are subject to, and are qualified in their entirety by, reference to these agreements, which are filed as exhibits hereto and incorporated herein by reference.
This Current Report is being filed in connection with a series of transactions consummated by the Company and certain related events and actions taken by the Company.
This Current Report responds to the following Items in Form 8-K:
Prior to the Merger, we were a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). As a result of the Merger, we have ceased to be a shell company. The information contained in this Current Report, together with the information contained in our Annual Report on Form 10-K for the fiscal year ended January 31, 2013, and our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as filed with the SEC, constitute the current “Form 10 information” necessary to satisfy the conditions contained in Rule 144(i)(2) under the Securities Act of 1933, as amended (the “Securities Act”).
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Item 1.01 | Entry into a Material Definitive Agreement |
The information contained in Item 2.01 below relating to the various agreements described therein is incorporated herein by reference.
Item 2.01 | Completion of Acquisition or Disposition of Assets |
THE MERGER AND RELATED TRANSACTIONS
Merger Agreement
On August 23, 2013 (the “Closing Date”), the Company, Acquisition Sub and Neurotrope BioScience entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), which closed on the same date. Pursuant to the terms of the Merger Agreement, Acquisition Sub merged with and into Neurotrope BioScience, which was the surviving corporation and thus became a wholly-owned subsidiary of Neurotrope, Inc.
Pursuant to the Merger, we ceased to engage in the business of providing software solutions to deliver geo-location targeted coupon advertising to mobile internet devices and acquired the business of Neurotrope BioScience to engage in developing two product platforms, including a diagnostic test for Alzheimer’s Disease (“AD”) and a drug candidate called bryostatin for the treatment of Alzheimer’s Disease, both of which are in the clinical testing stage. See “Split-Off” below.
At the closing of the Merger, (a) each of the 19,000,000 shares of Neurotrope BioScience’s common stock issued and outstanding immediately prior to the closing of the Merger was converted into one share of our Common Stock, and (b) each of the 21,920,000 shares of Neurotrope BioScience’s Series A convertible preferred stock issued and outstanding immediately prior to the closing of the Merger was converted into one share of our Series A Preferred Stock. (See “Description of Securities—Preferred Stock—Series A Preferred Stock” below for a description of the voting powers, preferences and other rights of our Series A Preferred Stock.) As a result, an aggregate of (a) 19,000,000 shares of our Common Stock were issued to the holders of Neurotrope BioScience’s common stock, and (b) 21,920,000 shares of our Series A Preferred Stock were issued to the holders of Neurotrope BioScience’s Series A convertible preferred stock. In addition, warrants issued to the placement agents and permitted sub-agents to purchase 900,000 shares of Neurotrope BioScience’s common stock were converted into Agent Warrants (as defined below) to purchase 900,000 shares of our Common Stock, and warrants issued to the placement agents and permitted sub-agents to purchase 1,217,000 shares of Neurotrope BioScience’s Series A convertible preferred stock were converted into Agent Warrants to purchase 1,217,000 shares of our Series A Preferred Stock. Neurotrope BioScience did not have any other stock purchase warrants or any stock options outstanding at the time of the Merger. The warrants to purchase 900,000 shares of our Common Stock and 1,217,000 shares of our Series A Preferred Stock issued on conversion of the warrants issued by Neurotrope BioScience as described above are referred to, collectively, as the “Agent Warrants.”
The Merger Agreement contained customary representations and warranties and pre- and post-closing covenants of each party and customary closing conditions. Breaches of the representations and warranties will be subject to customary indemnification provisions, subject to specified aggregate limits of liability.
The Merger will be treated as a recapitalization of the Company for financial accounting purposes. Neurotrope BioScience will be considered the acquirer for accounting purposes, and the historical financial statements of Neurotrope, Inc., before the Merger will be replaced with the historical financial statements of Neurotrope BioScience before the Merger in all future filings with the SEC.
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The parties have taken all actions necessary to ensure that the Merger is treated as a tax-free exchange under Section 351 of the Internal Revenue Code of 1986, as amended.
The issuance of shares of our Common Stock and Series A Preferred Stock to holders of Neurotrope BioScience’s capital stock in connection with the Merger was not registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering, and Regulation D promulgated by the SEC under that section. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement, and are subject to further contractual restrictions on transfer as described below.
We also agreed not to register under the Securities Act the resale of the shares of our Common Stock received in the Merger by our officers, directors and key employees and holders of 10% or more of our Common Stock for a period of two years following the closing of the Merger.
The form of the Merger Agreement is filed as an exhibit to this Report. All descriptions of the Merger Agreement herein are qualified in their entirety by reference to the text thereof filed as an exhibit hereto, which is incorporated herein by reference.
Split-Off
Upon the closing of the Merger, under the terms of a split-off agreement and a general release agreement, the Company transferred all of its pre-Merger operating assets and liabilities to its wholly-owned special-purpose subsidiary, Blue Flash Communications Corp. , a Nevada corporation (“Split-Off Subsidiary”), formed on August 15, 2013. Thereafter, pursuant to the split-off agreement, the Company transferred all of the outstanding shares of capital stock of Split-Off Subsidiary to Marisa Watson , the pre-Merger majority stockholder of the Company, and the former sole officer and director of the Company (the “Split-Off”), in consideration of and in exchange for (i) the surrender and cancellation of an aggregate of 20,178,000 shares of our Common Stock held by Ms. Watson (which were cancelled and will resume the status of authorized but unissued shares of our Common Stock) and (ii) certain representations, covenants and indemni ties. All descriptions of the split-off agreement and the general release agreement herein are qualified in their entirety by reference to the text thereof filed as exhibits hereto, which are incorporated herein by reference.
The PPO
Concurrently with the closing of the Merger and in contemplation of the Merger, Neurotrope BioScience held a closing of its PPO in which it sold 11,533,375 shares of its Series A preferred stock, at a price of $1.00 per share, for gross proceeds (before deducting commissions and expenses of the offering) of $11,533,375. The offering that resulted in this closing was conducted on a “best efforts” basis. This closing of the PPO and the closing of the Merger were conditioned upon each other.
Neurotrope BioScience had previously held closings of the PPO for 10,386,625 shares of its Series A convertible preferred stock, for a purchase price of $1.00 per share, for aggregate gross proceeds of $10,386,625 (before deducting placement agent fees and expenses of the offering).
Neurotrope BioScience agreed to pay the placement agents in the PPO, EDI Financial, Inc. and Allied Beacon Financial, Inc., registered broker-dealers, a cash commission of 10% of the gross funds raised from investors in the PPO. In addition, the placement agents received (a) for the first $12,000,000 of aggregate gross PPO proceeds (including the prior closings), (i) warrants exercisable for a period of ten (10) years to purchase a number of shares of Neurotrope BioScience common stock equal to 7.5% of the number of shares of Neurotrope BioScience Series A convertible preferred stock sold to investors introduced by it, with a per share exercise price of $0.01, and (ii) warrants exercisable for a period of ten (10) years to purchase a number of shares of Neurotrope BioScience Series A convertible preferred stock equal to 2.5% of the number of shares of Neurotrope BioScience Series A convertible preferred stock sold to investors introduced by it, with a per share exercise price of $1.00; and (b) on aggregate gross PPO proceeds in excess of $12,000,000, warrants exercisable for a period of ten (10) years to purchase a number of shares of Neurotrope BioScience Series A convertible preferred stock equal to 10% of the number of shares of Neurotrope BioScience Series A convertible preferred stock sold to investors introduced by it, with an exercise price of $1.00 per shareAs a result of the foregoing, the placement agents and their permitted sub-agents were paid an aggregate commission of $2,117,000 and were issued warrants purchase an aggregate of 900,000 shares of Neurotrope BioScience common stock and warrants to purchase an aggregate of 1,217,000 shares of Neurotrope BioScience Series A convertible preferred stock, which were converted into Agent Warrants to purchase an aggregate of 900,000 shares of our Common Stock and an aggregate of 1,217,000 shares of our Series A Preferred Stock, as described more fully above. Neurotrope BioScience was also required to reimburse the placement agents $25,000 of legal expenses incurred in connection with the PPO. Neurotrope BioScience agreed to indemnify the placement agents and their sub-agents to the fullest extent permitted by law, against certain liabilities that may be incurred in connection with this PPO, including certain civil liabilities under the Securities Act, and, where such indemnification is not available, to contribute to the payments the placement agents and its sub-agents may be required to make in respect of such liabilities.
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All descriptions of the Agent Warrants herein are qualified in their entirety by reference to the text thereof filed as exhibits hereto, which are incorporated herein by reference.
Registration Rights
In connection with the PPO, we entered into a Preferred Stockholders Agreement, pursuant to which we have agreed to file a registration statement registering for resale the shares of our Common Stock underlying the shares of Series A Preferred Stock issued in the Merger in exchange for the shares of Neurotrope BioScience Series A convertible preferred stock sold in the PPO (the “Registrable Securities”) as follows: If at any time after the earlier of (i) five years after the closing of the PPO or (ii) 180 days after the effective date of the registration statement for an underwritten public offering of equity securities of the Company under the Securities Act with a price to the public of at least $5.00 per share and aggregate gross proceeds to the Company of at least $30,000,000 (a "QPO"), the Company receives a request from holders of at least 40% of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement with the SEC with respect to Registrable Securities having an anticipated aggregate offering price, net of selling expenses, of at least $15,000,000, then the Company shall (x) within ten (10) days after the date such request is given, give notice thereof to all other holders of Registrable Securities; and (y) as soon as practicable, and in any event within sixty (60) days after the date such request is given, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the initiating holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other holders, subject to certain limitations.
If at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from holders of at least thirty percent (30%) of the Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such holders having an anticipated aggregate offering price, net of selling expenses, of at least $1,000,000, then the Company shall (i) within ten (10) days after the date such request is given, give a notice to all other holders of Registrable Securities; and (ii) as soon as practicable, and in any event within forty-five (45) days after the date such request is given, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration, subject to certain limitations.
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If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the holders of Series A Preferred Stock) any of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than certain excluded registrations), the Company shall give each holder of Registrable Securities notice of such registration, and upon the request of each holder, shall, subject to certain limitations, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration.
We have agreed to maintain the effectiveness of any registration statement referred to above for at least 120 days after the date on which the registration statement is declared effective by the SEC, or, if earlier, until the distribution contemplated by the registration statement has been completed.
We will pay all expenses in connection with any registration obligation provided in the registration rights agreement, including, without limitation, all registration, filing, stock exchange fees, printing expenses, all fees and expenses of complying with applicable securities laws, and the fees and disbursements of our counsel and of our independent accountants. Each investor will be responsible for its own underwriting discounts and commissions, transfer taxes and the expenses of any attorney or other advisor such investor decides to employ.
Registration rights shall terminate upon the earliest of (i) the date when shares of registrable securities are eligible to be sold without restriction under Rule 144, (ii) the closing of a Deemed Liquidation Event, as such term is defined in the Company's certificate of incorporation and (iii) the fifth anniversary of the effective date of the company's first QPO after the Closing Date.
All descriptions of the Preferred Stockholders Agreement herein are qualified in their entirety by reference to the text thereof filed as an exhibit hereto, which is incorporated herein by reference.
The holders of the Agent Warrants have “piggyback” registration rights for the shares Common Stock underlying the Agent Warrants (including shares of Common Stock issuable upon conversion of the Series A Preferred Stock underlying the Agent Warrants) with respect to any registration statement filed by PubCo that would permit the inclusion of such underlying shares, and subject to customary limitations.
Common Stockholders’ Agreement
The Company has entered into an Amended and Restated Stockholders Agreement (the "Common Stockholders Agreement"), dated August 23, 2013, with all of the holders of Neurotrope BioScience’s common stock prior to the Merger: Neurosciences Research Ventures, Inc. (“NRV”), Dr. Daniel Alkon (“Alkon”), Northlea Partners LLLP (“Northlea”) and Dr. Jim New (“New”), which amends and restates in its entirety the agreement between such stockholders and Neurotrope BioScience in effect prior to the Meger. Pursuant to the Common Stockholders Agreement, the parties agreed to certain corporate governance matters pertaining to the Company (including with respect to the composition of the Board of Directors) and to certain restrictions on the transfer of shares of Common Stock held by such parties. Each shareholder who is a party to the Common Stockholders Agreement agreed that:
· | the authorized number of directors of the Company will be seven, with six directors elected by the holders of a majority of the outstanding Common Stock, voting as a separate class (each, a “Common Director”) and one director elected by the holders of a majority of the outstanding Parent Series A Preferred Stock, voting as a separate class on an as-converted basis; |
· | the following five persons shall be nominated and elected to the Board as Common Directors: |
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o | two representatives designated by NRV (each, an “NRV Designee”), who initially shall be William S. Singer and Ralph Bean; |
o | two representatives designated by designated by the “Majority Abeles Stockholders” (as defined) (each, an “Abeles Designee”), who initially shall be Dr. John Abeles and Dr. Jim New; and |
o | one independent representative designated by the Board (the “Neurotrope Designee”), which designee has not been determined as of the date of this Agreement; and |
· | subject to the provisions of applicable law, no NRV Designee, Abeles Designee or Neurotrope Designee shall be removed from the Board unless such removal is requested in writing by the party that designated such designee. |
In addition, each shareholder who is a party to the Stockholders Agreement granted the other parties (including the Company) certain rights of first refusal with respect to the sale or transfer of his or its shares of Common Stock in the Company. Each shareholder who is a party to the Stockholders Agreement also agreed to certain tag-along rights and drag-along obligations with respect to their shares of common stock in the Company. In addition, Northlea Partners LLLP and Dr. Jim New agreed to vote together for certain specified matters that are approved by the Board of Directors of the Company (and against such matters that are not approved by the Board of Directors of the Company), including with respect to (i) licensing or sublicensing of intellectual property licensed from BRNI, (ii) certain fundamental changes or changes in ownership with respect to the Company and (iii) the liquidation, dissolution or winding up of the Company. The voting obligations described in the preceding sentence will terminate on the earlier of the effective date of a Company QPO and the closing of a sale by the Company of equity securities resulting in gross proceeds to the Company of at least $12,000,000.
Voting Agreement
The Company, NRV, Northlea, New, Alkon, Hannah Rose Holdings, LLC (“HRH”) and another stockholder of the Company entered into a Voting Agreement dated as of August 23, 2013, pursuant to which HRH and such other stockholder (which holds 488,079 shares of Common Stock) agreed to vote all of their Common Stock such that:
· | the authorized number of directors of the Company will be seven, with six directors elected by the holders of a majority of the outstanding Common Stock, voting as a separate class (each, a “Common Director”) and one director elected by the holders of a majority of the outstanding Parent Series A Preferred Stock, voting as a separate class on an as-converted basis; |
· | the following five persons shall be nominated and elected to the Board as Common Directors: |
o | two NRV Designees, who initially shall be William S. Singer and Ralph Bean; |
o | two representatives designated by the holders of a majority in interest of the Shares of Common Stock of Parent held by New and Abeles (each, an “Abeles Designee”), who initially shall be Dr. John Abeles and Dr. Jim New; and |
o | one independent Neurotrope Designee, which designee has not been determined as of the date of this Agreement; and |
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· | subject to the provisions of applicable law, no NRV Designee, Abeles Designee or Neurotrope Designee shall be removed from the Board unless such removal is requested in writing by the party that designated such designee. |
In addition, each of NRV, Abeles, New and Alkon agreed to vote all of their Common Stock in favor of electing as a Common Director after the Merger one independent representative designated by HRH (the “HRH Designee”) as soon as practicable after such representative has been identified by HRH. NRV, Abeles, New and Alkon agree to vote their Common Stock in favor of the election of the HRH Designee only at the time of such individual's initial appointment to the Parent's Board, and nothing obligates them to vote in favor of the election of any other individual as an HRH Designee or in favor of the continuing service of the HRH Designee once elected to the Board.
For information on numbers of shares of our stock held by NRV, Abeles, New, Alkon and HRH, see “Security Ownership of Certain Beneficial Owners and Management” below.
2013 Equity Incentive Plan
Before the Merger, our Board of Directors adopted, and our stockholders approved, our 2013 Equity Incentive Plan (the “2013 Plan”), which provides for the issuance of incentive awards of up to 7,000,000 shares of our Common Stock to officers, key employees, consultants and directors. Following the closing of the Merger, options to purchase an aggregate of 5,154,404 shares of our Common Stock were issued to four founding stockholders of Neurotrope BioScience, our five directors and a consultant. See “Market Price of and Dividends on Common Equity and Related Stockholder Matters - Securities Authorized for Issuance under Equity Compensation Plans” below for more information about the 2013 Plan and the outstanding stock options.
Departure and Appointment of Directors and Officers
Our Board of Directors is authorized to consist of seven members and currently consists of five members, leaving two vacancies. On the Closing Date, Ronald Warren, our sole director before the Merger, resigned his position as a director, and John Abeles, Jim New, William Singer, Ralph Bean and Jay Haft were appointed to the Board of Directors.
Also on the Closing Date, Mr. Warren, our President, Secretary, Treasurer and sole officer before the Merger, resigned from these positions, and Jim New was appointed as our Chief Executive Officer and President, Robert Weinstein was appointed as our Chief Financial Officer and Treasurer, William Singer was appointed as our Secretary and Dan Alkon was appointed our Chief Scientific Officer by the Board.
See “Management – Directors and Executive Officers” below for information about our new directors and executive officers.
Lock-up Agreements and Other Restrictions
In connection with the Merger, each of our executive officers and directors named above and each person holding 10% or more of our Common Stock after giving effect to the Merger, the Split-Off and the PPO (the “Restricted Holders”), holding at that date in the aggregate 19,000,000 shares of our Common Stock, entered into agreements (the “Lock-Up and No Shorting Agreements”), whereby they are restricted for a period of 24 months after the Merger from certain sales or dispositions of our Common Stock held by them immediately after the Merger, except in certain limited circumstances (the “Lock-Up”).
Further, for a period of 24 months after the Merger, each Restricted Holder has agreed in the Lock-Up and No Shorting Agreements to be subject to restrictions on engaging in certain transactions, including effecting or agreeing to effect short sales, whether or not against the box, establishing any “put equivalent position” with respect to our Common Stock, borrowing or pre-borrowing any shares of our Common Stock, or granting other rights (including put or call options) with respect to our Common Stock or with respect to any security that includes, relates to or derives any significant part of its value from our Common Stock, or otherwise seeks to hedge his position in our Common Stock.
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Pro Forma Ownership
Immediately after giving effect to (i) the Merger and (ii) the cancellation of 20,178,000 shares in the Split-Off, and (iii) the closing of the PPO there were 21,700,000 issued and outstanding shares of our Common Stock, as follows:
· | The stockholders of Neurotrope BioScience prior to the Merger hold 19,000,000 shares of our Common Stock; and |
· | the stockholders of the Company prior to the Merger (excluding Marissa Watson, who surrendered her shares in the Split-Off) hold 2,700,000 shares of our Common Stock. |
In addition,
· | the investors in the PPO hold 21,920,000 shares of our Series A Preferred Stock; |
· | the placement agents and their permitted sub-agents hold Agent Warrants to purchase |
o | 900,000 shares of our Common Stock, subject to adjustment in certain circumstances as provided therein; and |
o | 1,217,000 shares of our Series A Preferred Stock, subject to adjustment in certain circumstances as provided therein |
· | the 2013 Plan authorizes issuance of up to 7,000,000 shares of our Common Stock as incentive awards to executive officers, key employees, consultants and directors; options to purchase 5,154,404 shares of Common Stock have been granted under the 2013 Plan. |
No other securities convertible into or exercisable or exchangeable for our Common Stock (including options or warrants) are outstanding.
Our common stock is quoted on the OTC Markets (OTCQB) under the symbol “BLFLD,” which will change to “NTRP” on September 9, 2013.
Accounting Treatment; Change of Control
The Merger is being accounted for as a “reverse merger,” and Neurotrope BioScience is deemed to be the acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the Merger will be those of Neurotrope BioScience and will be recorded at the historical cost basis of Neurotrope BioScience, and the consolidated financial statements after completion of the Merger will include the assets and liabilities of Neurotrope BioScience, historical operations of Neurotrope BioScience and operations of the Company and its subsidiaries from the closing date of the Merger. As a result of the issuance of the shares of our Common Stock pursuant to the Merger, a change in control of the Company occurred as of the date of consummation of the Merger. Except as described in this Current Report, no arrangements or understandings exist among present or former controlling stockholders with respect to the election of members of our Board of Directors and, to our knowledge, no other arrangements exist that might result in a change of control of the Company.
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We continue to be a “smaller reporting company,” as defined under the Exchange Act, following the Merger. We believe that as a result of the Merger we have ceased to be a “shell company” (as such term is defined in Rule 12b-2 under the Exchange Act).
DESCRIPTION OF BUSINESS
Immediately following the Merger, the business of Neurotrope BioScience became our business. Neurotrope BioScience’s was formed to develop and market two product platforms: a diagnostic test for Alzheimer’s Disease and a drug candidate called Bryostatin for the treatment of Alzheimer’s Disease, both of which are in the clinical testing stage.
History
As described above, we were incorporated in Florida as BlueFlash Communications, Inc. on January 11, 2011. Prior to the Merger and Split-Off (each as defined above), our business was to provide software solutions to deliver geo-location targeted coupon advertising to mobile internet devices. As a result of the Split-Off and the Merger, the Company discontinued its pre-Merger business and acquired the business of Neurotrope BioScience and its subsidiaries.
Our authorized capital stock currently consists of 300,000,000 shares of common stock, par value $0.0001, and 50,000,000 shares of “blank check” preferred stock, par value $0.0001, 24,325,000 of which has been designated as Series A Preferred Stock. Our common stock is quoted on the OTC Markets (OTCQB) under the symbol “BLFLD,” which will change to “NTRP” on September 9, 2013.
Our principal executive offices are located at 10732 Hawk’s Vista Street, Plantation, Florida 33324, USA. Our telephone number is 1-945-632-6630. Our website address is www.neurotropebioscience.com .
Neurotrope BioScience was incorporated on October 31, 2012, under the laws of the State of Delaware. It is a clinical stage biopharmaceutical and diagnostics company. The company has been principally focused on developing two product platforms, a diagnostic test for Alzheimer’s Disease (sometimes referred to herein as AD) and a drug candidate called bryostatin for the treatment of Alzheimer’s Disease, both of which are in the clinical testing stage.
We are considered to be a development stage company, as defined by Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 915-10, in that we are devoting substantially all of our efforts to establishing a new business, where planned principal operations have commenced, but no revenues have been derived from these operations.
Neurotrope BioScience entered into a Technology License and Services Agreement, dated October 31, 2012, with the Blanchette Rockefeller Neurosciences Institute (“BRNI”) and its affiliate NRV II, LLC, pursuant to which the company was granted an exclusive non-transferable license to certain patents and technologies required to develop our proposed products (for additional information, see “Description of Business—Intellectual Property—Technology License and Services Agreement”). The company was formed for the primary purpose of commercializing certain technologies, which were initially developed by BRNI, for therapeutic or diagnostic applications for Alzheimer’s Disease or other cognitive dysfunctions. These technologies have been under development since 1999 and have been financed through significant funding from a variety of non-investor sources (which include not-for-profit foundations, the National Institutes of Health (which is part of the U.S. Department of Health and Human Services) and contributions from individuals).
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BRNI is a non-profit medical research institution dedicated to the study of memory and memory disorders. BRNI was founded in 1999 in memory of Blanchette Ferry Hooker Rockefeller, the mother of U.S. Senator John D. Rockefeller IV, who died of Alzheimer’s Disease. BRNI operates out of two facilities: a 78,000 square foot research building located on the campus of the University of West Virginia located in Morgantown, West Virginia, and a 9,000 square foot facility located on the campus of John Hopkins University in Rockville, Maryland. Through financial contributions made by the Rockefeller family, other donations made by individuals, including the estate of Sir John Templeton, and funding from federal and state authorities, BRNI has supported a significant level of research and development identifying lead drug candidates which are now ready for clinical testing and ultimately commercialization. The technology and associated inventions underlying our products are proprietary to BRNI.
In addition to bryostatin and the diagnostic test for Alzheimer’s Disease, we intend to pursue development of two other technology platforms with applications related to the treatment of Alzheimer’s Disease based on technology developed by and licensed from BRNI: the first, a platform for transporting drugs into the brain through the “blood-brain-barrier”; and, the second, a group of drugs for enhancing cognition, mood and alertness for neuropsychiatric conditions.
We expect that our first product, a diagnostic test system for the non-invasive detection of AD, will finish the testing phase of its development in 2015, whereupon we will evaluate the feasibility of its commercialization. The test uses an enzyme target which we believe controls most, if not all, of the early and recognized AD pathological processes.
BRNI is currently running compassionate use clinical trials in familial Alzheimer’s Disease with the experimental drug prototype bryostatin under a U.S. Food and Drug Administration (“FDA”) approved study protocol. We plan to expand this clinical study effort in familial Alzheimer’s Disease in the 2013-2014 timeframe to include additional patients. Also, we plan to begin Phase 2 clinical studies with bryostatin in mild-to-moderate stage AD patients in 2014. Bryostatin modulates the same enzyme target used by the diagnostic test for the detection of AD. We have human safety data and laboratory and animal results that suggest we may be able to improve symptoms and halt the progress of AD. We believe the drug prototypes restore synaptic structures and functions damaged by AD, leading to improvements in cognition and memory. Beyond AD, several other neurodegenerative diseases, such as ischemic stroke, traumatic brain injury, Fragile X mental retardation, depression and aging in the brain, may be amenable to treatment with the same approach.
Alzheimer’s Disease and the Potential Market for our Products
The Epidemic of Alzheimer’s Disease
According to the Alzheimers Association, it was estimated that 36 million people worldwide had AD in 2010. The prevalence of AD is independent of race, ethnicity, geography, life style and, to a large extent, genetics. The most common cause of developing AD is living too long. In developing countries, where the median age of death is less than 65 years old, AD is rarely recognized or diagnosed. In the U.S in 2013, 5.2 million persons are estimated to have AD, and 96% of these people are older than 65 years of age.
Researchers have explored and continue to explore a wide range of drug mechanisms in hopes of developing drugs to combat this disease. Figure 1 illustrates the range of mechanisms under consideration. Our approach, which involves the activation of PKC e , represents a novel mechanism in the armamentarium of potential AD drug therapies.
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Figure 1. Different Pharmacologic Targets being pursued for the Treatment of AD 1
It has been shown that, during several years preceding the diagnosis of dementia associated with Alzheimer’s Disease, there is a gradual cognition decline which at first may have rather benign characteristics. Entering the mild cognitive impairment (MCI) phase of the disease marks progression of AD to the point where there is synaptic dysfunction and loss of neurons (Figure 2). The mild cognitive impairment stage transitions into the moderate and, finally, severe stages of the disease that are characterized by greater systemic loss of neurons in the brain tissue.
1 | Business Insights: Reference Code B100040-005, Publication Date May 2011, “Advances in Alzheimer’s Disease Drug Discovery” |
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Figure 2. Early Diagnosis of AD is Essential to Effective Treatment 2
This progressive degeneration produces some abnormalities in the brain’s neurotransmitter systems as would be expected in cell dysfunction. A combination of cholinergic and glutamatergic dysfunction appears to underlie some of the symptomology of AD, and thus have become targets for pharmacologic intervention.
The loss of neuronal function and neuronal cell death is also related to the abnormal processing of β amyloid (Aβ) peptide, ultimately leading to the formation of Aβ plaques in the brain. As illustrated in Figure 2, this amyloid load in the brain usually becomes marked before the symptoms of the mild cognitive impairment (MCI) phase appear in AD patients.
The amyloid cascade hypothesis states that amyloid pathology leads to tau protein hyperphosphorylation and neurofibrillary tangles, excitotoxicity, neuroinflammation and finally synaptic depletion and neuronal death. The majority of drug development efforts to date have focused on stopping the production of Aβ or its fragments, and the elimination of these peptides from either intracellular or extracellular locations, has represented the preponderance of drug design efforts to halt the progression of AD. However, these efforts have been unsuccessful.
Neurotrope believes the current disappointment in clearing formed amyloid as a therapeutic intervention comes from a faulty view of the process. In our view, amyloid is merely a signal of the final phase of the pathology, and its appearance is an indication that the cessation of neuronal function in neuronal cells “stained” with plaque is inevitable.
In the words of Dr. Dan Alkon, Scientific Director at BRNI and our Chief Scientific Officer, “AD is not primarily a disease of plaques and tangles as many had previously concluded, it is most importantly a disease of synapses. In animal studies we found that PKC e activation in neurons targets the loss of synapses in the Alzheimer’s brain, and can virtually eliminate all other elements of the disease, i.e. the elevation of the toxic protein A Beta, the loss of neurons, the appearance of plaques, and the loss of cognitive function.”
2 | Lancet Neurol. 2010;9,119 CR Jack et al, “ Hypothetical model of dynamic biomarkers of the Alzheimer’s pathological cascade” |
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Potential Market for our Products
According to an article titled “Progress in Alzheimer’s Disease” published in J. Neurol in 2012, there has been a dearth of new product introductions in the last 20 years either for the treatment of AD symptoms or its definitive diagnosis in patients who begin exhibiting the memory and cognitive disorders associated with the disease. According to the Alzheimer’s Association, all of the products introduced to date for the treatment of AD have yielded negative or marginal results with no long-term effect on the progression of AD and no improvement in the memory or cognitive performance of the patients receiving these therapies. With 36 million people worldwide estimated to have AD in 2010, there is significant commercial potential for a new therapeutic that is effective in delaying the progression of the disease.
We believe the market for drugs, therapies or diagnostics to treat and analyze AD exist exclusively in the developed world and are principally comprised of the North American, European and Japanese markets. The aggregate AD market is subdivided into four distinct segments which are shown in Figure 3, as are the projected compounded annual growth rates (CAGRs) for these segments over the 2009-2014 timeframe.
Sales of the major drug therapies available only by prescription are reported in Figure 3, which includes, among others, the acetylcholinesterase inhibitors (Exelon®, Razadyne®, and Aricept®) and the NMDA ligand Namenda®. These drugs are approved for the symptomatic treatment of the cognitive aspects of AD but have no meaningful effect on disease progression, giving only temporary improvement in cognitive decline. Despite their limited efficacy, this group of drugs had collective worldwide sales in 2011 in excess of approximately $6 billion, according to a BBC Research Report. The negative CAGR for this segment reflects the fact that this class of drugs faces generic competition over the timeframe considered.
Figure 3. Global Market for Alzheimer’s Disease ($ mm): 2009-2014 3
A much higher growth rate is projected for the use of biomarkers and diagnostics over the 2009-2014 timeframe. The use of techniques or tools to measure disease progression and clinical trial endpoints are, in our estimation, in high demand across the industry. We believe that there is currently no diagnostic test for AD that has achieved significant market penetration.
3 | BCC Research Report PHM062A Alzheimer’s Disease Therapeutics and Diagnostics: Global Markets, January 2010. Available at http://www.bccresearch.com/market-research/pharmaceuticals/alzheimers-disease-therapeutics-phm062a.html |
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The “Therapeutics for Treatment of Symptoms” category cited in Figure 3 represents drugs from other classes that are being used to temporarily treat some of the symptoms of AD 4 . Lastly “Imaging” techniques to visualize and map Alzheimer’s Disease in the brains of patients while they are still alive is making inroads in the industry with the approval of some recent products (e.g., Amyvid®).
Neurotrope’s Proposed Products
Challenges in Treating AD
One of the challenges in treating AD is that its symptoms become manifest only years after the disease process has actually commenced. Treatment strategies attempting to intervene once symptoms become apparent are focused on stimulating the neurotransmitter activity of still healthy neurons, or removing the amyloid plaque deposited in the brain. All drug development efforts to date that have targeted the removal of beta-amyloid or tau protein as their therapeutic mechanism of action have failed, and drugs approved for stimulating neurotransmitter activity offer short-lived, palliative results for AD patients. As such, these strategies have yielded negative or marginal results with no effect on the progression of AD and no improvement in the memory or cognitive performance of the patients receiving these therapies, according to an article published in The American Journal of Pathology.
Dead or dying neurons cannot be returned to function, and many in the AD field currently believe that stemming the progression of the disease may only be possible with very early stage intervention. The FDA is encouraging the pharmaceutical industry to increase efforts to investigate such early stage interventional treatments by recommending that modified clinical endpoints, both functional and cognitive, be established to monitor the efficacy of drug prototypes being tested in early stage AD patients, according to an article published in The New England Journal of Medicine 5
In contrast, we believe that our data from various preclinical animal models demonstrates that activation of the enzyme called protein kinase C epsilon (“ PKC e ”) in central nervous system neurons returns neuronal vitality and function in areas of the brain damaged by AD, resulting in the restoration of memory and cognition.
Synaptogenesis
The research team at BRNI has developed a new approach to treat neurodegenerative disease through the activation of protein kinase C-epsilon (PKC e ). While the inhibition of PKC e has previously been explored in clinical studies for the treatment of cancer, BRNI has discovered that the selective activation of this enzyme is effective in treating memory and cognition disorders stemming from neurodegenerative disease.
We believe that deficient activity or low concentrations of PKC e in aging subjects is one of the main causes of the neurodegeneration seen in AD. The schematic in Figure 4 illustrates only a portion of the changes mediated by PKC e , and how they may help reverse the neuronal damage and loss central to the pathogenic process in Alzheimer’s Disease.
4 | See footnote 1. |
5 | NEJM.org: The New England Journal of Medicine, March 15, 2013, page 1: Drug Development of Early Alzheimer’s Disease, N. Kozauer, M.D., and Russell Katz, M.D. |
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Figure 4. PKC e Activation Involves 5 Different Mechanisms to Stop the Progression of Alzheimer’s Disease 6
Activation of PKC e has been achieved with drug prototypes that mimic the activity of diacylglycerol and phosphatidylserine, which are the natural ligands for this enzyme. In addition, a variety of in vitro and in vivo models have demonstrated that these drug prototypes are effective in restoring the structure and function of neuronal synapses. The first clinical application of the PKC e activators are focused on the treatment of Alzheimer’s Disease, but a number of other neurodegenerative diseases may be amenable to similar treatment. A list of these future drug targets is shown in Figure 5.
6 | Based on unpublished BRNI research. |
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Figure 5. Therapeutic targets for neuroregeneration through PKC e activation
Treatment of AD by Stimulating Synaptic Regeneration and Prevention of Neuronal Death
BRNI’s research program in this area lies outside the conventional wisdom that has dominated research efforts in the industry. The pathology of AD likely has multiple layers in its development and the accumulating presence of tau phosphorylated tangles and Aβ are causative factors in the poisoning of neurons and the resultant cognitive and memory disorders. However, once this process presents clinical manifestations of AD, restoring synaptic function thus far has not been effectively achieved by removing Aβ plaques with experimental drug interventions. Neurons cannot replicate, so once they’re poisoned with Aβ, the loss of function to the patient is irreversible.
BRNI’s and our approach is to restore general viability and hence synaptic function in still functioning neurons by stimulating the regeneration and growth of the dendritic branches in these neurons. This process can be visualized at the microscopic level in the neuronal cells of rats whose neurons have been damaged by ischemic shock (depriving oxygen) or traumatic injury to the brain. The morphology of the damaged neurons in these animal models looks strikingly different after they are treated with experimental drugs that activate the enzyme called protein kinase C epsilon (PKC e ). The new growth of dendritic trees on the damaged neurons creates a multiplicity of new synaptic connections, basically re-wiring the damaged neurons and restoring their function. Earlier therapeutic intervention with a PKC e activator produces better outcomes in tests measuring restored animal cognition function.
PKC e Activation Stimulates the Formation of New Synaptic Connections
The new synaptic connections formed from the damaged neurons in the rats can be demonstrated in various behavioral models for the animals that are used to measure memory functions. Treatment with bryostatin, and similar compounds synthesized at BRNI, for 12 weeks in transgenic rodent models pre-disposed to develop an AD-type of pathology shortly after birth, showed that the compounds promoted the growth of new synapses and preserved the existing synapses. In addition, these drugs also stopped the decrease of PKC e and the increase of soluble amyloid, according an article published in Journal of Neuroscience. 7
In cell tissue culture systems, the difference in morphology between neurons damaged by the application of ASPD (a modified form of Aβ) as compared to neurons activated by the application of bryostatin (Bryo) + retinoic acid (RA) is seen in Figure 6. Treatment with bryostatin, through PKC e activation, stimulates the regeneration of neurons and the formation of new synaptic connections.
7 | Journal of Neuroscience 2011, 31 (2), 630, D. Alkon et al. |
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Figure 6. Synaptogenesis in Hippocampus Neurons 8
The Central Role of PKC e in Maintaining Neuron Structure and Function
Upon activation, PKC e migrates from the cytosol to the cell membrane where it activates the MAP kinases Erk1/2 and NF-κβ, causing a series of changes leading to increased DNA transcription, synaptic maturation, a consequent increase of neurotrophin levels (such as NGF and BDNF), an inhibition of apoptosis, a reduction of β amyloid, and mediation of APOE3 neuroprotection.
This myriad of events is orchestrated by PKC e , and prompts a number of secondary events occurring in both the pre- and post-synaptic portions of the neuron. Cellular visualization of this effect shows an increase in the number of pre-synaptic vesicles in the neurons, an increase in pre-synaptic levels of PKC e and an increase in the number of mushroom spines associated with individual synaptic boutons, which spines may be important in memory. Their genesis in these neurons is responsible for the formation of new synapses.
The central role of PKC e activation in these dynamic events occurs much further upstream from the pathology associated with the deposition of neurofibrillary tangles and Aβ. This does not contradict the amyloid hypotheses for AD, but offers an earlier timepoint for therapeutic intervention which could prevent the formation of tangles and plaque.
Decreased amyloid formation from PKC e activation results from an increase in the rate of Aβ degradation by ECE (endothelin converting enzyme) and also an induction of α secretase mediated cleavage of amyloid precursor protein through phosphorylation of an extracellular signal regulated kinase known as Erk 1 / 2. In rodent models genetically predisposed to forming large amounts of amyloid deposits in their brains, PKC e activation was found to interrupt the ongoing formation of amyloid, suggesting that this approach may delay the progression of AD.
8 | Based on unpublished BRNI research. |
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The key to BRNI’s innovation in this area has been in identifying highly potent drug prototypes which at low concentrations cause the specific and transient activation of PKC e , without interacting with the other isozyme variants of PKC whose inactivation would negate the synaptogenic properties of the e isoform.
Testing PKC e Activation in Man
The basic drug mechanism invoking PKC e activation for neuronal regeneration has never been evaluated in man for any drug class or therapeutic application. We believe that BRNI’s research in this field is an ideal platform for testing this approach in human subjects.
We have contracted with BRNI in a research and collaboration agreement for ongoing support in this field, and have licensed from BRNI a body of biomedical research comprised of new methods and drug prototypes designed to stimulate neuronal regeneration. For additional information, see “Description of Business—Intellectual Property—Technology License and Services Agreement.” The commercial application of this technology has potential to impact Alzheimer’s Disease as well as traumatic brain injury, ischemic stroke, post-traumatic stress syndrome and learning disorders.
Drug Prototypes That Treat AD Through Regeneration
BRNI has developed two distinct groups of small molecule drug prototypes categorized as the bryostatin and polyunsaturated fatty acid (PUFA) analogues which are effective in the activation of PKC e . Representative structures of these chemically distinct classes of drugs prototypes are shown in Figure 7.
Figure 7. Lead Structures from the Chemical Families of Bryostatin and PUFA Analogues Effective in the Activation of PKC e 9
These molecules activate PKC e by binding to two different and distinct active sites on the enzyme. The natural ligands that bind to these sites and act as activators for PKC e are diacylglycerol and phosphatidylserine. The bryostatin analogues act as mimetics for diacylglycerol and, similarly, the PUFA analogues act as mimetics through their binding to the phosphatidylserine site. Both chemical families show a high level of specificity in activating the epsilon ( e ) variant in the PKC family of isozymes.
9 | Trends in Biochemical Sciences V. 34, #3, p.136. T.J. Nelson et al, “ Neuroprotective versus Tumorigenic protein kinase C activators” |
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Part of the hierarchal array of in vitro and in vivo tests used by BRNI in optimizing the potency of their drug prototypes is displayed in Figure 8. This “system” of drug screening is another major part of BRNI’s proprietary know-how.
Figure 8. Optimization of PKC e Activation Effects in Lead Drug Candidates: Array of in vitro and in vivo Test Models 10
Bryostatin
The flagship product in our armamentarium is bryostatin. Bryostatin is a natural product isolated from a marine organism. Bryostatin is a PKCα and e activator that was originally developed as an anticancer drug. According to Clinical Cancer Research, this drug candidate was previously evaluated in 63 clinical studies involving more than 1,200 patients at the National Cancer Institute for the treatment of various forms of cancer. While having failed these studies as an experimental anti-cancer therapy, much useful information on the safety, pharmacodynamics and toxicity of the drug was obtained from these in-human trials.
10 | Based on unpublished BRNI research. |
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BRNI discovered that, at a much lower dose than what was used in these anticancer trials, bryostatin is a potent activator of PKC e and may have efficacy in treating AD. Activation of PKC e has now been shown to partially restore synaptic function in neurons damaged by AD, ischemic stroke or traumatic brain injury in in vitro and in vivo animal models.
The National Cancer Institute has entered into a material transfer agreement with BRNI to provide the bryostatin required for pre-clinical research as well as all of the Phase 2 clinical trials planned by the Company. The clinical material transfer agreement specifies that BRNI retains all of the bryostatin intellectual property. Our license agreement with BRNI (see “Description of Business—Intellectual Property—Technology License and Services Agreement”) permits our access to new bryostatin clinical trial data and information held by the National Cancer Institute, as well as past clinical, safety and toxicity data compiled by the National Cancer Institute during the time this drug was being evaluated for its anticancer properties. The National Cancer Institute has agreed to supply BRNI, and, thereby, us, with bryostatin to explore the efficacy of this drug in treating AD. The clinical material transfer agreement prohibits the use of bryostatin for commercial purposes, for which a separate license may be required.
BRNI has received FDA approval to conduct an exploratory evaluation of bryostatin on a compassionate use basis in AD patients who have an inherited form of AD, frequently called familial Alzheimer’s Disease. Familial Alzheimer’s Disease results from one of four major mutations in the genome, and this mutation is passed on from generation to generation within a family that carries the defective gene. The tragic consequence of familial Alzheimer’s Disease is that it strikes its victims at an early age, often while they are in their twenties. The aggressive progression of familial Alzheimer’s Disease can render these patients in the terminal stages of Alzheimer’s Disease in their late 30s and early 40s.
We intend to collaborate with BRNI and obtain our own approval from the FDA to further the clinical studies in Familial Alzheimer’s Disease initiated by BRNI throughout the 2013-2014 timeframe. We also plan to initiate a Phase 2a study in 12 AD patients to assess the safety and tolerability of the drug candidate in 2014. In both clinical studies, we will assess the efficacy of bryostatin on improving the cognition of these patients or delaying the progression of the disease.
PUFA
Several other drug prototypes termed the PUFA analogues have been synthesized at BRNI and evaluated for their PKC e activating properties in models of AD. The PUFA analogues are not structurally related to bryostatin and therefore activate PKC e at a different site than bryostatin. We believe the PUFA analogues represent a potential source for follow-on drug candidates. PKC e activators from BRNI’s PUFA family of drug prototypes have demonstrated neuroregeneration efficacy in BRNI’s laboratories roughly equivalent to that of bryostatin. Our goal is to commence clinical evaluation of a lead drug candidate from this chemical series in 2014. We plan for the PUFA analogues to undergo clinical evaluation for the treatment of AD regardless of the clinical test results generated by the initial evaluation of bryostatin.
Diagnostic Test for AD
If accurate biomarkers are established to allow clinicians to make an early diagnosis of AD and a determination of its severity, pharmacotherapy of the disease could start earlier and perhaps delay its progression and end-stage consequences.
The absolute determination of AD in patients is currently achieved only upon autopsy; clinicians are unable to definitively diagnose the disease in living patients. BRNI’s research on the role of PKC e in neuroregeneration has allowed it to develop different peripheral biomarkers that have a high correlation level with the presence of AD. BRNI has developed three peripheral biomarkers whose expression is mediated by PKC e . A description of these biomarkers and the assay systems used to measure them is displayed in Figure 9.
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Using fibroblasts obtained from a simple skin biopsy, a series of in vitro tests are used to amplify the expression of these biomarkers which can be used to detect AD. The skin fibroblast displays the same basic pathophysiology indicative of AD as a neuron in the central nervous system. At present, there have been four studies of our diagnostic test involving a total of 174 patients which have analyzed AD patients, patients with mixed dementia (AD plus other dementia), normal or controls, and patients with non-AD dementia.
Figure 9. Methodology for AD in vitro Diagnostic Test 11
The molecular indices that form the backbone of the diagnostic test were derived from the convergence of signaling pathways that mediate Memory, AD Pathophysiology and Synaptogenesis. In each of these processes, the level of PKC e activation plays a central role. Each of the three peripheral biomarkers was individually evaluated against a separate group of subjects as illustrated in Figure 10. The specificity and selectivity for each of the biomarkers demonstrates the precision of this diagnostic test system, not only for the absolute confirmation of AD, but the ability of the test to discriminate AD dementia from that of other forms of dementia. We are currently planning the final clinical study in the development of this diagnostic test system, which is targeted for completion in 2015. This study will simultaneously evaluate all three biomarkers in approximately 300 AD patients providing additional cross-validation data between the different biomarkers.
11 | Neurobiology of Aging 2010, V.31, p.889, Tapan Khan et al, and PNAS, 2006, V. 103 #35, p. 13203, “ An internally controlled peripheral biomarker for Alzheimer’s disease : Erk1 and Erk2 responses to the inflammatory signal bradykinin” |
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Figure 10. Database for Validating the in vitro Diagnostic Test from Skin Biopsy Samples 12
We plan to finish the testing phase of the development of this diagnostic test in 2015, whereupon we will evaluate the feasibility of its commercialization.
We believe the hallmarks of our diagnostic test are:
· | its ease of use for both the patient and clinician; |
· | the ability of the test to differentiate AD-type dementias from those dementias having a different origin, and; |
· | the test is equally accurate in confirming the presence of AD in patients who are asymptomatic, or in those patients who might be experiencing the first clinical signs of AD. |
Future objectives for the diagnostic test are its application in establishing the stage of the AD progression and the rate of progression for the disease from the first diagnostic test result.
Based on current laboratory capacity, we expect to be able to analyze up to 100 samples per month. Quality control standards are applied against every parameter in the diagnostic test process, to help ensure a high level of consistency in the test results regardless of the laboratory or technicians operating the test.
We will actively seek a marketing partner to assist both in the promotion of the diagnostic test, and laboratory support to process tests that exceed our laboratory capacity.
12 | Based on unpublished BRNI research. |
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Learning and Memory Disorders
A parallel drug discovery program at BRNI, which is also licensed to us, has discovered a new role for the enzyme carbonic anhydrase in modulating the attention status of animals. This serves as a direct input to their learning capacity and the consolidation of new memories that are a consequence of the learning exercise. Drug prototypes that activate carbonic anhydrase transform the normal inhibitory synapses that are gamma-aminobutyric acid (GABA) mediated into excitatory synapses which enhance the learning capacity of the test animals.
Although this discovery will require at least several years of preclinical refinement before drug candidates are ready for testing in humans, the potential clinical applications offer a new mechanism to potentially modulate attention deficit disorder (ADD) and post-traumatic stress disorder (PTSD). Patients with ADD are not able to focus on a task long enough to facilitate the memory function and thus could benefit from a drug that activates carbonic anhydrase; while patients with PTSD struggle with turning off bad memories that alter their perceptions and disrupt their ability to absorb new sensory inputs from their current reality. In this case, carbonic anhydrase inhibitors may effectively turn off the feedback of bad memories which cloud their consciousness and have devastating effects on their daily existence.
Enhanced Delivery of Drugs Through the Blood-Brain-Barrier
The brain is self-enclosed by a fatty sheath that covers those blood vessels that are exposed to the peripheral blood supply. The evolutionary purpose of this fatty sheath is to prevent the brain from being exposed to deleterious substances of natural or man-made origins that may be circulating in our peripheral blood supply. This barrier also makes it very difficult for hydrophilic drugs to enter the brain. While the concentration of such drugs may be high when measured in the blood plasma, usually their concentration in the brain is only a fraction of that seen in the periphery. The blood-brain-barrier does employ active transport mechanisms to “import” from the peripheral blood supply essential nutrients it requires for its function. These active transport systems circumvent the barrier protection qualities of the blood-brain-barrier and can be exploited for the stealth delivery of drug substances needed in the brain to combat infection, inflammation or other disease.
BRNI has exploited one of these active transport systems which is responsible for moving cholesterol and apolipoprotein E (ApoE) across the blood-brain-barrier to support the brain’s metabolic function. The hydrophilic antibiotic tetracycline has been compartmentalized in synthetically prepared low density lipoprotein (LDL) micelles that have numerous molecules of ApoE imbedded in its membrane. The normal penetration of tetracycline into the brain when administered systemically is negligible, but can be dramatically improved when it is incorporated into the ApoE–LDL micelles.
This discovery has established a proof-in-principle for using LDL-ApoE micelles to facilitate the entry of hydrophilic drugs into the brain.
We plan to expand the development program for this blood-brain-barrier delivery system at BRNI, and generalize its application to a variety of drugs through a contract research service offered to other pharmaceutical companies seeking to improve the penetration of their drug prototypes into the brain.
Corporate Development Plan
Our priorities over the next 24 months are focused on achieving the following milestone events:
· | The first of these milestone events commences with our FDA Phase 2a single dose clinical study with bryostatin in AD patients. The results of this study are expected to be reported by the third quarter of 2014. If this study generates positive results, we expect to be positioned to initiate a Phase 2b study by the end of the fourth quarter of 2014; |
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· | We are applying to the FDA for approval to conduct a multiple dose study with bryostatin on a compassionate use basis in AD patients who suffer from an early onset form of this disease due to an inherited genetic mutation. If approval is timely received, we expect the initial results from this study to be available by the end of the fourth quarter of 2013, with further ongoing results expected to be reported at different intervals throughout 2014; and |
· | We plan to finish the testing phase of the development of our in vitro diagnostic test system for the detection of Alzheimer’s Disease in 2015, whereupon we will evaluate the feasibility of its commercialization. |
Our operating plan for attaining these objectives is illustrated in Figure 11.
Figure 11. Operating Plan for the next 24 Months
We plan to engage a contract research organization to help plan, execute and analyze the two Phase 2 studies we have planned in AD. Based on a fast track clinical development plan, if the Phase 2 clinical development program for bryostatin is a success, we believe this product could possibly obtain FDA approval by the end of 2018.
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Ongoing consulting services furnished by BRNI will support our efforts to nominate a PUFA drug prototype for Phase 1 evaluation in AD, which is currently expected by the end of the second quarter of 2014.
Intellectual Property
Technology License and Services Agreement
Neurotrope BioScience entered into a Technology License and Services Agreement, dated October 31, 2012, with BRNI and its affiliate NRV II, LLC, which was amended by Amendment #1 to the License Agreement, dated August 21, 2013 (as amended, the “License Agreement”). Pursuant to the License Agreement, BRNI and NRV II, LLC granted to Neurotrope BioScience an exclusive, non-transferable, world-wide, royalty-bearing license to certain patents owned by BRNI or licensed to NRV II, LLC by BRNI as of or subsequent to October 31, 2012 to develop, use, manufacture, market and sell products or services for therapeutic or diagnostic applications for Alzheimer’s Disease or other cognitive dysfunctions. There are certain exceptions to the exclusivity of the license, including for BRNI and its affiliates to use the licensed intellectual property to engage in research and development and other non-commercial activities and to provide services to us or to perform other activities in connection with the License Agreement, and with respect to intellectual property acquired by BRNI or NRV II, LLC that would be subject to the License Agreement but is subject to a license existing as of the date of acquisition. Pursuant to the License Agreement, BRNI has the exclusive right (but not the obligation) to apply for, file, prosecute or maintain patents and patent applications for the technologies licensed to us. However, in order to maintain our rights to use the licensed technologies, we must reimburse BRNI for all of the attorney’s fees and other costs and expenses related to any of the foregoing.
The License Agreement requires us to use, and to pay the fees, costs and expenses of, BRNI to provide research and development services or other scientific assistance and support services unless BRNI provides its prior written consent to the use of third-party service provider, which consent may not be commercially unreasonably withheld. We are required to pay to BRNI a royalty in the amount of between 2% and 5% of the our revenues in connection with the licensed technology depending upon the percentage of our ownership held by Neuroscience Research Ventures, Inc., which is an affiliate of BRNI (the amount of the royalty generally increases as the percentage ownership by Neuroscience Research Ventures, Inc. decreases). Within 30 days after our receipt of any amount of capital raised in a financing prior to a public offering, we are required to pay to BRNI 5% of such amount as an advance payment of future royalties. In addition, upon the February 28, 2013 closing on the sale of Series A Preferred Stock, we were required to pay BRNI a fee in the amount of approximately $1.6 million. The License Agreement further requires us to pay BRNI (i) a fixed research fee equal to a pro-rata amount of $1 million in the year during which the we close on a $25 million round of financing, (ii) a fixed research fee of $1 million per year for each of the five calendar years following the completion of such financing and (iii) an annual fixed research fee in an amount to be negotiated and agreed upon no later than 90 days prior to the end of the fifth calendar year following the completion of such financing to be paid with respect to each remaining calendar year during the term of the License Agreement.
The term of the License Agreement continues until the later of the date (i) the last of the licensed patents expires, is abandoned or is declared unenforceable or invalid (in each case, determined in accordance with the License Agreement) and (ii) the last of the licensed technology enters the public domain. BRNI has the right to terminate the License Agreement after 30 days prior notice in certain circumstances, including if we were to materially breach any provisions of the License Agreement after a 60-day cure period for breaches that are capable of being cured, in the event of certain bankruptcy or insolvency proceedings or in the event of the termination of that certain Stockholders Agreement dated October 31, 2012 with respect to us.
Effective August 28, 2013, the Company signed a statement of work (“SOW”) with BRNI pursuant to the License Agreement, whereby the Company has contracted for the further development of its AD diagnostic product. The project is intended to validate each of three biomarkers in a heterogeneous patient population to determine sensitivity and selectivity parameters for each biomarker, or combination of biomarkers, to detect Alzheimer’s Disease. The three biomarkers to be evaluated are: the PKC e levels, the Erk1/2 ratios, and the fibroblast morphology test. Pursuant to the SOW, the Company is obligated to pay BRNI a total of $1,645,470 in twelve equal monthly installments of $137,123, payable on the first business day of each month. These payments are for operating expenses associated with BRNI’s diagnostic laboratories. Operating expenses that are incurred in excess of this total amount are the responsibility of BRNI unless prior approval is obtained from the Company. The SOW may be extended if BRNI provides the Company with two months advanced notice that the SOW objectives are not met within the initial twelve month period. The Company will agree to continue funding the SOW at the same monthly rate for a period not to exceed an additional six months to conclude the first anticipated clinical trial for the AD diagnostic product. In addition, the Company has agreed to pay an estimated $877,300 in external costs to complete the first clinical trial. If the results of the first clinical trial are accurate to pre-described tolerances, the Company has agreed to consider paying BRNI additional funds to further related research and development activities.
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BRNI’s Intellectual Property
BRNI has established an extensive intellectual property portfolio that includes 52 issued patents, 93 pending patents and 3 provisional patent filings, in the U.S. and elsewhere, which, we believe, together cover the world’s key pharmaceutical market. BRNI’s patent portfolio includes method of use patents claiming an extended family of bryostatin analogues in the treatment of cognitive dysfunction and memory disorders. Composition of matter and method of use patents have been issued to BRNI that cover the use of the PUFA family of molecules for the same therapeutic applications. BRNI has also filed patent applications for drug delivery systems and other composition formulations.
The License Agreement provides the Company rights to the patents and technologies required to develop its proposed products. The patents and technologies licensed to the Company pursuant to the License Agreement include, without limitation, the following:
· | an in vitro diagnostic system to detect AD; |
· | drug prototypes composed of the bryostatin and PUFA chemical families; |
· | a patent protected technology to enhance drug delivery through the blood-brain-barrier; and |
· | lead molecules and methodologies to modify attention-gated learning, alertness and memory disorders through the modulation of the enzyme carbonic anhydrase. |
A substantial amount of in-human data exists that was generated by the National Cancer Institute that involves the earlier evaluation of bryostatin as an anticancer agent. The National Cancer Institute also holds the existing inventory of the bryostatin drug product which is suitable for use in man. Our use of the substantial data package generated by the National Cancer Institute on bryostatin, as well as access to the clinical supply of this substance, is permitted under a material transfer agreements entered into and between the National Cancer Institute and BRNI.
There are no known patent conflicts or freedom to operate issues at this time which could encumber our ability to commercialize either the AD diagnostic system or the PKC e activators for the treatment of cognition and memory disorders. However, we cannot provide any assurance that such conflicts will not arise in the future. See the risk factors captioned “Our commercial success will depend, in part, on our ability, and the ability of our licensors, to obtain and maintain patent protection. Our licensors’ failure to obtain and maintain patent protection for our products may have a material adverse effect on our business.” and “Our licensed patented technologies may infringe on other patents, which may expose us to costly litigation.” under “Risk Factors—Risks Related to our Business.”
Governmental Regulation and Product Approval
The manufacturing and marketing of our potential products and our ongoing research and development activities are subject to extensive regulation by the FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries.
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United States Regulation
Before any of our products can be marketed in the United States, they must receive approval from the FDA. To receive this approval, any drug we develop must undergo rigorous preclinical testing and clinical trials that demonstrate the product candidate’s safety and effectiveness for each indicated use. This extensive regulatory process controls, among other things, the development, testing, manufacture, safety, efficacy, record keeping, labeling, storage, approval, advertising, promotion, sale, and distribution of pharmaceutical products.
In general, before any new ethical pharmaceutical product can be marketed in the United States, the process typically required by the FDA includes:
· | preclinical laboratory and animal tests; |
· | submission of an investigational new drug application, or IND, which must become effective before human clinical trials may begin; |
· | adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use; |
· | pre-approval inspection of manufacturing facilities and selected clinical investigators; |
· | Submission of a New Drug Application, or NDA, to the FDA; and |
· | FDA approval of an NDA, or an NDA supplement (for subsequent indications or other modifications, including a change in location of the manufacturing facility). |
Preclinical Testing
In the United States, drug candidates are tested in animals until adequate proof of safety and efficacy is established. These preclinical studies generally evaluate the mechanism of action and pharmacology of the product and assess the potential safety and efficacy of the product. Tested compounds must be produced according to applicable current good manufacturing practice requirements and preclinical safety tests must be conducted in compliance with FDA and international regulations regarding good laboratory practices. The results of the preclinical tests, together with manufacturing information and analytical data, are generally submitted to the FDA as part of an IND, which must become effective before human clinical trials may commence. The IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA requests an extension or raises concerns about the conduct of the clinical trials as outlined in the application. If the FDA has any concerns, the sponsor of the application and the FDA must resolve the concerns before clinical trials can begin. Regulatory authorities may require additional preclinical data before allowing the clinical studies to commence or proceed from one phase to another, and could demand that the studies be discontinued or suspended at any time if there are significant safety issues. Furthermore, an independent institutional review board for each medical center proposing to participate in the conduct of the clinical trial, must review and approve the clinical protocol and patient informed consent form before commencement of the study at the respective medical center.
Clinical Trials
Clinical trials for new drug candidates are typically conducted in three sequential phases that may overlap. In phase 1, the initial introduction of the drug candidate into human volunteers, the emphasis is on testing for safety or adverse effects, dosage, tolerance, metabolism, distribution, excretion, and clinical pharmacology. Phase 2 involves studies in a limited patient population to determine the initial efficacy of the drug candidate for specific targeted indications, to determine dosage tolerance and optimal dosage and to identify possible adverse side effects and safety risks. Once a compound shows evidence of effectiveness and is found to have an acceptable safety profile in phase 2 evaluations, pivotal phase 3 trials are undertaken to more fully evaluate clinical outcomes and to establish the overall risk/benefit profile of the drug, and to provide, if appropriate, an adequate basis for product labeling. During all clinical trials, physicians will monitor patients to determine effectiveness of the drug candidate and to observe and report any reactions or safety risks that may result from use of the drug candidate. The FDA, the trial sites internal review board or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk.
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The data from the clinical trials, together with preclinical data and other supporting information that establishes a drug candidate’s safety, are submitted to the FDA in the form of a new drug application (NDA) or NDA supplement (for approval of a new indication if the product candidate is already approved for another indication). Under applicable laws and FDA regulations, each NDA submitted for FDA approval is usually given an internal administrative review within 45 to 60 days following submission of the NDA. If deemed complete, the FDA will “file” the NDA, thereby triggering substantive review of the application. The FDA can refuse to file any NDA that it deems incomplete or not properly reviewable. The FDA has established internal substantive review goals of six months for priority NDAs (for drugs addressing serious or life threatening conditions for which there is an unmet medical need) and ten months for regular NDAs. The FDA, however, is not legally required to complete its review within these periods, and these performance goals may change over time. Moreover, the outcome of the review, even if generally favorable, is not typically an actual approval, but an “action letter” that describes additional work that must be done before the NDA can be approved. The FDA’s review of a NDA may involve review and recommendations by an independent FDA advisory committee. The FDA may deny approval of an NDA or an NDA supplement if the applicable regulatory criteria are not satisfied, or it may require additional clinical data and/or an additional pivotal phase 3 clinical trial. Even if such data are submitted, the FDA may ultimately decide that the NDA or NDA supplement does not satisfy the criteria for approval.
Data Review and Approval
Substantial financial resources are necessary to fund the research, clinical trials and related activities necessary to satisfy FDA requirements or similar requirements of state, local and foreign regulatory agencies. It normally takes many years to satisfy these various regulatory requirements, assuming they are satisfied. Information generated in this process is susceptible to varying interpretations that could delay, limit, or prevent regulatory approval at any stage of the process. Accordingly, the actual time and expense required to bring a product to market may vary substantially. We cannot assure you that we will submit applications for required authorizations to manufacture and/or market potential products or that any such application will be reviewed and approved by the appropriate regulatory authorities in a timely manner, if at all. Data obtained from clinical activities is not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. Success in early stage clinical trials does not ensure success in later stage clinical trials. Even if a product candidate receives regulatory approval, the approval may be significantly limited to specific disease states, patient populations and dosages, or have conditions placed on them that restrict the commercial applications, advertising, promotion or distribution of these products.
Once issued, the FDA may withdraw product approval if ongoing regulatory standards are not met or if safety problems occur after the product reaches the market. In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products which have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs. The FDA may also request additional clinical trials after a product is approved. These so-called phase 4 studies may be made a condition to be satisfied after a drug receives approval. The results of phase 4 studies can confirm the effectiveness of a product candidate and can provide important safety information via the FDA’s voluntary adverse drug reaction reporting system. Any products manufactured or distributed by us pursuant to FDA approvals would be subject to continuing regulation by the FDA, including record-keeping requirements and reporting of adverse experiences with the drug. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with good manufacturing practices, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. We cannot be certain that we or our present or future suppliers will be able to comply with the good manufacturing practices regulations and other FDA regulatory requirements. If our present or future suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a drug from distribution or withdraw approval of the NDA for that drug. Furthermore, even after regulatory approval is obtained, later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market.
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The FDA closely regulates the marketing and promotion of drugs. Approval may be subject to post-marketing surveillance and other record keeping and reporting obligations, and involve ongoing requirements. Product approvals may be withdrawn if compliance with regulatory standards is not maintained or if problems occur following initial marketing. A company can make only those claims relating to safety and efficacy that are approved by the FDA. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available drugs for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturers’ communications on the subject of such off-label use.
505(b)(2)
The traditional approval process for new drugs is set out in Section 505(b)(1) of the Federal Food, Drug, and Cosmetic Act. An alternative pathway to FDA approval, established by Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, permits the applicant to rely on certain preclinical or clinical information generated by others for an approved product as some of the information required for approval and for which the applicant has not obtained a right of reference. The FDA may also require companies to perform additional studies to support the change from the approved product. The FDA may then approve the new product candidate for all or some of the indications for which the referenced product was approved, as well as for any new indications sought by the Section 505(b)(2) applicant.
To the extent that the Section 505(b)(2) applicant is relying on existing information for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book publication. Specifically, the applicant must certify that either: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is valid or will not be infringed by the new product. If the applicant does not challenge the unexpired listed patents, the Section 505(b)(2) application will not be approved until all the listed patents claiming the referenced product have expired. The Section 505(b)(2) application also will not be approved until any non-patent exclusivity, such exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired.
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Fast Track Approval
The Federal Food, Drug, and Cosmetic Act, as amended, and FDA regulations provide certain mechanisms for the accelerated “Fast Track” approval of potential products intended to treat serious or life-threatening illnesses which have demonstrated the potential to address unmet medical needs. The procedures permit early consultation and commitment from the FDA regarding the preclinical and clinical studies necessary to gain marketing approval. Provisions of this regulatory framework also permit, in certain cases, NDAs to be approved on the basis of valid indirect measurements of benefit of product effectiveness, thus accelerating the normal approval process. In the future, certain potential products employing our technology might qualify for this accelerated regulatory procedure. Even if the FDA agrees that these potential products qualify for accelerated approval procedures, the FDA may deny approval of our drugs or may require additional studies before approval. The FDA may also require us to perform post-approval, or phase 4, studies as a condition of such early approval. In addition, the FDA may impose restrictions on distribution and/or promotion in connection with any accelerated approval, and may withdraw approval if post-approval studies do not confirm the intended clinical benefit or safety of the potential product.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting a NDA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same disease, except in very limited circumstances, for seven years. These very limited circumstances are (i) an inability to supply the drug in sufficient quantities or (ii) a situation in which a new formulation of the drug has shown superior safety or efficacy. This exclusivity, however, also could block the approval of our product for seven years if a competitor obtains earlier approval of the same drug for the same indication.
Foreign Regulation
In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products in foreign countries. Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
Under European Union regulatory systems, we may submit marketing authorization applications either under a centralized or decentralized procedure. The centralized procedure, which is available for medicines produced by biotechnology or which are highly innovative, provides for the grant of a single marketing authorization that is valid for all EU member states. This authorization is a marketing authorization application. The decentralized procedure provides for mutual recognition of national approval decisions. Under this procedure, the holder of a national marketing authorization may submit an application to the remaining member states. Within 90 days of receiving the applications and assessment report, each member state must decide whether to recognize approval. This procedure is referred to as the mutual recognition procedure.
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The policies of the FDA and foreign regulatory authorities may change and additional government regulations may be enacted which could prevent or delay regulatory approval of our products and could also increase the cost of regulatory compliance. We cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the United States or abroad.
Regulation of Diagnostic Tests
Our diagnostic test must be offered in a manner than complies with the regulatory framework developed by the FDA and the Centers for Medicare and Medicaid with respect to diagnostic tests. See the risk factors captioned “If we are unable to engage a CLIA-certified lab to process our diagnostic test at its facilities, the commercialization of our diagnostic test may be unsuccessful.” and “If the FDA were to begin requiring approval or clearance of our tests, we could incur substantial costs and time delays associated with meeting requirements for pre-market clearance or approval.”
Other Government Regulation
Our research and development activities use biological and hazardous materials that are dangerous to human health and safety or the environment. We are subject to a variety of federal, state and local laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these materials and wastes resulting from these materials. We are also subject to regulation by the Occupational Safety and Health Administration and federal and state environmental protection agencies and to regulation under the Toxic Substances Control Act.
In addition, once our products are marketed commercially, we will have to comply with the various laws relating to the Medicare, Medicaid and other federal healthcare programs. These federal laws include, by way of example, the following:
· | The anti-kickback statute (Section 1128B(b) of the Social Security Act) prohibits certain business practices and relationships that might affect the provision and cost of healthcare services reimbursable under Medicare, Medicaid and other federal healthcare programs, including the payment or receipt of remuneration for the referral of patients whose care will be paid by Medicare or other governmental programs; |
· | The physician self-referral prohibition (Ethics in Patient Referral Act of 1989, as amended, commonly referred to as the Stark Law, Section 1877 of the Social Security Act), which prohibits referrals by physicians of Medicare or Medicaid patients to providers of a broad range of designated healthcare services in which the physicians (or their immediate family members) have ownership interests or with which they have certain other financial arrangements; |
· | The anti-inducement law (Section 1128A(a)(5) of the Social Security Act), which prohibits providers from offering anything to a Medicare or Medicaid beneficiary to induce that beneficiary to use items or services covered by either program; |
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· | The False Claims Act (31 U.S.C. § 3729 et seq.), which prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for payment to the federal government (including the Medicare and Medicaid programs); |
· | The Civil Monetary Penalties Law (Section 1128A of the Social Security Act), which authorizes the United States Department of Health and Human Services to impose civil penalties administratively for fraudulent or abusive acts. |
Sanctions for violating these federal laws include criminal and civil penalties that range from punitive sanctions, damage assessments, money penalties, imprisonment, denial of Medicare and Medicaid payments, or exclusion from the Medicare and Medicaid programs, or both. These laws also impose an affirmative duty on those receiving Medicare or Medicaid funding to ensure that they do not employ or contract with persons excluded from the Medicare and other government programs.
Competition
We compete with many companies, research institutes, hospitals, governments and universities that are working to develop products and processes to treat or diagnose Alzheimer’s Disease. Many of these entities have substantially greater financial, technical, manufacturing, marketing, distribution and other resources than we do. However, there has been a dearth of new product introductions in the last 20 years either for the treatment of AD symptoms or its definitive diagnosis in patients who begin exhibiting the memory and cognitive disorders associated with the disease. All of the products introduced to date for the treatment of AD have yielded negative or marginal results with no effect on the progression of AD and no improvement in the memory or cognitive performance of the patients receiving these therapies. We believe that there is currently no diagnostic test for AD that has achieved significant market penetration, and thus the absolute determination of AD in patients is currently achieved only upon autopsy. We believe we are the only company currently pursuing PKC e activation as a mechanism to treat AD and neurodegenerative disease. Although we believe that we have no direct competitors working in this same field at the present time, we cannot provide assurance that our competitors will not discover compounds or processes that may be competitive with our products and introduce such products or processes before us.
Employees
As of the date of this current report, our sole full-time employee is our Chief Executive Officer, and we have no part-time employees. In addition, we have a part-time Chief Financial Officer, and a part-time consultant supporting our business development efforts, each of whom provides services as an independent contractor.
We plan to hire an additional six full-time employees within the next twelve months whose principal responsibilities will be the support of our clinical development activities.
Description of Properties
Our principal executive offices are currently located in the home of our Chief Executive Officer at 10732 Hawk’s Vista Street, Plantation, Florida 33324, USA. We incur no costs for the use of this office. We intend to relocate our headquarters to leased office space in the near future.
The 9,000 square foot BRNI lab that serves as the base of operations for the development of our diagnostic test is located on the campus of John Hopkins University in Rockville, Maryland. We do not lease space in this laboratory; rather, BRNI provides services to us from this lab pursuant to arrangements entered into between us and BRNI under the Technology License and Services Agreement, for which we compensate BRNI.
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RISK FACTORS
An investment in our securities involves a high degree of risk. You should not invest in our securities if you cannot afford to lose your entire investment. In deciding whether you should invest in our securities, you should carefully consider the following information together with all of the other information contained in this Current Report. Any of the following risk factors can cause our business, prospects, financial condition or results of operations to suffer and you to lose all or part of your investment.
Risks Related to Our Business and Financial Condition
Our ongoing viability as a company depends on our ability to successfully develop and commercialize bryostatin and our diagnostic test for the detection of Alzheimer’s Disease.
We are principally focused on developing two product platforms, a drug, bryostatin, for the treatment of Alzheimer’s Disease and a diagnostic test for the detection of Alzheimer’s Disease, both of which are still in the clinical testing stage and have not yet been fully developed. Our potential success is highly uncertain since both of our principal product candidates are in the development stage and are subject to regulatory approval. Our potential success depends upon our ability to complete development and successfully commercialize in a timely manner the diagnostic test for Alzheimer’s Disease and bryostatin for the treatment of Alzheimer’s Disease. We must develop bryostatin, test for efficacy in the targeted patient population and manufacture the finished dosage form of bryostatin on commercial scale to meet regulatory standards and receive regulatory approvals. The development and commercialization process is both time-consuming and costly, and involves a high degree of business risk. Bryostatin is still at an early stage in its product development cycle, and our follow-on products are still at the concept stage. In order to make our diagnostic test system for Alzheimer’s Disease commercially available, we must make investments to upgrade BRNI’s laboratory facilities or contract with a third-party lab for the processing of the test. The results of clinical testing of our products are uncertain and we cannot assure that we will be able to obtain regulatory approvals of our products. If obtained, regulatory approvals may take longer or be more expensive than anticipated. Furthermore, even if regulatory approvals are obtained, our products may not perform as we expect and we may not be able to be successfully and profitably produce and market our products. \Delays in any part of the process or our inability to obtain regulatory approval of our products could adversely affect our future operating results by restricting (or even prohibiting) the introduction and sale of our products.
We are a development stage company and have a limited operating history upon which investors can evaluate our future prospects. For that reason, it is difficult to judge our prospects.
We are in the early development stage and we are subject to all of the risks inherent in the establishment of a new business enterprise. While development of our products was started in 1999 by BRNI, we incorporated our business on October 31, 2012 and on that same date entered into an exclusive license agreement for the continuing development and commercialization of our products with BRNI, and therefore have a limited operating history. Our proposed products are currently in the research and development stage and we have not generated any revenues, nor do we expect our products to generate revenues for at least the next 24 to 36 months, if ever. As a result, the Company must be evaluated in light of the potential problems, delays, uncertainties and complications encountered in connection with a newly established pharmaceutical development business. The risks include, but are not limited to, the possibilities that any or all of our potential products will be found to be ineffective or, that the products once developed, although effective, are not economical to market; that our competitors hold proprietary rights that preclude us from marketing such products; that our competitors market a superior or equivalent product; or the failure to receive necessary regulatory clearances for our proposed products. To achieve profitable operations, we must successfully develop, obtain regulatory approval for, introduce and successfully market at a profit products that are currently in the research and development phase. Much of the clinical development work and testing for our product candidates remains to be completed. No assurance can be given that our research and development efforts will be successful, that required regulatory approvals will be obtained, that any of our products will be safe and effective, that any products, if developed and introduced, will be successfully marketed or achieve market acceptance or that products will be marketed at prices necessary to generate profits. Failure to successfully develop, obtain regulatory approvals for, or introduce and market our products would have material adverse effects on our business prospects, financial condition and results of operations.
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We will rely on BRNI, and may also rely on other independent third-party contract research organizations, to perform clinical and non-clinical studies of our drug candidate and diagnostic test and to perform other research and development services.
The License Agreement requires the Company to use BRNI as its Preferred Provider to provide research and development services or other scientific assistance and support services, including clinical trials. With BRNI’s prior written consent, we may, however, also rely on independent third-party contract research organizations to perform clinical and non-clinical studies of our drug candidate and diagnostic test (each such third-party contract research organization, along with BRNI, a “ CRO ”). Many important aspects of the services that may be performed for us by CROs would be out of our direct control. If there were to be any dispute or disruption in our relationship with such CROs, the development of our diagnostic test and drug candidate may be delayed. Moreover, in our regulatory submissions, we would expect to rely on the quality and validity of the clinical work performed by third-party CROs. If any of our CROs’ processes, methodologies or results were determined to be invalid or inadequate, our own clinical data and results and related regulatory approvals could be materially adversely impacted.
We have relied on the representations and materials provided by BRNI, including scientific, peer-reviewed and non-peer reviewed publications, abstracts, slides, internal documents, verbal communications, patents and related patent filings, with respect to the results of its research related to our proposed products.
BRNI began the development of the intellectual property that forms the basis for our proposed products in 1999. We have relied on the quality and validity of the research results obtained by BRNI with respect to this intellectual property, and we have not independently verified, or engaged a third party to independently verify, the raw preclinical and clinical data produced by BRNI. If any of BRNI’s basic processes, methodologies or results were determined to be invalid or inadequate, our own clinical data and results and related regulatory approvals, could be materially adversely impacted.
If we do not obtain the necessary regulatory approvals in the U.S. and/or other countries, we will not be able to sell our drug candidates.
We cannot assure you that we will receive the approvals necessary to commercialize any of our drug candidates or any drug candidates we acquire or develop in the future. We will need approval from the FDA to commercialize our drug candidates in the U.S. and approvals from similar regulatory authorities in foreign jurisdictions to commercialize our drug candidates in those jurisdictions. In order to obtain FDA approval of bryostatin or any other drug candidate for the treatment of Alzheimer’s Disease, we must submit to the FDA a Biologics License Application, or BLA, demonstrating that the drug candidate is safe, pure and potent, or effective for its intended use. This demonstration requires significant research including completion of clinical trials. Satisfaction of the FDA’s regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the drug candidate and requires substantial resources for research, development and testing. We cannot predict whether our clinical trials will demonstrate the safety and efficacy of our drug candidates or if the results of any clinical trials will be sufficient to advance to the next phase of development or for approval from FDA. We also cannot predict whether our research and clinical approaches will result in drugs or therapeutics that the FDA considers safe and effective for the proposed indications. The FDA has substantial discretion in the drug approval process. The approval process may be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur prior to or during our regulatory review. Delays in obtaining regulatory approvals may: prevent or delay commercialization of, and our ability to derive revenues from, our drug candidates; and diminish any competitive advantages that we may otherwise believe that we hold. Even if we comply with all FDA requests, the FDA may ultimately reject one or more of our BLAs. We may never obtain regulatory clearance for any of our drug candidates. Failure to obtain FDA approval of our drug candidates will leave us without a saleable product and therefore without any source of revenues. In addition, the FDA may require us to conduct additional clinical testing or to perform post-marketing studies, as a condition to granting marketing approval of a drug product. If conditional marketing approval is obtained, the results generated after approval could result in loss of marketing approval, changes in product labeling, and/or new or increased concerns about the side effects or efficacy of a product. The FDA has significant post-market authority, including the explicit authority to require post-market studies and clinical trials, labeling changes based on new safety information and compliance with FDA-approved risk evaluation and mitigation strategies. The FDA’s exercise of its authority has in some cases resulted, and in the future could result, in delays or increased costs during product development, clinical trials and regulatory review, increased costs to comply with additional post-approval regulatory requirements and potential restrictions on sales of approved drugs. In foreign jurisdictions, the regulatory approval processes generally include the same or similar risks as those associated with the FDA approval procedures described above. We cannot assure you that we will receive the approvals necessary to commercialize our drug candidates for sale either within or outside the United States.
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If we are unable to engage a CLIA-certified lab to process our diagnostic test at its facilities, the commercialization of our diagnostic test may be unsuccessful.
We plan to offer our diagnostic test for Alzheimer’s Disease in the United States solely in conjunction with a comprehensive panel of laboratory services provided in a laboratory that has been accredited under the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) to perform high complexity testing. We believe that if our test is solely available through a CLIA-certified lab, we may market the test as a laboratory developed test (“LDT”). Under current FDA enforcement policies and guidance, LDT’s generally do not require FDA premarket clearance or approval before commercialization, and we plan to market our test on that basis. If we are unable to contract with a CLIA-certified lab for the processing of our diagnostic test, we may not be able to market the test as a LTD, which could result in substantial delay in the commercialization of our diagnostic test.
If the FDA were to begin requiring approval or clearance of our tests, we could incur substantial costs and time delays associated with meeting requirements for pre-market clearance or approval.
Although the FDA maintains that it has authority to regulate the development and use of LDT’s, such as ours, as medical devices, it has not exercised its authority with respect to most LDT’s as a matter of enforcement discretion. The FDA does not generally extend its enforcement discretion to reagents or software provided by third parties and used to perform LDT’s, and therefore these products must typically comply with FDA medical device regulations, which are wide-ranging and govern, among other things: product design and development, product testing, product labeling, product storage, pre-market clearance or approval, advertising and promotion and product sales and distribution.
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We believe that our diagnostic test, as utilized in a CLIA-certified laboratory testing, is an LDT. As a result, we believe that pursuant to the FDA’s current policies and guidance that the FDA does not require that we obtain regulatory clearances or approvals for our test. The container we provide for collection and transport of biopsy samples from a pathology laboratory to our clinical reference laboratory may be a medical device subject to FDA regulation but, we believe, is currently exempt from pre-market review by the FDA. While we believe that we are currently in material compliance with applicable laws and regulations, we cannot assure you that the FDA or other regulatory agencies would agree with our determination, and a determination that we have violated these laws, or a public announcement that we are being investigated for possible violations of these laws, could adversely affect our business prospects, financial condition and results of operations.
Moreover, FDA guidance and policy pertaining to diagnostic testing is continuing to evolve and is subject to ongoing review and revision. A significant change in any of the laws, regulations or policies may require us to change our business model in order to maintain regulatory compliance. At various times since 2006, the FDA has issued guidance documents or announced draft guidance regarding initiatives that may require varying levels of FDA oversight of our test. For example, in June 2010, the FDA announced a public meeting to discuss the agency’s oversight of LDT’s prompted by the increased complexity of LDT’s and their increasingly important role in clinical decision-making and disease management, particularly in the context of personalized medicine. The FDA indicated that it was considering a risk-based application of oversight to LDT’s and that, following public input and discussion, it might issue separate draft guidance on the regulation of LDT’s, which ultimately could require that we seek and obtain either pre-market clearance or approval of LDT’s, depending upon the risk-based approach FDA adopts. The public meeting was held in July 2010 and further public comments were submitted to the FDA through September 2010. The FDA has stated it is continuing to develop draft guidance in this area. Section 1143 of the Food and Drug Administration Safety and Innovation Act, signed by the U.S. President on July 9, 2012, requires the FDA to notify the U.S. Congress at least 60 days prior to issuing a draft or final guidance regulating LDT’s and provide details of the anticipated action.
We cannot provide any assurance that FDA regulation, including pre-market review, will not be required in the future for our tests, whether through additional guidance issued by the FDA, new enforcement policies adopted by the FDA or new legislation enacted by Congress. We believe it is possible that legislation will be enacted into law or guidance could be issued by the FDA which may result in increased regulatory burdens for us to offer our test.
The requirement of pre-market review could negatively affect our business until such review is completed and clearance to market or approval is obtained. The FDA could require that we stop selling our tests pending pre-market clearance or approval. If the FDA allows our test to remain on the market but there is uncertainty about our tests, if they are labeled investigational by the FDA or if labeling claims FDA allows us to make are very limited, orders or reimbursement may decline. The regulatory approval process may involve, among other things, successfully completing additional clinical trials and making a 510(k) submission, or filing a pre-market approval application with the FDA. If the FDA requires pre-market review, our tests may not be cleared or approved on a timely basis, if at all. We may also decide voluntarily to pursue FDA pre-market review of our tests if we determine that doing so would be appropriate.
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If we were required to conduct additional clinical trials prior to continuing to offer our test, those trials could lead to delays or failure to obtain necessary regulatory approval, which could cause significant delays in commercializing any future products and harm our ability to generate revenue.
We have not generated any revenues since our inception and we do not expect to generate revenue for the foreseeable future. If we do not generate revenues and achieve profitability, we may have to curtail or cease our development plans and operations.
Our ability to generate revenues depends upon many factors, including our ability to complete development of our proposed products, our ability to obtain necessary regulatory approvals for our proposed products and our ability to successfully commercialize, market and sell our products. We have not generated any revenues since our inception on October 31, 2012. We expect to incur significant operating losses over the next several years. If we do not generate revenues, do not achieve profitability and do not have other sources of financing for our business, we may have to curtail or cease our development plans and operations, which could cause investors to lose the entire amount of their investment.
Our operating losses and lack of revenues raise substantial doubt about our ability to continue as a going concern. If we do not continue as a going concern, investors could lose their entire investment.
Our operating losses and lack of revenues to support our cost structure raise substantial doubt about our ability to continue as a going concern. If we do not generate revenues, do not achieve profitability and do not have other sources of financing for our business, we may have to curtail or cease our development plans and operations, which could cause investors to lose the entire amount of their investment.
We will likely need additional financing to continue our operations. If we are unable to obtain additional financing on acceptable terms, we may have to curtail or cease our development plans and operations.
Since our inception on October 31, 2012, we have raised approximately $18,000,000 (net of offering expenses and advanced royalties paid to BRNI) from the sale of shares of our Series A Preferred Stock and, as of the date of this current report, we had approximately $16 million of available cash. We expect that our operating expenses over the next several years will increase as we expand our product acquisition, facilities, infrastructure and research and development activities. Based upon our projected activities, we believe that our current available cash will be sufficient to support our current operating plan for between 36 and 48 months. However, if our operating plan changes or we incur significant unanticipated expenses, we may require additional capital before this timeframe. Additional funds may be raised through debt financing and/or the issuance of equity securities, there being no assurance that any type of financing on terms acceptable to us will be available or otherwise occur. Debt financing must be repaid regardless of whether we generate revenues or cash flows from operations and may be secured by substantially all of our assets. Any equity financing or debt financing that requires the issuance of warrants or other equity securities to the lender would cause the percentage ownership by our current shareholders to be diluted, which dilution may be substantial. Also, any additional equity securities issued may have rights, preferences or privileges senior to those of existing shareholders. If such financing is not available when required or is not available on acceptable terms, we may be required to reduce or eliminate certain product candidates and development activities related to bryostatin or the “bryologs” and it may ultimately require us to suspend or cease operations, which could cause investors to lose the entire amount of their investment.
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If our Technology License and Services Agreement with BRNI were terminated, we may be required to cease operations.
Our rights to develop, commercialize and sell our proposed products are dependent upon our Technology License and Services Agreement with BRNI and its affiliate NRV II, LLC. BRNI has the right to terminate this agreement after 30 days prior notice in certain circumstances, including if we were to materially breach any provisions of the agreement after a 60-day cure period for breaches that are capable of being cured, in the event of certain bankruptcy or insolvency proceedings or in the event of the termination of the Common Stockholders Agreement with respect to the Company. Additionally, this agreement provides that the license may not be assigned, including by means of a change of control of the Company, without the consent of BRNI. For additional information regarding the Technology License and Services Agreement, see “Description of Business—Intellectual Property—Technology License and Services Agreement.” If the Technology License and Services Agreement were terminated, we would no longer have the rights to develop, commercialize and sell our proposed products, and we may be required to cease operations.
Our commercial success will depend, in part, on our ability, and the ability of our licensors, to obtain and maintain patent protection. Our licensors’ failure to obtain and maintain patent protection for our products may have a material adverse effect on our business.
Pursuant to our Technology License and Services Agreement with BRNI and its affiliate NRV II, LLC, we have obtained rights to certain patents owned by BRNI or licensed to NRV II, LLC by BRNI as of or subsequent to October 31, 2012. For additional information regarding the Technology License and Services Agreement, see “Description of Business—Intellectual Property—Technology License and Services Agreement.” In the future, we may seek rights from third parties to other patents or patent applications. Our success will depend, in part, on our ability and the ability of our licensors to maintain and/or obtain and enforce patent protection for our proposed products and to preserve our trade secrets, and to operate without infringing upon the proprietary rights of third parties. Patent positions in the field of biotechnology and pharmaceuticals are generally highly uncertain and involve complex legal and scientific questions. We cannot be certain that we or our licensors were the first inventors of inventions covered by our licensed patents or that we or they were the first to file. Accordingly, the patents licensed to us may not be valid or afford us protection against competitors with similar technology. The failure to maintain and/or obtain patent protection on the technologies underlying our proposed products may have material adverse effects on our competitive position and business prospects.
Our licensed patented technologies may infringe on other patents, which may expose us to costly litigation.
It is possible that our licensed patented technologies may infringe on patents or other rights owned by others. We may have to alter our products or processes, pay additional licensing fees, pay to defend an infringement action or challenge the validity of the patents in court or cease activities altogether because of patent rights of third parties, thereby causing additional unexpected costs and delays to us. Patent litigation is costly and time consuming, and we may not have sufficient resources to pay for such litigation. Pursuant to our Technology License and Services Agreement with BRNI and its affiliate NRV II, LLC, BRNI has the exclusive right (but not the obligation) to apply for, file, prosecute or maintain patents and patent applications for our licensed technologies. However, in order to maintain our rights to use our licensed technologies, we must reimburse BRNI for all of the attorney’s fees and other costs and expenses related to any of the foregoing. For additional information regarding the Technology License and Services Agreement, see “Description of Business—Intellectual Property—Technology License and Services Agreement.” If the patents licensed to us are determined to infringe a patent owned by a third party and we do not obtain a license under such third-party patents, or if we are found liable for infringement or are not able to have such third-party patents declared invalid, we may be liable for significant money damages, we may encounter significant delays in bringing products to market or we may be precluded from participating in the manufacture, use or sale of products or methods of treatment requiring such licenses.
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We may not be able to protect our trade secrets and other unpatented proprietary technologies, which could give our competitors an advantage over us.
In addition to our reliance on patents owned by BRNI, we rely upon trade secrets and other unpatented proprietary technologies. We may not be able to adequately protect our rights with regard to such unpatented proprietary technologies or competitors may independently develop substantially equivalent technologies. We seek to protect trade secrets and proprietary knowledge, in part through confidentiality agreements with our employees, consultants, advisors and collaborators. Nevertheless, these agreements may not effectively prevent disclosure of our confidential information and may not provide us with an adequate remedy in the event of unauthorized disclosure of such information and, as a result, our competitors could gain a competitive advantage over us.
We are dependent on Dr. James New, our Chief Executive Officer, for the successful execution of our business plan. The loss of Dr. New, or other key members of our prospective management team he may recruit, could have a material adverse effect on our business prospects.
We are highly dependent on Dr. James New, our Chief Executive Officer. We currently have an employment agreement with Dr. New, the material terms of which are described under “Executive and Director Compensation—Executive Compensation.” We are also dependent on his network of contacts and experience to recruit key talent to the Company. We do not have key-man insurance on any of our officers. Loss of the services of Dr. New could have a material adverse effect on our business prospects, financial condition and results of operations.
If we are unable to hire additional qualified personnel our business prospects may suffer.
Although we have not experienced any problems attracting and retaining key executives in the recent past and do not know that any key employee has plans to retire or leave our company, our success and achievement of our business plans depend upon our ability to recruit, hire, train and retain other highly qualified technical and managerial personnel. Competition for qualified employees among pharmaceutical and biotechnology companies is intense, and the loss of any of such persons, or an inability to attract, retain and motivate any additional highly skilled employees required for the implementation of our business plans and activities, could have a materially adverse effect on us. Our inability to attract and retain the necessary technical and managerial personnel and consultants and scientific and/or regulatory consultants and advisors could have a material adverse effect on our business prospects, financial condition and results of operations.
We may not be able to in-license or acquire new development-stage products or technologies.
Our product commercialization strategy relies, to some extent, on our ability to in-license or acquire product formulation techniques, new chemical entities, or related know-how in these fields that have proprietary protection. Another element of our strategy is focused on acquiring development stage products from competitors that are consistent with our product portfolio objectives and commercialization strategy. The acquisition of products requires the identification of appropriate candidates, negotiation of terms of acquisition, financing for the acquisition and integration of the candidates into our portfolio. Failure to accomplish any of these tasks may diminish our growth rate and adversely alter our competitive position.
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We are dependent upon the National Cancer Institute to supply bryostatin for our clinical trials.
BRNI has entered into a material transfer agreement with the National Cancer Institute, pursuant to which the National Cancer Institute has agreed to supply bryostatin to BRNI and one or more of its private sector collaborators and clinical trial investigators for the conduct of Phase 2 clinical trials and compassionate use trials. This agreement does not provide for a sufficient amount of bryostatin to support the completion of all clinical trials required to ultimately obtain FDA approval of bryostatin for the treatment of Alzheimer’s Disease. The National Cancer Institute currently is the only available source for the supply of bryostatin. Therefore, BRNI or we will have to enter into one or more subsequent agreements with the National Cancer Institute for the supply of additional amounts of bryostatin. If BRNI or we are unable to secure such additional agreements or if the National Cancer Institute otherwise discontinued for any reason supplying us with bryostatin, then we would have to discontinue our efforts to develop and commercialize bryostatin for the treatment of Alzheimer’s Disease.
We are dependent on BRNI to conduct clinical non-clinical studies of our drug candidates and diagnostic test and to provide services for certain core aspects of our business, and we may engage other third parties to provide such services in the future. Any interruption or failure by these third parties to meet their obligations pursuant to various agreements with us could have a material adverse effect on our business, results of operations and financial condition.
We rely on BRNI to conduct clinical and non-clinical studies of our drug candidates and diagnostic test and provide us with other services, and we may engage other third parties to provide such services in the future. Such third party contractors are subject to FDA requirements. Our business and financial viability are dependent on the regulatory compliance of these third parties, and on the strength, validity and terms of our various contracts with these third parties. Any interruption or failure by these third party contractors to meet their obligations pursuant to various agreements with us may be outside of our control and could have a material adverse effect on our business, financial condition and the results of operations.
We expect to rely on third parties to manufacture our proposed products and, as a result, we may not be able to control our product development.
We currently do not have an FDA approved manufacturing facility. We expect to rely on contract manufacturers to produce quantities of products and substances necessary for product commercialization. See also the risk factor above captioned “We are dependent upon the National Cancer Institute to supply bryostatin for our clinical trials.” Contract manufacturers that we may use must adhere to current good manufacturing practice regulations enforced by the FDA through its facilities inspection program. If the facilities of such manufacturers cannot pass a pre-approval plant inspection, the FDA pre-market approval of our products will not be granted. As a result:
· | there are a limited number of manufacturers that could produce the products for us and we may not be able to identify and enter into acceptable agreements with any manufacturers; |
· | the products may not be produced at costs or in quantities necessary to make them commercially viable; |
· | the quality of the products may not be acceptable to us; |
· | our manufacturing partners may go out of business or file for bankruptcy; |
· | our manufacturing partners may decide not to manufacture our products for us; |
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· | our manufacturing partners could fail to manufacture to our specifications; |
· | there could be delays in the delivery of quantities needed; |
· | we could be unable fulfill our commercial needs in the event we obtain regulatory approvals and there is strong market demand; or |
· | ongoing inspections by the FDA or other regulatory authorities may result in suspensions, seizures, recalls, fines, injunctions, revocations and/or criminal prosecutions. |
If we are unable to engage contract manufacturers or suppliers to manufacture or have packaged our products or if we are unable to contract for a sufficient supply of required products and substances on acceptable terms, or if we encounter delays or difficulties in our relationships with these manufacturers, or with a regulatory agency, then the submission of products for regulatory approval and subsequent sales of such products would be delayed. Any such delay may have a materially adverse effect on our business prospects, financial condition and results of operations.
We may rely on third parties for marketing and sales and our revenue prospects may depend on their efforts.
We currently have no experience in sales, marketing or distribution. We do not anticipate having the resources in the foreseeable future to allocate to the sales and marketing of our proposed products. As a result, our future success may depend, in part, on our ability to enter into and maintain collaborative relationships with one or more third parties, the collaborator’s strategic interest in the products we have under development and such collaborator’s ability to successfully market and sell any such products. We intend to pursue collaborative arrangements regarding the sales and marketing of our products as appropriate. However, we may not be able to establish or maintain such collaborative arrangements or, if we are able to do so, they may not have effective sales forces. To the extent that we decide not to, or are unable to, enter into collaborative arrangements with respect to the sales and marketing of our proposed products, significant capital expenditures, management resources and time will be required to establish and develop an in-house marketing and sales force with technical expertise. To the extent that we depend on third parties for marketing and distribution, any revenues received by us will depend upon the efforts of such third parties, which may not be successful.
If our products are not accepted by the medical community or health insurance companies, our business prospects will suffer.
Commercial sales of our proposed products will substantially depend upon the products’ efficacy and on their acceptance by the medical community, providers of comprehensive healthcare insurance, healthcare benefit plan managers, the Centers for Medicare and Medicaid Services (which is the U.S. federal agency which administers Medicare, Medicaid and the State Children’s Health Insurance Program) and other organizations. Widespread acceptance of our products will require educating the medical community and third party payers of medical treatments as to the benefits and reliability of the products. Our proposed products may not be accepted, and, even if they are accepted, we are unable to estimate the length of time it would take to gain such acceptance.
The branded prescription segment of the pharmaceutical industry in which we operate is competitive, and we are particularly subject to the risks of such competition.
The branded prescription segment of the pharmaceutical industry in which we operate is competitive, in part, because the products that are sold require extensive sales and marketing resources invested in their commercialization. The increasing cost of prescription pharmaceuticals has caused providers of comprehensive healthcare insurance, healthcare benefit plan managers, the Centers for Medicare and Medicaid Services, as well as other organizations, collectively known as third party payers, to tightly control and dictate their drug formulary plans to control the costs associated with the use of prescription pharmaceutical products used by enrollees in these plans. Our ability to gain formulary access to drug plans supported by these third party payers is substantially dependent on the differentiated patient benefit that our proposed products can provide compared closely to similar products claiming the same benefits or advantages. We may not be able to differentiate our proposed products from those of our competitors, successfully develop or introduce new products that are less costly or offer better performance than those of our competitors, or offer purchasers of our proposed products payment and other commercial terms as favorable as those offered by our competitors. We expect that some of our proposed products will eventually face competition from a significant number of biotechnology or large pharmaceutical companies. Because certain of our competitors have substantially greater financial and other resources than we have, we are particularly subject to the risks inherent in competing with them. The effects of this competition could materially adversely affect our business prospects, financial condition and results of operations.
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Our business will expose us to potential product liability risks, which could result in significant product liability exposure.
Our business will expose us to potential product liability risks that are inherent in the testing, designing, manufacturing and marketing of human diagnostic and therapeutic products. Product liability insurance in the pharmaceutical industry is generally expensive, and we may not be able to obtain or maintain product liability insurance in the future on acceptable terms or with adequate coverage against potential liabilities, if at all. A successful products liability claim brought against us could have a material adverse effect on our business prospects, financial condition and results of operations.
We do not currently have clinical trial liability insurance for our products and a successful clinical trial liability claim against us could have a material adverse effect on our financial condition even with such insurance coverage.
Our business will expose us to potential liability that results from risks associated with conducting clinical trials of our products. We do not currently have clinical trial liability insurance for our bryostatin drug product. Although we plan to procure insurance coverage for our bryostatin product prior to initiation of our planned Phase 2a trial as well as for future trials, there is no guarantee that we will be able to procure such coverage on favorable rates if at all and, even if procured, there is no guarantee that we will procure adequate coverage to satisfy any liability we may incur. A successful clinical trial liability claim brought against us could have a material adverse effect on our business prospects, financial condition and results of operations even if we successfully obtain clinical trial insurance.
We do not currently have comprehensive insurance and a successful liability claim against us could have a material adverse effect on our financial condition.
Our business and actions can expose us to potential liability risks that are inherent in business. We do not currently maintain commercial general liability insurance. A successful liability claim brought against us could have a material adverse effect on our business prospects, financial condition and results of operations.
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Reforms in the health care industry and the uncertainty associated with pharmaceutical pricing, reimbursement and related matters could adversely affect the marketing, pricing and demand for our products.
Public and private entities are seeking ways to reduce or contain increasing health care costs. All generic pharmaceutical manufacturers whose products are covered by the Medicaid program are required to rebate to each state a percentage of their “average manufacturer price” for the products in question. The extension of prescription drug coverage to all Medicare recipients was approved by Congress several years ago. Numerous other proposals to curb rising pharmaceutical prices have also been introduced or proposed in Congress and in some state legislatures. We cannot predict the nature of the measures that may be adopted or their effect on our competitive position. Our ability to market our products depends, in part, on reimbursement levels for them and related treatment established by health care providers, private health insurers and other organizations, including health maintenance organizations and managed care organizations. In the event that governmental authorities enact additional legislation or adopt regulations that affect third party coverage and reimbursement, demand for our products may be reduced, which may materially adversely affect our business prospects, financial condition and results of operations.
Consolidation in the pharmaceutical industry could materially affect our ability to operate as an independent entity.
The dearth of new product introductions in the branded prescription segment of the pharmaceutical market is a direct result of a long drought in basic research productivity in the industry. The pressure to grow revenues while containing the escalating costs of basic research and development has resulted in an increase in mergers and acquisitions in our industry. More consolidation in the pharmaceutical industry is expected over the next five years. We could become an acquisition target by a larger competitor and, as a consequence, suffer serious disruptions to our business model or even lose control of our ability to operate as an independent entity. Such events could have a material adverse effect on our product development efforts or the commercialization of our proposed products.
Risks Related to Our Common Stock
There currently is no public market for our Common Stock. Failure to develop or maintain a trading market could negatively affect the value of our Common Stock and make it difficult or impossible for you to sell your shares.
There is currently no public market for shares of our Common Stock and one may never develop. Our common stock is quoted on the OTC Markets. The OTC Markets is a thinly traded market and lacks the liquidity of certain other public markets with which some investors may have more experience. We may not ever be able to satisfy the listing requirements for our Common Stock to be listed on a national securities exchange, which are often a more widely-traded and liquid market. Some, but not all, of the factors which may delay or prevent the listing of our Common Stock on a more widely-traded and liquid market include the following: our stockholders’ equity may be insufficient; the market value of our outstanding securities may be too low; our net income from operations may be too low; our Common Stock may not be sufficiently widely held; we may not be able to secure market makers for our Common Stock; and we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our Common Stock listed. Should we fail to satisfy the initial listing standards of the national exchanges, or our Common Stock is otherwise rejected for listing and remains listed on the OTC Markets or suspended from the OTC Markets, the trading price of our Common Stock could suffer and the trading market for our Common Stock may be less liquid and our Common Stock price may be subject to increased volatility.
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We cannot assure you that our Common Stock will become liquid or that it will be listed on a securities exchange.
Until our Common Stock is listed on a national securities exchange such as the New York Stock Exchange or the Nasdaq Stock Market, we expect our Common Stock to remain eligible for quotation on the OTC Markets, or on another over-the-counter quotation system, or in the “pink sheets.” In those venues, however, an investor may find it difficult to obtain accurate quotations as to the market value of our Common Stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our Common Stock, which may further affect the liquidity of our Common Stock. This would also make it more difficult for us to raise capital.
Our common stock is subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.
The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
· | that a broker or dealer approve a person’s account for transactions in penny stocks; and |
· | the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. |
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
· | obtain financial information and investment experience objectives of the person; and |
· | make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. |
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth:
· | the basis on which the broker or dealer made the suitability determination; and |
· | that the broker or dealer received a signed, written agreement from the investor prior to the transaction. |
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of common stock and cause a decline in the market value of stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities.
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The price of our Common Stock may become volatile, which could lead to losses by investors and costly securities litigation.
The trading price of our Common Stock is likely to be highly volatile and could fluctuate in response to factors such as:
· | actual or anticipated variations in our operating results; |
· | announcements of developments by us or our competitors; |
· | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; |
· | adoption of new accounting standards affecting our Company’s industry; |
· | additions or departures of key personnel; |
· | sales of our Common Stock or other securities in the open market; |
· | changes in our industry; |
· | regulatory and economic developments, including our ability to obtain working capital financing; |
· | our ability to execute our business plan; and |
· | other events or factors, many of which are beyond our control. |
The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against the public company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and resources, which could harm our business and financial condition.
We do not anticipate dividends to be paid on our Common Stock, and investors may lose the entire amount of their investment.
Cash dividends have never been declared or paid on our Common Stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares. If we do not pay dividends, our Common Stock may be less valuable because a return on your investment will only occur if our stock price appreciates. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.
If securities analysts do not initiate coverage or continue to cover our Common Stock or publish unfavorable research or reports about our business, this may have a negative impact on the market price of our Common Stock.
The trading market for our Common Stock will depend on the research and reports that securities analysts publish about our business and the Company. It is often more difficult to obtain analyst coverage for companies whose securities are traded on the OTC Markets. We do not have any control over securities analysts. There is no guarantee that securities analysts will cover our Common Stock. If securities analysts do not cover our Common Stock, the lack of research coverage may adversely affect its market price. If we are covered by securities analysts, and our stock is the subject of an unfavorable report, our stock price and trading volume would likely decline. If one or more of these analysts ceases to cover the Company or fails to publish regular reports on the Company, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
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State Blue Sky registration: potential limitations on resale of the shares.
The holders of the shares of the Company, and persons who desire to purchase the shares in any trading market that might develop in the future, should be aware that there may be significant state law restrictions upon the ability of investors to resell the securities. Accordingly, investors should consider the secondary market for the Company’s securities to be a limited one. It is the intention of our management to seek coverage and publication of information regarding the Company in an accepted publication which permits a “manuals exemption.” This manuals exemption permits a security to be sold by stockholders in a particular state without being registered if the company issuing the security has a listing for that security in a securities manual recognized by that state. The listing entry must contain (i) the names of issuers, officers, and directors, (ii) an issuer’s balance sheet, and (iii) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. The principal accepted manuals are those published by Standard and Poor’s, and Mergent, Inc. Many states expressly recognize these manuals. A smaller number of states declare that they recognize securities manuals, but do not specify the recognized manuals. Among others, the following states do not have any provisions and, therefore, do not expressly recognize the manuals exemption: Alabama, Illinois, Kentucky, Louisiana, New York, Tennessee and Virginia.
You may experience dilution of your ownership interests because of the future issuance of additional shares of our Common Stock.
Any future issuance of our equity or equity-backed securities may dilute then-current stockholders’ ownership percentages and could also result in a decrease in the fair market value of our equity securities, because our assets would be owned by a larger pool of outstanding equity. As described above, we may need to raise additional capital through public or private offerings of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock. We may also issue such securities in connection with hiring or retaining employees and consultants (including stock options issued under our equity incentive plans), as payment to providers of goods and services, in connection with future acquisitions or for other business purposes. Our Board of Directors may at any time authorize the issuance of additional common or preferred stock without common stockholder approval, subject only to the total number of authorized common and preferred shares set forth in our articles of incorporation. The terms of equity securities issued by us in future transactions may be more favorable to new investors, and may include dividend and/or liquidation preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect. Also, the future issuance of any such additional shares of common or preferred stock or other securities may create downward pressure on the trading price of the common stock. There can be no assurance that any such future issuances will not be at a price (or exercise prices) below the price at which shares of the common stock are then traded. See “Description of Securities” below.
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The conversion of our issued and outstanding shares of Series A preferred stock could have the effect of diluting the voting power of our common stock holders.
The conversion of our shares of Series A preferred stock could have the effect of changing or preventing a change of control of the Company and could dilute your interests. Our authorized capital stock includes 50,000,000 shares of preferred stock, of which 24,325,000 shares are designated as Series A Preferred Stock.
The effects of the conversion of shares of our Series A preferred stock upon the rights of our common shareholders might include, among other things, restricting dividends on our common stock, diluting the voting power of our common stock holders, reducing the market price of the common stock, or impairing the liquidation rights of the common stock.
We may obtain additional capital through the issuance of preferred stock, which may limit your rights as a holder of our Common Stock.
Without any stockholder vote or action, our Board of Directors may designate and approve for issuance shares of our preferred stock. The terms of any preferred stock may include priority claims to assets and dividends and special voting rights which could limit the rights of the holders of our Common Stock. The designation and issuance of preferred stock favorable to current management or stockholders could make any possible takeover of the Company or the removal of our management more difficult.
Being a public company is expensive and administratively burdensome.
As a public reporting company we are subject to the information and reporting requirements of the Securities Act, the Exchange Act and other federal securities laws, rules and regulations related thereto, including compliance with the Sarbanes-Oxley Act. Complying with these laws and regulations requires the time and attention of our Board of Directors and management, and increases our expenses. Among other things, we must:
· | maintain and evaluate a system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board; |
· | maintain policies relating to disclosure controls and procedures; |
· | prepare and distribute periodic reports in compliance with our obligations under federal securities laws; |
· | institute a more comprehensive compliance function, including with respect to corporate governance; and |
· | involve, to a greater degree, our outside legal counsel and accountants in the above activities. |
The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders is expensive and much greater than that of a privately-held company, and compliance with these rules and regulations may require us to hire additional financial reporting, internal controls and other finance personnel, and will involve a material increase in regulatory, legal and accounting expenses and the attention of management. There can be no assurance that we will be able to comply with the applicable regulations in a timely manner, if at all. In addition, being a public company has made it more expensive for us to obtain director and officer liability insurance. In the future, we may be required to accept reduced coverage or incur substantially higher costs to obtain this coverage. These factors could also make it more difficult for us to attract and retain qualified executives and members of our Board of Directors, particularly directors willing to serve on an audit committee which we expect to establish.
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Any failure to maintain effective internal control over our financial reporting could materially adversely affect us.
Section 404 of the Sarbanes-Oxley Act of 2002 will require us to include in our annual reports on Form 10-K an assessment by management of the effectiveness of our internal control over financial reporting. In addition, at such time, if any, as we are no longer a “smaller reporting company,” our independent auditors will have to attest to and report on management’s assessment of the effectiveness of such internal control over financial reporting. While we intend to diligently and thoroughly document, review, test and improve our internal control over financial reporting in order to ensure compliance with Section 404, management may not be able to conclude that our internal control over financial reporting is effective. Furthermore, even if management were to reach such a conclusion, if our independent auditors are not satisfied with the adequacy of our internal control over financial reporting, or if the independent auditors interpret the requirements, rules or regulations differently than we do, then they may decline to attest to management’s assessment or may issue a report that is qualified. Any of these events could result in a loss of investor confidence in the reliability of our financial statements, which in turn could negatively impact the price of our Common Stock.
In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management and (if required in future) our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404. Our compliance with Section 404 may require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to retain the services of additional accounting and financial staff or consultants with appropriate public company experience and technical accounting knowledge to satisfy the ongoing requirements of Section 404. We intend to review the effectiveness of our internal controls and procedures and make any changes management determines appropriate, including to achieve compliance with Section 404 by the date on which we are required to so comply.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND results OF OPERATIONS
The following management’s discussion and analysis should be read in conjunction with the historical financial statements and the related notes thereto contained in this report. The management’s discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors” in this Form 8-K, that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this report.
As the result of the Merger and the change in business and operations of the Company, from engaging in the business of providing software solutions to deliver geo-location targeted coupon advertising to mobile internet devices, to the business of developing two product platforms, including a diagnostic test for Alzheimer’s Disease (“AD”) and a drug candidate called bryostatin for the treatment of AD, a discussion of the past financial results of Neurotrope, Inc., is not pertinent, and under applicable accounting principles the historical financial results of Neurotrope BioScience, the accounting acquirer, prior to the Merger are considered the historical financial results of the Company.
The following discussion highlights Neurotrope BioScience’s results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on Neurotrope BioScience’s audited and unaudited financial statements contained in this Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.
Basis of Presentation
The audited financial statements for our fiscal years ended December 31, 2012, and the unaudited financial statements for our fiscal six months ended June 30, 2013, include a summary of our significant accounting policies and should be read in conjunction with the discussion below. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these audited financial statements. All such adjustments are of a normal recurring nature.
Overview
Neurotrope BioScience, Inc. was founded as a Delaware Corporation in October 2012. Activities since the Company’s inception, through June 30, 2013, were devoted primarily to the development and commercialization of AD diagnostics and related therapeutic products for large and growing markets using innovative patented technology licensed from BRNI. This BRNI licensed technology has been under development since 1999 and have been financed from a variety of non-investor sources including not-for-profit foundations, the National Institute of Health and individual philanthropists. For a detailed description of the BRNI license agreement, refer to “Certain Relationships and Related Transactions” below in this Item 2.01.
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As of June 30, 2013, the Company had devoted substantially all of its efforts to product development, raising capital and building infrastructure through utilizing its strategic alliances, specifically with BRNI. The Company did not, as of that date, realize any revenues from its planned principal operations. Accordingly, the Company is considered to be in the development stage.
Strategy
One of the central tenets developed by BRNI is that the neurodegeneration underlying these neurological diseases can be halted and reversed if treatment is initiated early enough. This process occurs by an improvement in nerve cell viability and synaptic function through activation of an enzyme called protein kinase C (PKC). This enzyme is actually a super family of isozymes ( α, β, γ, δ, ε … ) which have different activities in different tissues. The PKCepsilon (aka PKCε) variant has a very high concentration in the synapses of neurons, suggesting it plays a role in maintaining synaptic function. Deficient activity or low concentrations of PKCepsilon in aging subjects is thought to be once of main causes of the neurodegeneration seen in AD. Through a variety of the latest biomedical techniques and animal models developed to map and quantify neuroregeneration, BRNI has established a very central role for PKCepsilon in re-modeling or restoring synaptic function in both healthy and diseased neurons in the central nervous system.
The flagship product in the Neurotrope armamentarium is bryostatin. This drug has previously been evaluated in 1,200 patients at the National Cancer Institute (“NCI”) for the treatment of various forms of cancer. While bryostatin did not show sufficient anti-cancer effects to warrant commercialization of the compound, much useful information on the safety, pharmacodynamics, and toxicity of the drug was gleaned from these in-human trials.
BRNI discovered that at a much lower dose than that which was used in these anticancer trials, bryostatin is a potent activator of PKCε and may have efficacy in treating AD. Activation of PKCε has now been shown to partially restore synaptic function in neurons damaged by AD, ischemic stroke or traumatic brain injury in in vitro and in vivo animal models.
The NCI has allowed BRNI access to the valuable chemical, animal and human data from its cancer studies. Through the licenses forged between BRNI and Neurotrope, Neurotope in turn has access to this same information to be used in our own research and regulatory programs.
The Company’s strategy is to efficiently utilize BRNI’s proprietary and patented technologies to further the development of those technologies toward commercializing a diagnostic and therapeutic product for AD and potentially utilize these technologies to diagnose and treat other neurological diseases.
Critical Accounting Policies, Estimates, and Judgments
Our financial statements are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, our commitments to strategic alliance partners and the timing of the achievement of collaboration milestones. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.
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Results of Operations
Fiscal period ended June 30, 2013
The Company began operations in October 2012. As a result, no comparable financial information is applicable and information is presented for the six months ended June 30, 2013 only.
Revenues
The Company has not generated any revenues for the six months ended June 30, 2013.
Operating Expenses
Overview
Total operating expenses for the six months ended June 30, 2013 were $1,325,545. Most significantly, during this period, the Company incurred related party research and development expenses for its ongoing development of its future diagnostic testing and pharmaceutical product in collaboration with BRNI and administrative expenses to manage the Company’s business.
Research and Development Expenses
For the six months ended June 30, 2013, the Company incurred $318,894 to BRNI for ongoing research and development and to fund an ongoing compassionate use trial of the Company’s AD therapeutic product under development.
General and Administrative Expenses
The Company incurred related party general and administrative expenses totaling $660,327. Of this amount, $469,898 was paid to BRNI as a prepaid royalty against future royalties payable to BRNI upon commercialization of licensed technologies. In addition, $122,457 was incurred for salaries, taxes, insurance and travel expenses of our Chief Executive Officer, $42,972 was incurred for financial and business development consulting expenses and $25,000 was incurred for travel and other administrative expenses associated with Company operating activities.
The Company incurred $346,324 of general and administrative salaries for the six months ended June 30, 2013. $153,611 was incurred for legal expenses, principally relating to the BRNI licensing agreement, $92,200 was incurred for professional fees associated with financial and accounting advisory services, $82,348 was incurred for outside operations consulting services, $10,413 was incurred for accounting services and $7,754 was incurred for office supplies and expenses.
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Fiscal year ended December 31, 2012
The Company began operations in October 2012. As a result, no comparable financial information is applicable and information is presented for the year ended December 31, 2012 only.
Revenues
The Company has not generated revenues for the year ended December 31, 2012.
Operating Expenses
Overview
Total operating expenses for the year ended December 31, 2012 were $1,437,793. Most significantly, during this period, the Company incurred related party research and development expenses for its ongoing development of its future diagnostic testing and pharmaceutical product in collaboration with BRNI and administrative expenses to manage the Company’s business.
Research and Development Expenses
For the year ended December 31, 2012, the Company incurred expenses to BRNI totaling $983,491 for ongoing research and development incurred to fund the Company’s use of BRNI resources.
General and Administrative Expenses
The Company incurred related party general and administrative expenses totaling $257,145. Of this amount, $139,901 was incurred by BRNI for expenses associated with patent estate maintenance and licensing and administrative services provided to the Company, $41,667 was incurred for consulting fees paid to our current Chief Executive Officer (who was acting as a consultant rather than an employee at that time) and $27,552 was incurred for travel expenses.
The Company incurred $197,157 of general and administrative salaries for the year ended December 31, 2012. $193,594 was incurred for legal expenses, principally relating to the Company licensing agreement with BRNI and employment agreement expenses and $3,562 was incurred for professional fees associated with financial and accounting advisory services.
Financial Condition, Liquidity and Capital Resources
Since its inception, the Company has primarily devoted its efforts to negotiating the license agreement with BRNI and using BRNI’s resources to further the development of the Company’s diagnostic and therapeutic products toward commercialization while conducting business planning and recruiting executive management. Accordingly, the Company is considered to be in the development stage.
Cash and Working Capital
Since inception, the Company incurred negative cash flows from operations. As of June 30, 2013, the Company had an accumulated deficit of $2,763,338 and had working capital of $6,609,624 as compared to a working capital deficit of $1,437,793 as of December 31, 2012. The $8,047,417 increase in working capital was primarily attributable to the Company’s private placements of the Series A Preferred Stock in February and May 2013, providing total net proceeds of approximately $9.4 million, offset by operating losses incurred by the Company for the six months ended June 30, 2013.
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As of December 31, 2012, the Company incurred operating losses of $1,437,793 which were all payable at year end as the Company did not have any cash as of December 31, 2012 to pay expenses. A portion of these payables were paid in 2013 upon the Company raising cash proceeds from its private placements of Series A Preferred Stock in February and May 2013.
Sources of Liquidity
Since inception, we have satisfied our operating cash requirements from the private placement of Series A Preferred Stock sold principally to outside investors.
In February 2013, through a private placement, the Company issued 9,073,300 shares of Series A Preferred Stock at $1.00 per share, resulting in gross proceeds of $9,073,300. In connection with the closing of the private placement, the Company paid a placement agent $882,330. In May 2013, the Company issued an additional 1,313,325 shares of Series A Preferred Stock, resulting in gross proceeds of $1,313,325, on which the Company paid a placement agent $131,332. In August 2013, the Company issued 11,533,375 of Series A Preferred Stock at $1.00 per share, resulting in gross proceeds of $11,533,375. In connection with the closing of the private placement, the Company paid a placement agent $1,128,337. We believe that the Merger will provide additional alternatives to issue securities and raise capital in the future.
As of August 23, 2013 (after the closing of its Series A Preferred Stock placement discussed above), the Company has approximately $16 million in cash. During the next two years, the Company expects to spend approximately $8 million on development of both its AD diagnostic and therapeutic products. With these expenditures, the Company anticipates launching its commercialized AD diagnostic product and conducting significant clinical trials on its AD therapeutic. The Company expects to also incur approximately $4 million in general and administrative costs to support the Company’s ongoing research and development expenses and its expenses associated with being a publicly traded company.
Pursuant to the SOW signed with BRNI on August 28, 2013, the Company is obligated to pay BRNI a total of $1,645,470 in twelve equal monthly installments of $137,123, payable on the first business day of each month. In addition, the Company has agreed to pay an estimated $877,300 in external costs to complete the first clinical trial.
With the proceeds from the private placements of Series A, management believes the Company has sufficient capital to fund its research and development and related general and administrative expenses for at least the next 24 to 36 months of operations under its current business plan. Management believes the Company will generate revenues through commercialization of its diagnostic product within the next 36 months. The Company is contemplating raising an additional $25 million to further its product development. This fundraising has not yet begun, and no specific terms have been set. There can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms or at all.
Off-Balance Sheet Arrangements
The Company did not engage in any “off-balance sheet arrangements” (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of June 30, 2013.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pre Merger
The following table sets forth certain information regarding the beneficial ownership of our common stock as of January 31, 2013, by each person or entity known by us to be the beneficial owner of more than 5% of the outstanding shares of common stock, each of our directors and named executive officers, and all of our directors and executive officers as a group.
Unless otherwise indicated, the persons named in the table below have sole voting and investment power with respect to the number of shares indicated as beneficially owned by them.
Title of Class |
Name and Address
of Beneficial Owner |
Amount and Nature
of Beneficial Owner |
Percent of Class |
Common Stock |
Marissa Watson*
1801 26th Street, Sacramento, CA 95816 |
9,000,000 shares
Secretary, Treasurer, Director |
88.2% |
Common Stock |
All officers and directors
as a group |
9,000,000 | 88.2% |
* Ms. Watson served as the Company’s Chief Executive Officer, Chief Financial Officer, President and sole Director until June 20, 2013.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. In accordance with Securities and Exchange Commission rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the table are deemed beneficially owned by the optionees. Subject to community property laws, where applicable, the persons or entities named in the table above have sole voting and investment power with respect to all shares of our common stock indicated as beneficially owned by them.
Post Merger
The following table sets forth information with respect to the beneficial ownership of our Common Stock as of August 26, 2013, by (i) each stockholder known by us to be the beneficial owner of more than 5% of our Common Stock or Series A Preferred Stock (our only classes of voting securities), (ii) each of our directors and executive officers, and (iii) all of our directors and executive officers as a group. To the best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of our Common Stock or Series A Preferred Stock beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted. Other than the Merger, to our knowledge, there is no arrangement, including any pledge by any person of securities of the Company or any of its parents, the operation of which may at a subsequent date result in a change in control of the Company.
Unless otherwise indicated in the following table, the address for each person named in the table is c/o Neurotrope, Inc., 10732 Hawk’s Vista Street, Plantation, Florida 33324, USA .
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Name and Address
of Beneficial Owner |
Common Stock Beneficially Owned | Percent of Common Stock Beneficially Owned (1) | Series A Preferred Stock Beneficially Owned | Percent of Series A Preferred Stock Beneficially Owned (1) | ||||||||||||
Intuitive Neurotrope LLC (2) Attn: William Dioguardi 1901 Main Street Lake Como, NJ 07719 |
4,086,625 | 15.9 | % | 4,086,625 | 18.6 | % | ||||||||||
Neurosciences Research Ventures, Inc. (3) 364 Patteson Drive, #279 Morgantown, WV 26505 |
10,687,500 | 45.8 | % | 0 | - | |||||||||||
Charles Ramat (4) [address] |
1,163,194 | 5.1 | % | 1,000,000 | 4.6 | % | ||||||||||
Hannah Rose Holdings, LLC (5) 101 Grovers Mill Road Suite #200 Lawrenceville, NJ 08648 |
3,014,424 | 13.3 | % | 1,000,000 | 4.6 | % | ||||||||||
E. Jeffrey Peierls (6)
73 South Holman Way
|
2,000,000 | 8.4 | % | 2,000,000 | 9.1 | % | ||||||||||
Dr. Daniel Alkon (7) | 1,125,000 | 5.1 | % | 0 | - | |||||||||||
Dr. Jim New (8) |
4,545,000 | 20.3 | % | 0 | - | |||||||||||
Robert Weinstein | 0 | - | 0 | - | ||||||||||||
Dr. John H. Abeles (9) | 6,901,536 | 29.5 | % | 750,000 | 3.4 | % | ||||||||||
William Singer | 10,843 | 0.1 | % | 0 | - | |||||||||||
Ralph Bean |
9,036 | - | 0 | - | ||||||||||||
Jay Haft | 34,036 | 0.2 | % | 25,000 | 0.1 | % | ||||||||||
All directors and executive officers as a group (6 persons) |
(1) | Applicable percentage ownership is based on 21,700,000 shares of common stock outstanding and 21,920,000 shares of Series A Preferred Stock outstanding as of August 29, 2013, together with securities exercisable or convertible into shares of common stock or Series A Preferred Stock, respectively, within 60 days of August 29, 2013 for each shareholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. The shares issuable pursuant to the exercise or conversion of such securities are deemed outstanding for the purpose of computing the percentage of ownership of the security holder, but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person. |
(2) | William Dioguardi, the manager of Intuitive Neurotrope LLC, has sole power to (i) vote or direct the vote of the shares beneficially owned by Intuitive Neurotrope LLC and (ii) dispose or direct the disposition of the shares beneficially owned by Intuitive Neurotrope LLC. |
(3) | Neurosciences Research Ventures, Inc. is an affiliate of the Blanchette Rockefeller Neurosciences Institute. In addition to such shares, Neurosciences Research Ventures, Inc. may be deemed to be in a group with Dr. Daniel Alkon, Northlea Partners LLLP and Dr. Jim New, and thereby deemed to beneficially own any shares that are beneficially owned by such shareholders, as a result of their agreement to vote their shares in the Company in favor of certain matters pursuant to an Amended and Restated Stockholders Agreement dated August 23, 2013 (see also “Certain Relationships and Related Transactions”). |
(4) | The shares of common stock and Series A Preferred Stock indicated as beneficially owned by Charles Ramat are held by Mr. Ramat, Ramat Consulting and NTR21 Holdings, LLC. Mr. Ramat is an affiliate of each of Ramat Consulting and NTR21 Holdings, LLC, and has sole power to vote or direct the vote, and to dispose or direct the disposition, of such shares of common stock and Series A Preferred Stock |
(5) | Hannah Rose Holdings, LLC is controlled by Matt Rosenblum. Hannah Rose Holdings, LLC and Mr. Rosenblum may be deemed to be in a group with Neurosciences Research Ventures, Inc., Dr. Daniel Alkon, Dr. Jim New, Northlea Partners LLLP and another stockholder, and thereby deemed to beneficially own any shares that are beneficially owned by such shareholders, as a result of their agreement to vote their shares in the Company in favor of certain matters pursuant to a Voting Agreement dated August 23, 2013 (see also “Certain Relationships and Related Transactions”). |
(6) | The shares of common stock and Series A Preferred Stock indicated as beneficially owned by E. Jeffrey Peierls includes shares of Series A Preferred Stock that are owned by Brian E. Peierls, E. Jeffrey Peierls, The Peierls Bypass Trust, U.D.E.F. Peierls for Brian E. Peierls, U.D.E.F. Peierls for E. Jeffrey Peierls, U.D.J.N. Peierls for Brian Eliot Peierls, U.D.J.N. Peierls for E. Jeffrey Pierls, U.D.E.S. Peierls for E.F. Peierls et al., U.W.E.S. Peierls for Brian E. Peierls Accumulation, U.W.E.S. Peierls for E. Jeffrey Peierls Accumulation, U.W.J.N. Peierls for Brian E. Peierls, U.W.J.N. Peierls for E. Jeffrey Peierls, The Peierls Foundation, Inc., U.D. Ethel F. Peierls Charitable Lead Trust and U.W. Libby Peierls Marital Trust. E. Jeffrey Peierls has sole power to vote or direct the vote, and to dispose or direct the disposition, of such shares of common stock and Series A Preferred Stock. |
(7) | In addition to the shares of common stock indicated as beneficially owned by Dr. Daniel Alkon, Dr. Alkon may be deemed to be in a group with Neurosciences Research Ventures, Inc., Northlea Partners LLLP and Dr. Jim New, and thereby deemed to beneficially own any shares that are beneficially owned by such shareholders, as a result of their agreement to vote their shares in the Company in favor of certain matters pursuant to an Amended and Restated Stockholders Agreement dated August 23, 2013 (see also “Certain Relationships and Related Transactions”). |
(8) | In addition to the shares of common stock indicated as beneficially owned by Dr. Jim New, Dr. New may be deemed to be in a group with Neurosciences Research Ventures, Inc., Dr. Daniel Alkon and Northlea Partners LLLP, and thereby deemed to beneficially own any shares that are beneficially owned by such shareholders, as a result of their agreement to vote their shares in the Company in favor of certain matters pursuant to an Amended and Restated Stockholders Agreement dated August 23, 2013 (see also “Certain Relationships and Related Transactions”). |
(9) | The shares of common stock and Series A Preferred Stock indicated as beneficially owned by Dr. John H. Abeles are held by Northlea Partners LLLP. Dr. Abeles is an affiliate of Northlea Partners LLLP and has sole power to vote or direct the vote, and to dispose or direct the disposition, of such shares of common stock and Series A Preferred Stock. In addition to such shares, Dr. Abeles and Northlea Partners LLLP may be deemed to be in a group with Neurosciences Research Ventures, Inc., Dr. Daniel Alkon and Dr. Jim New, and thereby deemed to beneficially own any shares that are beneficially owned by such shareholders, as a result of their agreement to vote their shares in the Company in favor of certain matters pursuant to an Amended and Restated Stockholders Agreement dated August 23, 2013 (see also “Certain Relationships and Related Transactions”). |
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Directors, Executive Officers, Promoters and Control Persons
Directors and Executive Officers
Below are the names of and certain information regarding the Company’s current executive officers and directors who were appointed effective as of the closing of the Merger:
Name | Age | Position | Date Named to Board of Directors/as Executive Officer | |||
John Abeles | 68 | Director and Chairman of the Board | August 23, 2013 | |||
Jim New | 60 | Director and Chief Executive Officer | August 23, 2013 | |||
William Singer | 72 | Director and Secretary | August 23, 2013 | |||
Ralph Bean | 72 | Director | August 23, 2013 | |||
Jay M. Haft | 77 | Director | August 23, 2013 | |||
Robert Weinstein | 53 | Chief Financial Officer and Treasurer | August 23, 2013 |
Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting of stockholders and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.
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A majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members of the Board of Directors individually or collectively consent in writing to the action.
The authorized number of directors to constitute our Board of Directors is seven. Pursuant to the terms of the Merger Agreement, Neurotrope BioScience and the Company agreed that the Company’s Board of Directors, as of the closing of the Merger, would consist of five members, of whom Neurotrope BioScience had the right to nominate four directors. In addition, (a) as described above, the holders of Series A Preferred Stock have the right to nominate one director, and (b) Hannah Rose Holdings LLC, a pre-reverse merger stockholder of the Company beneficially owning approximately 13.3% of our common stock, has the right to nominate one “independent” director, subject to the Company’s approval, not to be unreasonably withheld. Our Board of Directors is now comprised of Messrs. Abeles, New, Singer and Bean, who were nominated by Neurotrope BioScience, and Mr. Haft, who was nominated by the holders of Series A Preferred Stock. Executive officers are appointed by the Board of Directors and serve at its pleasure. The Company agreed in the Merger Agreement cause to be appointed as soon as practicable after the closing two additional “independent” directors, including the Hannah Rose Holdings nominee, for a total of seven directors. See “The Merger and Related Transactions—Common Stockholders’ Agreement” and “—Voting Agreement” above.
The principal occupation and business experience during the past five years for our executive officers and directors is as follows:
Dr. John H. Abeles – Director and Chairman of the Board of Directors. Dr. Abeles is the President and founder of MedVest, Inc., which has provided consulting services to health care and high technology companies since 1980. His many board positions, both past and present, provide him with a unique perspective to counsel emerging companies on their strategic planning functions, capital raising activities, and operational effectiveness.
Dr. Abeles was born in 1945 in Rhodesia (now Zimbabwe). He practiced Medicine in London, before joining the Pharmaceutical Industry as a Senior Medical Executive, with Sterling Drug, Pfizer Inc. and Revlon Health Care. In 1975 he became a Wall Street health-care analyst with Kidder Peabody until 1980. Dr. Abeles was one of the first physicians to become an analyst at a Wall Street investment firm.
He is also the Managing Member of Dalyda Finance LLC, a family company engaging promising artistic and performing talent.
Since March 1992, Dr. Abeles has been the Founder, Sole Investor and General Partner of Northlea Partners LLLP, a private venture capital and private capital family office headquartered in Boca Raton, Florida.
Since 1998, he has served as the Chairman of UniMedica Inc., a web-enabled medical school education consulting and publishing firm, and as Assistant Professor of Clinical Pharmacology and Therapeutics at the International University of Health Sciences. He has served as a Director of Higuchi Bio-Science Institute, University of Kansas since 1997, and as a Director of the College of Chemistry Advisory Board at the University of California at Berkeley since 2001.
Dr. Abeles received his Medical degree as well as a degree in Pharmacology from the University of Birmingham, England. He is a Fellow of the Royal Society of Medicine, London.
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Dr. Jim New – Chief Executive Officer and Director. Dr. New has served as Chief Executive Officer and a director of the Company since November 1, 2012 (from November 1, 2012 until February 28, 2013 as an independent contractor and since February 28, 2013 as an employee of the Company).
Dr. New’s industry experience spans the science and business elements of commercial pharmaceutical operations, as well as both the brand and generic pharmaceutical product development functions in the industry. Most recently he was CEO of AIKO Biotechnology (2011), and prior to this CEO of Lifecycle Pharma ( 2009). From 2002-2007 he was CEO and co-founder of Abrika Pharmaceuticals, which was acquired by Actavis. From 1999-2001 he worked for Novartis in Switzerland, first as Head of Worldwide Business Development, and later as Head of Mergers and Acquisitions. He was Senior Director of Licensing and Development at Pfizer from 1994-1999 and Director of Corporate Development at GlaxoSmithKline in 1993. From 1988 to 1992 he worked as a Director in the Licensing Department at Bristol-Myers Squibb, and from 1980 -1987 he worked as a medicinal chemist at BMS.
Dr. New received his undergraduate degree in Biology at SUNY Geneseo, a M.S. degree in Biochemistry at the University of Maine, his Ph.D. in Medicinal Chemistry at the University of Buffalo, and his MBA degree from Columbia Business School.
Robert Weinstein - Chief Financial Officer. Mr. Weinstein joined the Company in June 2013 as its acting Chief Financial Officer. He has extensive accounting and finance experience, spanning more than 25 years, as a public accountant, investment banker, healthcare private equity fund principal and chief financial officer.
From September 2011 to current, Mr. Weinstein has been an independent consultant for several healthcare companies in the pharmaceutical and biotechnology industries. From March 2010 to August 2011, he was the Chief Financial Officer of Green Energy Management Services Holdings, Inc., a publicly-traded energy consulting company. From August 2007 to February 2010, Mr. Weinstein served as Chief Financial Officer of Xcorporeal, Inc., a publicly-traded, development-stage medical device company which was sold in March 2010 to Fresenius Medical USA, the largest provider of dialysis equipment and services worldwide.
Mr. Weinstein received his MBA degree in finance and international business from the University of Chicago Graduate School of Business, is a Certified Public Accountant (inactive), and received his BS degree in accounting from the State University of New York at Albany.
William S. Singer – Director. Mr. Singer serves as President of BRNI and is also on its board of directors. He was a partner in the Chicago office of the law firm of Kirkland & Ellis LLP from 1980 until 2006 and has been of-counsel to that firm since that time, and concentrates his practice on corporate, real estate, and legislative matters. Since 2006, he also has been the sole proprietor of Singer Consulting LLC, which advises clients on federal legislation. He has been listed in Crain’s Who’s Who in Chicago Business 2000, 2001, 2002, 2003, and 2004 editions.
Mr. Singer has been prominently active in Chicago public service, serving as an Alderman for several years as a candidate for Mayoral office.
Ralph Bean – Director. Mr. Bean received his law degree from West Virginia University where he also obtained his undergraduate degree in Political Science. While in law school, he was the Editor in Chief of the West Virginia Law Review and was inducted into the Order of the Coif. He received his master of law degree from Harvard University in 1967. Mr. Bean is admitted to practice law in West Virginia, Virginia and the District of Columbia.
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Mr. Bean has an extensive background in government relations, public utility and energy concerns. He began his practice of law as a corporate counsel for C&P Telephone Companies in Charleston and later in Washington, D.C. Returning to West Virginia, Mr. Bean served as Elections Chief in the office of then Secretary of State Jay Rockefeller from 1970 to 1972. In 1974, Mr. Bean joined the Consolidated Natural Gas System (CNG) as corporate counsel.
In 1984, Mr. Bean was appointed general counsel of Hope Gas Inc., CNG’s local distribution company in West Virginia. He was named president of Hope Gas in 1986 and held this position until December 1995 when he joined Steptoe & Johnson PLLC as a partner of the firm.
He has participated in two WV trade missions to Asia and serves on the following high-level boards: A Vision Shared (successor to the WV Council for Community & Economic Development); Discover the Real WV Foundation (Emeritus); Claude Worthington Benedum Foundation - the largest source of private philanthropy in WV (Emeritus); West Virginia University Foundation (Emeritus); Huntington National Bank WV; Board member and past chair of BRNI.
Jay M. Haft – Director. Mr. Haft has served as Chairman of the Board of Directors at Dusa Pharmaceuticals since 2008, and retired from that position upon the recent sale of the company. Since 2005 to the present, Mr. Haft has been a partner and a member of the Investment Committee of Columbus Nova, a private investment arm of the Renova Group. From 1989 to 1994 he was a senior corporate partner of the law firm of Parker, Duryee, Rosoff and Haft, and was of counsel to the same firm from 1994 until 2002. He is currently of counsel to the law firm of Reed Smith. Mr. Haft has served on approximately 30 corporate boards, including his tenure as Chairman of the Emerson Radio Corporation. He is also active in the non-profit sector as well, particularly in the areas of education and art. Mr. Haft earned his Bachelor’s degree and graduated Phi Beta Kappa from Yale University and earned his law degree from Yale Law School.
Other Key Personnel
Dr. Daniel Alkon – Chief Scientific Officer. Dr. Alkon received his undergraduate degree in chemistry in 1965 at the University of Pennsylvania. After earning his M.D. at Cornell University and finishing an internship in medicine at the Mt Sinai Hospital in New York, he joined the staff of the National Institutes of Health where during his 30 year career he became a medical Director in the U.S. Public Health Service at the NINDS and Chief of the Laboratory of Adaptive Systems. In 1999, Dr. Alkon then became the founding Scientific Director of BRNI and occupies the Toyota Chair in Neuroscience at the Institute. In this position he and his team conduct multidisciplinary research on the molecular and biophysical mechanisms of memory and memory dysfunction in psychiatric and neurological disorders, particularly Alzheimer’s disease. He is also a Professor at BRNI and a Professor of Neurology at West Virginia University.
As an internationally recognized pioneer in research on brain-based neural networks and the molecular basis of memory, he has authored hundreds of scientific articles as well as several books including Memory Traces in the Brain by Cambridge University Press, and the popular book Memory’s Voice by Harper Collins.
Director Independence
We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.”
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Family Relationships
There are no family relationships among our Directors or executive officers.
Involvement in Certain Legal Proceedings
None of our directors or executive officers has been involved in any of the following events during the past ten years:
· | any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
· | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences); |
· | being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; or |
· | being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. |
Board Committees
The Company currently has not established any committees of the Board of Directors. Our Board of Directors may designate from among its members an executive committee and one or more other committees in the future. We do not have a nominating committee or a nominating committee charter. Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, other than as described above, no security holders have made any such recommendations. The entire Board of Directors performs all functions that would otherwise be performed by committees. Given the present size of our board it is not practical for us to have committees. If we are able to grow our business and increase our operations, we intend to expand the size of our board and allocate responsibilities accordingly.
Audit Committee Financial Expert
We have no separate audit committee at this time. The entire Board of Directors oversees our audits and auditing procedures. The Board of Directors has at this time not determined whether any director is an “audit committee financial expert” within the meaning of Item 407(d)(5) for SEC regulation S-K.
Code of Ethics
The Company currently has not adopted a written code of ethics.
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EXECUTIVE COMPENSATION
Summary Compensation Table
Name & Principal Position |
Fiscal Year
ended December 31, |
Salary ($) | Bonus ($) | Stock Awards($) | Option Awards($) | Non-Equity Incentive Plan Compensation ($) | Non-Qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||||
Marissa | 2012 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
Watson (1) | 2011 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
Jim New |
2012
|
41,667 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
(2) | 2011 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
(1) | On June 20, 2013, Ms. Watson resigned as our sole officer and director. |
(2) | Reflects compensation received from Neurotrope BioScience, which was formed in 2012. Salary was accrued in 2012 but paid in 2013. On February 28, 2013, Mr. New was appointed as our Chief Executive Officer and President |
Outstanding Equity Awards at Fiscal Year-End
We have one compensation plan approved by our stockholders, the 2013 Plan. As of the date hereof, we have not granted any awards under the 2013 Plan. We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.
Except as indicated below, we have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers listed above.
Employment Agreements
Jim New. Dr. Jim New has served as Chief Executive Officer and a director of Neurotrope BioScience since November 1, 2012 (from November 1, 2012 until February 28, 2013 as an independent contractor and from February 28, 2013 as an employee) and of the Company since August 23, 2013. Neurotrope BioScience paid Dr. New $250,000 (on an annualized basis) for his services as Chief Executive Officer of the Company during the period when Dr. New was an independent contractor to the Company (November 1, 2012 until February 28, 2013). Neurotrope BioScience entered into an employment agreement with Dr. New dated as of February 25, 2013. Pursuant to the terms of that employment agreement, upon the closing of the Merger, the Company, as successor to Neurotrope BioScience, became the counterparty to the employment agreement with Dr. New. Pursuant to his employment agreement, Dr. New currently serves as Chief Executive Officer of the Company. Dr. New’s employment agreement continues for a term of four years from February 28, 2013. Pursuant to Dr. New’s employment agreement, his initial salary is $250,000 per year, which will increase to $300,000 per year beginning on the later of (the date of increase is referred to as the “Salary Increase Date”) (i) February 28, 2015 (the second annual anniversary of the commencement of Dr. New’s employment term) and (ii) the Company’s closing on a B round of financing in an amount equal to $25 million. In addition, Dr. New is entitled to a guaranteed cash bonus equal to $50,000 per year during the periods prior to the Salary Increase Date and $100,000 per year during periods after the Salary Increase Date. The Company also is required to make available to Dr. New any benefits and perquisites that may from time to time be generally provided to its executive officers. Until the Company implements a group health insurance policy for its employees, the Company has agreed to reimburse Dr. New for the cost of family health insurance coverage up to $1,254 per month on a grossed-up tax basis. Neurotrope BioScience also paid Dr. New $10,000 as a reimbursement of legal fees incurred in connection with Dr. New’s employment agreement and his purchase of shares of common stock in Neurotrope BioScience. Dr. New is entitled to holidays, personal days and sick days in accordance with the Company’s standard policies and procedures in effect from time to time and four weeks of paid vacation per year. The Company may terminate Dr. New’s employment agreement at any time without cause (as defined in Dr. New’s employment agreement), and Dr. New may resign at any time for good reason (as defined in Dr. New’s employment agreement), upon not less than 30 days prior written notice, in which case the Company would be required to pay Dr. New severance in an amount equal to one year of salary plus payment for any accrued but unused vacation or leave time and one year of family health insurance. In the event the Company were to terminate Dr. New’s employment for cause or if Dr. New were to resign without good reason, then Dr. New would be entitled only to accrued but unpaid salary and accrued but unused vacation or leave time through the date of termination.
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Robert Weinstein. Neurotrope BioScience entered into a consulting agreement, dated as of June 2, 2013, with Medical Cash Management Solutions, LLC, pursuant to which Robert Weinstein (who is an affiliate of Medical Cash Management Solutions, LLC) served as Chief Financial Officer of the Neurotrope BioScience on a part-time basis, which agreement was terminated as of the date of the Merger, and the Company entered into a consulting agreement with Medical Cash Management Solutions, LLC on August 23, 2013, on substantially the same terms. The term of the consulting agreement expires November 30, 2013, unless it is extended by mutual agreement of the parties. During the term of the consulting agreement, Mr. Weinstein is required to devote at least three days per week to the Company. As consideration for Mr. Weinstein’s services, the Company is required to pay Medical Cash Management Solutions, LLC, $20,000 per month during the term of the consulting agreement unless it is terminated earlier as described below. Either party may voluntarily terminate the consulting agreement upon 30 days prior written notice. In addition, the Company has the right to terminate the Consulting Agreement at any time for cause (as defined in the consulting agreement) or in the event of Mr. Weinstein’s disability (as defined in the consulting agreement). The consulting agreement will automatically terminate if Mr. Weinstein ceases to be managing member of Medical Cash Management Solutions, LLC or in the event of Mr. Weinstein’s death.
Director Compensation
The Company currently does not pay any cash compensation to members of its board of directors for their services as directors of the Company, except that it pays Dr. Abeles $9,000 per month in consideration of his service as Chairman of the board of directors. However, the Company reimburses its directors for all reasonable out-of-pocket expenses incurred in connection with their attendance at meetings of the board of directors. The Company will grant to each new director, at the time of such director's appointment, an option to purchase 250,000 common shares, with a term of ten years, exercisable at the fair market value per share of the common stock on the date of grant, which will vest 20% per year for each of five years after the date of grant (subject to acceleration of vesting upon a change of control of the Company).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SEC rules require us to disclose any transaction or currently proposed transaction in which the Company is a participant and in which any related person has or will have a direct or indirect material interest involving the lesser of $120,000.00 or one percent (1%) of the average of the Company’s total assets as of the end of last two completed fiscal years. A related person is any executive officer, director, nominee for director, or holder of 5% or more of the Company’s common stock, or an immediate family member of any of those persons.
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The descriptions set forth above under the captions “The Merger and Related Transactions—Merger Agreement,” “—Split-Off,” “—the PPO,” “—Registration Rights,” “—Other Rights of Series A Preferred Stock,” “—Common Stockholders’ Agreement,” “—2013 Equity Incentive Plan,” “—Lock-up Agreements and Other Restrictions” and “Executive Compensation—Employment Agreements” and —Director Compensation” and below under “Description of Securities—Options” are incorporated herein by reference.
Northlea Partners LLLP, which is controlled by our Chairman of the Board, Dr. John Abeles, purchased an aggregate of 750,000 shares of Series A Preferred Stock in the PPO for an aggregate purchase price of $750,000. Jay Haft, our director, purchased an aggregate of 25,000 shares of Series A Preferred Stock in the PPO for an aggregate purchase price of $25,000.
Our rights to develop, commercialize and sell our proposed products are dependent upon Neurotrope BioScience’s Technology License and Services Agreement with BRNI and its affiliate NRV II, LLC. 20.7% of our outstanding voting securities are owned by Neurosciences Research Ventures, Inc., which is an affiliate of BRNI, and 2.2% of our outstanding voting securities are owned by Dan Alkon, who is the Scientific Director of BRNI and to the Chief Scientific Officer of the Company. We are required to pay significant fees and royalties to BRNI pursuant to the Technology License and Services Agreement. The Technology License and Services Agreement requires us to use, and to pay the fees, costs and expenses of, only BRNI to provide research and development services or other scientific assistance and support services unless BRNI provides its prior written consent. In addition, BRNI has the right to terminate the Technology License and Services Agreement in certain circumstances. For additional information, see “Description of Business—Intellectual Property—Technology License and Services Agreement” above.
The Company’s director, William S. Singer, also currently is employed by BRNI as its President and serves as a member of BRNI’s board of directors. Company director Ralph Bean is also a member of the BRNI board of directors.
[Charles Ramat Consulting Agreement?] [Why?]
MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Common Stock is quoted on the OTC Markets (OTCQB) under the symbol “BLFLD,” which will change to “NTRP” on September 9, 2013.
However, no shares of Common Stock have been traded as of August 26, 2013.
As of the date of this Report, we have 21,700,000 shares of Common Stock outstanding held by 18 stockholders of record. To date, we have not paid dividends on our Common Stock.
As of the date of this Report , we have 21,920,000 outstanding shares of Series A Preferred Stock held by 154 stockholders of record.
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Dividend Policy
We have never paid any cash dividends on our capital stock and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.
Securities Authorized for Issuance under Equity Compensation Plans
The Company had no equity compensation plans as of the end of fiscal year 2012.
On August 22, 2013, our Board of Directors of the Company adopted, and on August 22, 2013, our stockholders approved, the 2013 Equity Incentive Plan, which reserves a total of 7,000,000 shares of our Common Stock for issuance under the 2013 Plan. If an incentive award granted under the 2013 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2013 Plan.
In addition, the number of shares of our Common Stock subject to the 2013 Plan, any number of shares subject to any numerical limit in the 2013 Plan, and the number of shares and terms of any incentive award are expected to be adjusted in the event of any change in our outstanding our Common Stock by reason of any stock dividend, spin-off, split-up, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares or similar transaction.
Administration
The compensation committee of the Board, or the Board in the absence of such a committee, will administer the 2013 Plan. Subject to the terms of the 2013 Plan, the compensation committee or the Board has complete authority and discretion to determine the terms of awards under the 2013 Plan.
Grants
The 2013 Plan authorizes the grant to participants of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended to comply with Section 162(m) of the Internal Revenue Code (as amended, the “Code”) and stock appreciation rights, as described below:
· | Options granted under the 2013 Plan entitle the grantee, upon exercise, to purchase a specified number of shares from us at a specified exercise price per share. The exercise price for shares of our Common Stock covered by an option generally cannot be less than the fair market value of our Common Stock on the date of grant unless agreed to otherwise at the time of the grant. In addition, in the case of an incentive stock option granted to an employee who, at the time the incentive stock option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any parent or subsidiary, the per share exercise price will be no less than 110% of the fair market value of our Common Stock on the date of grant. |
· | Restricted stock awards and restricted stock units may be awarded on terms and conditions established by the compensation committee, which may include performance conditions for restricted stock awards and the lapse of restrictions on the achievement of one or more performance goals for restricted stock units. |
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· | The compensation committee may make performance grants, each of which will contain performance goals for the award, including the performance criteria, the target and maximum amounts payable, and other terms and conditions. |
· | The 2013 Plan authorizes the granting of stock awards. The compensation committee will establish the number of shares of our Common Stock to be awarded and the terms applicable to each award, including performance restrictions. |
· | Stock appreciation rights (“SARs”) entitle the participant to receive a distribution in an amount not to exceed the number of shares of our Common Stock subject to the portion of the SAR exercised multiplied by the difference between the market price of a share of our Common Stock on the date of exercise of the SAR and the market price of a share of our Common Stock on the date of grant of the SAR. |
Duration, Amendment, and Termination
The Board has the power to amend, suspend or terminate the 2013 Plan without stockholder approval or ratification at any time or from time to time. No change may be made that increases the total number of shares of our Common Stock reserved for issuance pursuant to incentive awards or reduces the minimum exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders within one year. Unless sooner terminated, the 2013 Plan would terminate ten years after it is adopted.
As of the date hereof, options to purchase an aggregate of 5,154,404 shares of our Common Stock have been issued under the 2013 Plan. See “Description of Securities—Options” below for more information .
DESCRIPTION OF SECURITIES
We have authorized capital stock consisting of 300,000,000 shares of Common Stock, $0.0001 par value, and 50,000,000 shares of preferred stock, $0.0001 par value, 24,325,000 of which shares have been designated as Series A preferred stock. As of the date of this Report, we had 21,700,000 shares of Common Stock issued and outstanding, and 21,920,000 shares of Series A preferred stock issued and outstanding.
Common Stock
The holders of outstanding shares of common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends of such times and in such amounts as the board from time to time may determine. Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders. There is no cumulative voting of the election of directors then standing for election. The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding up of our company, the assets legally available for distribution to stockholders are distributable ratably among the holders of the common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors. Each outstanding share of common stock is duly and validly issued, fully paid and non-assessable.
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Preferred Stock
Shares of preferred stock may be issued from time to time in one or more series, each of which will have such distinctive designation or title as shall be determined by our Board of Directors prior to the issuance of any shares thereof. Preferred stock will have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series of preferred stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares thereof. The number of authorized shares of preferred stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all the then outstanding shares of our capital stock entitled to vote generally in the election of the directors, voting together as a single class, without a separate vote of the holders of the preferred stock, or any series thereof, unless a vote of any such holders is required pursuant to any preferred stock designation.
While we do not currently have any plans for the issuance of additional preferred stock, the issuance of such preferred stock could adversely affect the rights of the holders of common stock and, therefore, reduce the value of the common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of the common stock until the Board of Directors determines the specific rights of the holders of the preferred stock; however, these effects may include:
· | Restricting dividends on the common stock; |
· | Diluting the voting power of the common stock; |
· | Impairing the liquidation rights of the common stock; or |
· | Delaying or preventing a change in control of the Company without further action by the stockholders. |
Other than in connection with shares of preferred stock (as explained above), which preferred stock is not currently designated nor contemplated by us, we do not believe that any provision of our charter or By-Laws would delay, defer or prevent a change in control.
Series A Preferred Stock
Dividends . The holders of Series A Preferred Stock are entitled to receive non-cumulative dividends, in preference to any dividend on our Common Stock, at the rate of 8% of the original purchase price ($1.00 per share) per annum, payable if, when and as declared by PubCo's board of directors.
Liquidation Preference . In the event of any liquidation, dissolution or winding up of the Company, or the sale of substantially all of the assets of the Company, the holders of Series A Preferred Stock would be entitled to receive, in respect of each share of Series A Preferred Stock, prior and in preference to any distribution of the assets of the Company to the holders of Common Stock, an amount equal to $1.00 per share plus all declared but unpaid dividends.
Automatic Conversion . Each share of Series A Preferred Stock plus declared but unpaid dividends will convert automatically into shares of Common Stock at the applicable conversion rate then in effect on the earlier of (i) a consent vote by a holders of a majority of shares of Series A Preferred Stock (a “Majority Vote”) or (ii) the consummation of a qualified underwritten public offering of our Common Stock with a price per share to the public of at least $5.00 per share and aggregate proceeds (net of the underwriting discount and commissions) in excess of $30,000,000.
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The conversion rate for the Series A Preferred Stock is initially 1:1, subject to anti-dilution and other customary adjustments.
Optional Conversion . Each holder of Series A Preferred Stock has the right to convert such holder’s Series A Preferred Stock, at the option of such holder, at any time, into shares of Common Stock at the applicable conversion ratio. Initially each share of Series A Preferred Stock is convertible into one share of Common Stock, subject to adjustment in certain events.
Anti-dilution adjustments . Standard broad-based weighted average adjustment to the Series A Preferred Stock conversion price if any subsequent sale of stock or stock equivalents is done at a lower price per share, subject to customary exceptions.
Voting . The holders of Series A Preferred Stock will vote on an as-if converted basis with the holders of the Common Stock and any future series of preferred stock or Common Stock that, by its terms, votes on an as-if converted basis with the Common Stock on all matters to be voted on or consented to by the stockholders, other than the election of the six Common Directors, and except as may otherwise be required by Nevada law.
Registration Rights . See Item 2.01, “Completion of Acquisition or Disposition of Assets—The Merger and Related Transactions—Registration Rights” for a description of the registration rights granted to the holders of the Series A Preferred Stock, which description is incorporated herein by reference.
Other Rights of and Restrictions on Series A Preferred Stock .
The Preferred Stockholders Agreement also provides that:
Restrictions on Sales of Control of the Company . No holder of Series A Preferred Stock shall be a party to any transaction or series of related transactions in which a person, or a group of related persons, acquires from stockholders of the Company shares representing more than 50% of the outstanding voting power of the Company (a “Stock Sale”) unless all holders of Series A Preferred Stock are allowed to participate in such transaction and the consideration received pursuant to such transaction is allocated among the parties thereto in the manner specified, unless the holders of a majority of the Preferred Stock elect otherwise by written notice given to the Company.
Transfer Rights and Restrictions .
· | Each holder of Series A Preferred Stock grants to the Company a right of first refusal to purchase all or any portion of any capital stock of the Company that such stockholder may propose to transfer, sell or pledge at the same price and on the same terms and conditions as those offered to the prospective transferee. |
· | Each holder of Series A Preferred Stock grants to the other holders of Series A Preferred Stock a secondary refusal right to purchase all or any portion of any such capital stock of the Company that such stockholder may propose to transfer, sell or pledge not taken up by the Company pursuant to its right of first refusal. |
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· | Notwithstanding the foregoing, the above rights of refusal will not apply: (a) upon a transfer by a holder of Series A Preferred Stock that is an entity to its stockholders, members, partners or other equity holders, (b) to a pledge of that creates a mere security interest in the pledged capital stock, or (c) upon a transfer by a holder of Series A Preferred Stock that is a natural person that is made (i) for bona fide estate planning purposes and (ii) to his or her spouse, child (natural or adopted), or any other direct lineal descendant (or his or her spouse) (all of the foregoing collectively referred to as “family members”), or any other person approved by the Board of Directors of the Company, or any custodian or trustee of any trust, partnership or limited liability company for the benefit of, or the ownership interests of which are owned wholly by, such Stockholder or their respective family members. |
· | The above rights of refusal also will not apply to the sale of any capital stock (a) to the public in an offering pursuant to an effective registration statement under the Securities Act of 1933, as amended or (b) pursuant to a Deemed Liquidation Event (as defined in the Company’s Certificate of Incorporation). |
· | No holder of Series A Preferred Stock shall transfer, sell or pledge any capital stock of the Company (a) unless such transfer has been approved by the Company’s Board of Directors, (b) to any entity which, in the determination of the Company’s Board of Directors, directly or indirectly competes with the Company or (c) to any customer, distributor or supplier of the Company, if the Company’s Board of Directors should determine that such transfer would result in such customer, distributor or supplier receiving information that would place the Company at a competitive disadvantage with respect to such customer, distributor or supplier. |
· | The above transfer rights and restrictions will automatically terminate upon the earlier of (a) immediately prior to the consummation of an underwritten public offering of equity securities of the Company with a price to the public of at least $5 per share and aggregate gross proceeds of at least $30,000,000 and (b) the consummation of a Deemed Liquidation Event (as defined in the Company’s Certificate of Incorporation). |
Options
Options to purchase an aggregate of 5,154,404 shares of our Common Stock have been issued under the 2013 Plan on August 23, 2013, as follows:
· | Options to purchase 300,000 shares of Common Stock issued to a consultant with a term of ten years, at an exercise price of $1.00 per share. The option vested with respect to 20% of the shares as of February 28, 2013, and the balance is vesting on a daily basis over the four-year period beginning on February 28, 2013. |
· | Options to purchase 3,554,404 shares of Common Stock issued to founding stockholders of Neurotrope BioScience with a term of ten years, at an exercise price of $1.75 per share. These options are fully vested. These options were issued to: |
o | 955,500 to Northlea Partners LLLP, controlled by our Chairman, Dr. John Abeles |
o | 707,000 to our Chief Executive Officer and Director, Dr. Jim New |
o | 175,000 to our Chief Scientific Officer, Dr. Dan Alkon |
o | 1,662,500 to Neurosciences Research Ventures, Inc. |
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· | Options to purchase 1,300,000 shares of Common Stock issued to directors and observers (or their affiliates) with a term of ten years, at an exercise price of $1.00 per share. These options vest on a daily basis over five years from August 23, 2013. These options were issued to: |
o | 250,000 to Northlea Partners LLLP, controlled by our Chairman, Dr. John Abeles |
o | 250,000 to Ralph Bean |
o | 300,000 to Bill Singer |
o | 250,000 to Jay Haft |
o | 250,000 to Charles Ramat |
Warrants
As of the date hereof, the Agent Warrants entitle their holders to purchase 900,000 shares of Common Stock, with a term of ten years and an exercise price of $0.01 per share, and 1,217,000 shares of Series A Preferred Stock, with a term of ten years and an exercise price of $1.00 per share.
The Agent Warrants contain customary provisions for adjustment in the event of stock splits, subdivision or combination, mergers, etc.
The holders of the Agent Warrants have the right to exercise the warrant by means of a cashless (or “net-issue”) basis.
See Item 2.01, “Completion of Acquisition or Disposition of Assets—The Merger and Related Transactions—Registration Rights” for a description of the registration rights granted to the holders of the Agent Warrants, which description is incorporated herein by reference.
This summary description of the Agent Warrants is qualified in its entirety by reference to the form of such warrants filed as an exhibit to this Current Report.
Convertible Securities
As of the date hereof, other than the Common Stock options, Agent Warrants and Series A Preferred Stock described above, the Company does not have any outstanding convertible securities.
Transfer Agent
The transfer agent for our Common Stock is Philadelphia Stock Transfer, Inc. The transfer agent’s address is 2320 Haverford Rd., Suite 230, Ardmore, PA 19003 and its telephone number is +1-484-416-3124.
LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business.
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We are currently not aware of any pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by any governmental authority.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Nevada Private Corporation Law and our Articles of Incorporation allow us to indemnify our officers and directors from certain liabilities and our By-Laws state that we shall indemnify every (i) present or former director or officer of us, (ii) any person who while serving in any of the capacities referred to in clause (i) served at our request as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and (iii) any person nominated or designated by (or pursuant to authority granted by) the Board of Directors or any committee thereof to serve in any of the capacities referred to in clauses (i) or (ii) (each an “Indemnitee”).
Our By-Laws provide that we shall indemnify an Indemnitee against all judgments, penalties (including excise and similar taxes), fines, amounts paid in settlement and reasonable expenses actually incurred by the Indemnitee in connection with any proceeding in which he was, is or is threatened to be named as defendant or respondent, or in which he was or is a witness without being named a defendant or respondent, by reason, in whole or in part, of his serving or having served, or having been nominated or designated to serve, if it is determined that the Indemnitee (a) conducted himself in good faith, (b) reasonably believed, in the case of conduct in his official capacity, that his conduct was in our best interests and, in all other cases, that his conduct was at least not opposed to our best interests, and (c) in the case of any criminal proceeding, had no reasonable cause to believe that his conduct was unlawful; provided, however, that in the event that an Indemnitee is found liable to us or is found liable on the basis that personal benefit was improperly received by the Indemnitee, the indemnification (i) is limited to reasonable expenses actually incurred by the Indemnitee in connection with the proceeding and (ii) shall not be made in respect of any proceeding in which the Indemnitee shall have been found liable for willful or intentional misconduct in the performance of his duty to us.
Other than in the limited situation described above, our By-Laws provide that no indemnification shall be made in respect to any proceeding in which such Indemnitee has been (a) found liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from an action taken in the Indemnitee’s official capacity, or (b) found liable to us. The termination of any proceeding by judgment, order, settlement or conviction, or on a plea of nolo contendere or its equivalent, is not of itself determinative that the Indemnitee did not meet the requirements set forth in clauses (a) or (b) above. An Indemnitee shall be deemed to have been found liable in respect of any claim, issue or matter only after the Indemnitee shall have been so adjudged by a court of competent jurisdiction after exhaustion of all appeals therefrom. Reasonable expenses shall, include, without limitation, all court costs and all fees and disbursements of attorneys for the Indemnitee. The indemnification provided shall be applicable whether or not negligence or gross negligence of the Indemnitee is alleged or proven.
In addition to our By-Laws and our Articles of Incorporation, we have entered into an Indemnification Agreement with each of our directors pursuant to which we will be obligated to maintain liability insurance in favor of the directors serving the Company and its subsidiaries and affiliates. We will also be required to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law and our governing documents. We believe that entering into the contemplated agreements will help attract and retain highly competent and qualified persons to serve the Company. The form of Indemnification Agreement is filed as an exhibit to this Current Report.
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Other than discussed above, none of our By-Laws, our Articles of Incorporation or any indemnification agreement with any director of the Company includes any specific indemnification provisions for our officers or directors against liability under the Securities Act. Additionally, insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Item 3.02 | Unregistered Sales of Equity Securities |
All share and per share stock numbers in this section are after giving effect to the Merger on August 23, 2013, in which each share of Neurotrope BioScience common stock outstanding at the time of the Merger was automatically converted into one share of our Common Stock, and each share of Neurotrope BioScience Series A convertible preferred stock outstanding at the time of the Merger was automatically converted into one share of our Series A Preferred Stock.
The PPO
The information regarding the PPO, the Series A Preferred Stock and the Agent Warrants set forth in Item 2.01, “Completion of Acquisition or Disposition of Assets—The Merger and Related Transactions—The PPO,” “Description of Securities—Preferred Stock—Series A Preferred Stock” and “Description of Securities—Warrants” is incorporated herein by reference.
Shares Issued in Connection with the Merger
On August 23, 2013, pursuant to the terms of the Merger Agreement, all of the shares of common stock of Neurotrope BioScience were exchanged for 19,000,000 restricted shares of our Common Stock, and all of the shares of Series A Preferred Stock of Neurotrope BioScience were exchanged for 21,920,000 shares of our Series A Preferred Stock. This transaction was exempt from registration under Section 4(2) of the Securities Act as not involving any public offering. None of the securities were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions involved.
Sales of Unregistered Securities of Neurotrope BioScience
At the time of its formation on October 31, 2012, Neurotrope BioScience issued 1,000 shares of its common stock to its founders, at a price of $0.01 per share, in a private placement offering exempt from registration requirements. The number of shares of Neurotrope BioScience common stock issued to each such founder in such offering are as follows:
o | 475 to Neurosciences Research Ventures, Inc. |
o | 273 to Northlea Partners LLLP |
o | 202 to Jim New |
o | 50 to Dan Alkon |
On February 28, 2013, Neurotrope BioScience effected a stock split in which each of the 1,000 issued and outstanding shares of its common stock was converted into 19,000 shares of its common stock.
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Each of these issuances was exempt from registration under Section 4(2) of the Securities Act as transactions by an issuer not involving any public offering. The recipients of securities in each transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. None of these securities were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions involved.
Item 4.01 | Changes in Registrant’s Certifying Accountant. |
On August 23, 2013, Lake & Associates CPA’s LLC, was dismissed as our independent registered public accountant. On the same date, Friedman LLP was engaged as our new independent public accounting firm. The Board of Directors of the Company approved the dismissal of Lake & Associates CPA’s LLC, and approved the engagement of Friedman LLP as our independent auditor.
None of the reports of Lake & Associates CPA’s LLC on our financial statements for either of the past two years or subsequent interim period contained an adverse opinion or disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles, except that our audited financial statements contained in our Annual Reports on Form 10-K for the fiscal years ended January 31, 2013, and January 31, 2012, filed with the SEC, included a going concern qualification in the report of Lake & Associates CPA’s LLC.
During the Company’s two most recent fiscal years ended January 31, 2013 and 2012, and the subsequent interim periods preceding their dismissal, there were no disagreements with Lake & Associates CPA’s LLC, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Lake & Associates CPA’s LLC, would have caused them to make reference to the subject matter of the disagreement in connection with their report on the Company’s financial statements.
The Company provided Lake & Associates CPA’s LLC with a copy of the disclosures it is making in this Report and has requested that Lake & Associates CPA’s LLC, furnish it with a letter addressed to the SEC stating whether they agree with the above statements. The letter has not yet been received but will be filed as an exhibit to this Form 8-K by amendment if and when it is received.
On August 29, 2013, the Company was informed by letter from the SEC that effective August 13, 2013, the Public Company Accounting Oversight Board (“PCAOB”) revoked the registration of Lake & Associates CPA’s LLC and barred Jay Charles Lake, CPA, from being an associated person of a registered public accounting firm, on the basis of the PCAOB’s findings that Lake & Associates CPA’s LLC and Mr. Lake (the “Respondents”) violated PCAOB rules and auditing standards in auditing the 2009 financial statements of four issuer clients, that the firm violated PCAOB quality control standards, and that Mr. Lake directly and substantially contributed to the Firm’s violation of PCAOB quality control standards. Specifically, the PCAOB alleges that Respondents failed to, among other things: (a) plan the audits adequately; (b) perform sufficient audit procedures on material accounts, including revenue, accounts receivable, and inventory; and (c) prepare and maintain sufficient audit documentation. The full text of the PCAOB’s order can be found at http://pcaobus.org/Enforcement/Decisions/Documents/ 08132013_Lake.pdf. The Company was unaware of this action by the PCAOB at the time that our Board of Directors approved the dismissal of Lake & Associates CPA’s LLC as our independent registered public accountant. No report of Lake & Associates CPA’s LLC is included in this Current Report on Form 8-K. The Company is not one of the issuers whose financial statements were referred to in the PCAOB’s order.
During the two most recent fiscal years and the interim periods preceding the engagement, and through the date of this Report, neither the Company nor anyone on its behalf has previously consulted with Friedman LLP regarding either (a) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report was provided nor oral advice was provided to the Company that Friedman LLP concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (b) any matter that was either the subject of a disagreement (as defined in paragraph 304(a)(1)(iv) of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph 304(a)(1)(v)) of Regulation S-K).
Item 5.01 | Changes in Control of Registrant. |
The information regarding change of control of the Company in connection with the Merger set forth in Item 2.01, “Completion of Acquisition or Disposition of Assets—The Merger and Related Transactions” is incorporated herein by reference.
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Item 5.02 | Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers. |
The information regarding departure and election of directors and departure and appointment of principal officers of the Company in connection with the Merger set forth in Item 2.01, “Completion of Acquisition or Disposition of Assets—The Merger and Related Transactions” is incorporated herein by reference.
Item 5.06 | Change in Shell Company Status. |
Prior to the Merger, we were a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). As a result of the Merger, we have ceased to be a shell company. The information contained in this Current Report, together with the information contained in our Annual Report on Form 10-K for the fiscal year ended January 31, 2013, and our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as filed with the SEC, constitute the current “Form 10 information” necessary to satisfy the conditions contained in Rule 144(i)(2) under the Securities Act of 1933, as amended (the “Securities Act”).
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Item 9.01 | Financial Statements and Exhibits. |
(a) | Financial statements of business acquired. |
In accordance with Item 9.01(a), Neurotrope BioScience’s audited financial statements as of, and for the period from inception to December 31, 2012, and Neurotrope BioScience’s unaudited condensed financial statements as of, and for the six months ended June 30, 2013, are included in this Report beginning on Page F-1.
(b) | Pro forma financial information. |
In accordance with Item 9.01(b), unaudited pro forma condensed combined financial statements as of June 30, 2013, and for the period October 31, 2012 (Inception) to December 31, 2012, and the six months ended June 30, 2013, and the accompanying notes are included in this Report beginning on Page F-25.
(d) | Exhibits |
In reviewing the agreements included or incorporated by reference as exhibits to this Current Report on Form 8-K, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:
• | should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; |
• | have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; |
• | may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and |
• | were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. |
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Current Report on Form 8-K and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.
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Exhibit
Number |
Description |
|
2.1 | Agreement and Plan of Merger, dated June 20, 2013, between BlueFlash Communications, Inc. and Neurotrope, Inc. (incorporated by reference from Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 8, 2013) | |
2.2 | Amendment to Agreement and Plan of Merger, dated July 10, 2013, between BlueFlash Communications, Inc. and Neurotrope, Inc. (incorporated by reference from Exhibit 2.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 8, 2013) | |
2.3* |
Agreement and Plan of Merger and Reorganization, dated as of August 23, 2013, by and among the Registrant, Acquisition Sub and Neurotrope BioScience, Inc. |
|
3.1 |
Articles of Incorporation of the Registrant (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 8, 2013) |
|
3.2 | Florida Articles of Merger of BlueFlash Communications, Inc. with and into Neurotrope, Inc., filed August 5, 2013 (incorporated by reference from Exhibit 3.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 8, 2013) | |
3.3 | Nevada Articles of Merger of BlueFlash Communications, Inc. with and into Neurotrope, Inc., filed August 5, 2013 (incorporated by reference from Exhibit 3.4 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 8, 2013) | |
3.4* |
Certificate of Merger of Neurotrope BioScience, Inc., with and into Neurotrope Acquisition, Inc., filed August 23, 2013 |
|
3.5 |
Amended and Restated By-Laws of the Registrant (incorporated by reference from Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 8, 2013) |
|
10.1* |
Split-Off Agreement, dated as of August 23, 2013, by and among the Registrant, Blue Flash Communications Corp. and Marissa Watson |
|
10.2* |
General Release Agreement, dated as of August 23, 2013, by and among the Registrant, Blue Flash Communications Corp. and Marissa Watson |
|
10.3* |
Form of Lock-Up and No Short Selling Agreement between the Registrant and the officers, directors and shareholders party thereto |
|
10.4* |
Form of Subscription Agreement between the Neurotrope BioScience, Inc., and the investors party thereto |
|
10.5* | Form of Agent Warrant for Common Stock of the Registrant | |
10.6* | Form of Agent Warrant for Series A Preferred Stock of the Registrant |
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10.7* |
Placement Agency Agreement, dated June 25, 2013, between Neurotrope BioScience, Inc., and EDI Financial, Inc. |
|
10.8* | Amendment to Placement Agency Agreement, dated August 12, 2013, between Neurotrope BioScience, Inc., and EDI Financial, Inc. | |
10.9*† |
Employment Agreement, dated February 25, 2013, between the Registrant (as successor to Neurotrope BioScience) and Dr. James New |
|
10.10*† |
Consulting Agreement, dated as of June 2, 2013, between the Registrant and Medical Cash Management Solutions, LLC (assigned to the Registrant) |
|
10.11*† | The Registrant’s 2013 Equity Incentive Plan | |
10.12*† | Form of Option Agreement under 2013 Equity Incentive Plan | |
10.13* | Technology License and Services Agreement, dated October 31, 2012, among the Registrant, BRNI and NRV II, LLC | |
10.14* | Amendment #1 to Technology License and Services Agreement, dated August 21, 2013 among the Registrant, BRNI and NRV II, LLC | |
10.15* | Common Stockholders Agreement, dated August 23, 2013, among the Registrant and the stockholders party thereto | |
10.16* | Form of Preferred Stockholders Agreement, dated August 23, 2013, among the Registrant and the stockholders party thereto | |
10.17* | Voting Agreement dated as of August 23, 2013, among the Registrant and the stockholders party thereto | |
16.1** |
Letter from Lake & Associates CPA’s LLC to the Securities and Exchange Commission dated August 12, 2013 |
* Filed herewith
** To be filed by amendment.
† Management contract or compensatory plan or arrangement
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NEUROTROPE, INC.
FINANCIAL STATEMENTS
Table of Contents
Page Number | |
Report of Independent Registered Public Accounting Firm | F-2 |
Audited Financial Statements for the Period October 31, 2012 (Inception) through December 31, 2012 | |
Balance Sheet | F-3 |
Statement of Operations | F-4 |
Statement of Members’ Equity | F-5 |
Statements of Cash Flows | F-6 |
Notes to Financial Statements | F-7 |
Condensed Financial Statements for the six months ended June 30, 2013 (unaudited) | |
Condensed Balance Sheets | F- 13 |
Condensed Statements of Operations | F- 14 |
Condensed Statement of Members Equity (Deficiency) | F- 15 |
Condensed Statements of Cash Flows | F-16 |
Notes to Condensed Financial Statements | F-17 |
Pro Forma Financial Statements (Unaudited) | |
Pro Forma Combined Balance Sheet as of June 30, 2013 | F-25 |
Pro Forma Combined Statements of Operations for the three months ended June 30, 2013 | F- 26 |
Pro Forma Combined Statements of Operations for the years ended December 31, 2012 and 2011 | F-27 |
F- 1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of Neurotrope Bioscience, Inc.
We have audited the accompanying balance sheet of Neurotrope Bioscience, Inc. (the “Company”), a development stage company, as of December 31, 2012 and the related statements of operations, changes in stockholders’ deficiency and cash flows for the period October 31, 2012 (inception) through December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
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, 2012, and the results of its operations and its cash flows for the period October 31, 2012 (inception) through December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.
/s/ Friedman LLP
East Hanover, New Jersey
August 1, 2013
F- 2 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
BALANCE SHEET
December 31, 2012
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | - | ||||||
TOTAL CURRENT ASSETS | - | |||||||
TOTAL ASSETS | $ | - | ||||||
LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable - related party | $ | 1,198,969 | ||||||
Accounts payable | $ | 192,342 | ||||||
Accrued expenses - related party | 41,667 | |||||||
Advances from related party | 4,815 | |||||||
TOTAL CURRENT LIABILITIES | 1,437,793 | |||||||
TOTAL LIABILITIES | 1,437,793 | |||||||
SHAREHOLDERS' DEFICIT | ||||||||
Common stock - 45.000,000 shares authorized at | ||||||||
$0.01 par value; 19,000,000 shares issued and | ||||||||
outstanding | 190,000 | |||||||
Deficit accumulated during the development stage | (1,627,793 | ) | ||||||
TOTAL SHAREHOLDERS' DEFICIT | (1,437,793 | ) | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' | ||||||||
DEFICIT | $ | - |
See accompanying notes to financial statements.
F- 3 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the Period October 31, 2012 (Inception) Through December 31, 2012
EXPENSES | ||||
Research and development - related party | $ | 983,491 | ||
General and administrative - related party | 257,145 | |||
General and administrative | 197,157 | |||
TOTAL EXPENSES | 1,437,793 | |||
NET LOSS | $ | (1,437,793 | ) |
See accompanying notes to financial statements.
F- 4 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
STATEMENT OF DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE
For the Period October 31, 2012 (Inception) Through December 31, 2012
Deficit | ||||||||||||
Accumulated | ||||||||||||
During the | ||||||||||||
Common | Development | |||||||||||
Stock | Stage | Total | ||||||||||
Balance, October 31, 2012 | $ | - | $ | - | $ | - | ||||||
Issuance of common stock | 190,000 | (190,000 | ) | - | ||||||||
Net loss | - | (1,437,793 | ) | (1,437,793 | ) | |||||||
Balance, December 31, 2012 | $ | 190,000 | $ | (1,627,793 | ) | $ | (1,437,793 | ) |
See accompanying notes to financial statements.
F- 5 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Period October 31, 2012 (Inception) Through December 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES | ||||
Net loss | $ | (1,437,793 | ) | |
Adjustments to reconcile net loss to net | ||||
cash used by operating activities | ||||
Change in liabilities | ||||
Increase in accounts payable - related party | 1,198,969 | |||
Increase in accounts payable | 192,342 | |||
Increase in accrued expenses - related party | 41,667 | |||
Total adjustments | 1,432,978 | |||
Net Cash Used by Operating Activities | (4,815 | ) | ||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
Advances from related party | 4,815 | |||
Net Cash Provided by Financing Activities | 4,815 | |||
NET INCREASE IN CASH | - | |||
CASH AT BEGINNING OF PERIOD | - | |||
CASH AT END OF PERIOD | $ | - |
See accompanying notes to financial statements.
F- 6 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Period October 31, 2012 (Inception) Through December 31, 2012
Note 1 – Organization and Nature of Planned Business:
Neurotrope BioScience, Inc. (the “Company”) was incorporated in Delaware on October 31, 2012. The Company was formed to advance new diagnostic and therapeutic technologies in the field of neurodegenerative disease, primarily Alzheimer’s Disease. The Company plans to collaborate with Blanchette Rockefeller Neurosciences Institute (“BRNI”), a related party, in this process. The exclusive rights to the licensed technology transferred to the Company on February 28, 2013 (see note 4).
Note 2 - Summary of Significant Accounting Policies :
Development Stage:
The Company is considered to be a development stage company, as defined by Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 915-10, in that the Company is devoting substantially all of its efforts to establishing a new business where planned principal operations have commenced, but no revenues have been derived from these operations.
In addition, the Company’s licensed technology may not be ready for commercialization for several years, if at all. The Company expects to continue to incur losses at least until commercialization, because it anticipates that its expenditures on research and development and administrative activities will significantly exceed any potential revenues during the period. The Company cannot predict when, if ever, it will become profitable.
Use of Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Research and Development Costs:
All research and development costs, including costs to maintain or expand the patent portfolio which do not meet the criteria for capitalization are expensed when incurred. FASB ASC Topic 730 requires companies involved in research and development activities to capitalize non-refundable advance payments for such services pursuant to contractual arrangements because the right to receive those services represents an economic benefit. Such capitalized advances will be expensed when the services occur and the economic benefit is realized. There were no capitalized research and development services at December 31, 2012.
F- 7 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Period October 31, 2012 (Inception) Through December 31, 2012
Income Taxes:
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due and deferred taxes. Deferred taxes are recognized for differences between the bases of assets and liabilities for financial statement and income tax purposes and the tax effects of net operating loss and other carry forwards. The deferred tax assets and liabilities represent the future tax consequences of those differences and carry forwards, which will either be taxable or deductible when the related assets, liabilities or carry forwards are recovered or settled. Deferred tax assets are reduced by a valuation allowance when, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Uncertain Tax Positions:
The Company applies the provisions of FASB ASC 740-10, Accounting for Uncertain Tax Positions , which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The standard also provides guidance on de-recognition, classification, interest and penalties, and accounting in interim periods, disclosure and transitions.
The Company has concluded that there are no significant uncertain tax positions requiring recognition in the accompanying financial statements. The tax period that is subject to examination by major tax jurisdictions is from October 31, 2012 (inception) through December 31, 2012, for which the tax returns have not yet been filed.
In the event the Company was to receive an assessment for interest and/or penalties, it will be classified in the financial statements as selling, general and administrative expense when assessed.
Note 3 – Risks and Uncertainties :
The Company operates in an industry that is subject to rapid technological change, intense competition and significant government regulation. The Company’s operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory and other risks including the potential for business failure.
Note 4 – Related Party Transactions :
The Company incurred consulting fees of $41,667 to its President during the period from October 31, 2012 through December 31, 2012 (see Note 6). This amount is included in accrued expenses – related party in the accompanying balance sheet. The Company’s President also paid personally certain expenses of the Company totaling $4,815 at December 31, 2012, which is reported as advances from related party.
One director of the Company is also a director of BRNI. A second director of the Company is both the president and a director of BRNI.
F- 8 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Period October 31, 2012 (Inception) Through December 31, 2012
Effective October 31, 2012, the Company executed a Technology License and Services Agreement with BRNI, a related party, and two entities affiliated with BRNI (the “Agreement”). Under the terms of the Agreement, BRNI provides research services and grants the Company the exclusive and nontransferable license right, effective upon the Company's completion of a Series A Preferred Stock financing generating net proceeds to the Company of at least $8,000,000, to utilize its patents and other intellectual property. The Agreement terminates on the latter of the date (i) the last of the licensed patent expires, is abandoned, or is declared unenforceable or invalid or (ii) the last of the intellectual property enters the public domain.
The research services provided under the Agreement commenced on April 2, 2012. The Agreement requires the Company to reimburse BRNI for services rendered (the “Services Reimbursement”) on a pro-rated, thirty month basis, with respect to the period of time elapsed from April 2, 2012 through the time the Company completes a Series A Preferred Stock financing of at least $8,000,000 in net proceeds. BRNI invoiced the Company $1,198,696 for these service reimbursements through December 31, 2012. This amount is included in accounts payable in the accompanying balance sheet and consisted primarily of reimbursements of BRNI's personnel costs, research facility supplies and expenses and legal fees incurred in conjunction with obtaining the licensed patents. On February 28, 2013, the Company completed a Series A Preferred Stock financing (see Note 6).
After the initial Series A Preferred Stock financing, the License Agreement requires the Company to enter into scope of work agreements with BRNI, the preferred service provider for any research and development services or other related scientific assistance and support services. The Company shall not engage any other person other than BRNI to perform research or development services or other related scientific assistance without prior written consent of BRNI.
In addition to the fees under the services reimbursement and scope of work agreements, the Agreement requires the Company to pay BRNI a “Fixed Research Fee”, commencing the earlier of (i) the date that the Company completes a Series B Preferred Stock financing resulting in net proceeds of at least $25,000,000 or (ii) twenty-four months following the conclusion of the Series A Preferred Stock financing. The fixed research fee is (i) a pro- rata amount of $1,000,000 in the year the Company completes such financing (ii) $1,000,000 per year for five calendar years subsequent to such financing (iii) an annual fixed research fee in an amount to be negotiated and agreed upon no later than 90 days prior to the end of the fifth calendar year following the completion of such financing to be paid with respect to each remaining calendar year during the term of the Agreement. The Company has not completed this financing at December 31, 2012 (see Note 6) and, accordingly, no such fee was due as of that date.
The Agreement also requires the payment of royalties ranging between 2% and 5% of the Company’s revenues generated from the licensed patents and other intellectual property, dependent upon the percentage ownership that Neurosciences Research Ventures, Inc. (NRVI) holds in the Company. Under the Agreement, the Company is required to prepay royalty fees at a rate of 5% of all investor funds raised in the Series A or Series B Preferred Stock financings or any subsequent rounds of financing prior to a public offering, less commissions. On March 25, 2013, the Company prepaid $409,549 in royalties under the Agreement.
F- 9 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Period October 31, 2012 (Inception) Through December 31, 2012
Note 5 – Income Taxes :
The Company incurred a net operating loss for income tax purposes of $1,437,793 for the period from October 31, 2012 (inception) through December 31, 2012. This amount is available for carry forward for use in offsetting taxable income of future years through 2032. The net operating loss carry forward resulted in a deferred tax asset of $540,134 at December 31, 2012, which is reduced to zero by an offsetting valuation allowance. As a result, there is no current provision for income taxes
Note 6 – Subsequent Events :
The Company’s management has evaluated the effects of events occurring between December 31, 2012 and August 1, 2013, the date these financial statements were available to be issued, and has determined that no events have occurred that would require adjustment to, or disclosure in, the accompanying financial statements, except as described below.
Common Stock:
On February 28, 2013, the Company amended and restated its Certificate of Incorporation to authorize 45,000,000 common shares at a par value of $0.01. On that date, the Company issued 19,000,000 common shares. This recapitalization has been presented retroactively in the accompanying financial statements.
Preferred Stock:
The February 28, 2013 Amended and Restated Certificate of Incorporation also authorized 15,000,000 shares of Series A preferred stock at $0.01 par value. Through a private placement, the Company issued 9,073,300 preferred shares at $1 per share on that date, resulting in gross proceeds of $9,073,000. In connection with the February 28, 2013 closing of the private placement, the Company was required to pay the placement agent, Allied Beacon Partners, Inc., a cash fee equal to the sum of (a) 10% of the proceeds received from purchasers sourced by Allied Beacon Partners, Inc. and (b) 5% of the proceeds received from purchasers sourced by the Company. No fee was payable on proceeds received from purchasers who were already stockholders of the Company. The total cash fee that the Company was required to pay in connection with this closing was $882,330. The Company was also obligated to issue to Allied Beacon Partners, Inc. warrants for the purchase of common stock and Series A preferred stock of the Company in connection with the closing. The aggregate number of shares subject to such warrants was the sum of (x) 10% of the number of shares purchased by purchasers sourced by Allied Beacon Partners, Inc. and (b) 5% of the number of shares purchased by purchasers sourced by the Company. No warrants were earned on proceeds received from purchasers who were already stockholders of the Company.
On May 17, 2013, the Company issued an additional 1,313,325 shares of Series A preferred stock at $1 per share, resulting in gross proceeds of $1,313,325, on which the Company was obligated to provide the placement agent with cash and warrant compensation under the same terms as applied with respect to the February 28, 2013 closing.
The total number of shares subject to warrants that the Company was required to issue in connection with the February and May 2013 closings was 988,663, consisting of 480,320 shares of common stock and 508,342 shares of Series A preferred stock. These warrants have a term of ten years. The strike price for the common stock warrants is $0.01 per share and the strike price for the Series A preferred stock warrants is $1.00 per share. The warrants have not yet been issued by the Company.
F- 10 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Period October 31, 2012 (Inception) Through December 31, 2012
The Series A preferred stock ranks senior with respect to liquidation preference and dividend rights to the common stock and any other class or series of stock that the Company may issue. The Series A preferred stock accrues a dividend at an annual rate of $0.08 per share. No dividends have been declared on the Series A preferred stock. In the event of any voluntary or involuntary liquidation, dissolution or winding-up of our affairs or similar event, a holder of Series A preferred stock will be entitled to be paid, before any distribution or payment may be made to any holders of common stock or other class or series of stock, the liquidation amount (which shall equal $1.00 per share) and the amount of any accrued and unpaid dividends as of such distribution or payment date. Each share of Series A preferred stock is convertible into common stock at the option of the stockholder at a price of $1.00 per share, subject to adjustment. The Series A shares are subject to mandatory conversion upon the vote of holders of a majority of the outstanding shares of Series A preferred stock at any given time, or upon the closing of a sale of common stock to the public at a price of at least $5.00 per share (subject to adjustment in the case of certain events) in a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act, resulting in net proceeds to the Company of at least $30,000,000.The holders of Series A preferred stock are entitled to a class vote on certain Company actions, have the right to elect one of five members of the Company board of directors and have a right of first offer to purchase their pro rata share of equity securities issued by the Company in the future, in addition to certain additional rights and privileges as set forth in the Amended and Restated Certificate of Incorporation and in certain agreements between the Company and the holders thereof.
Contractual Commitments:
From October 31, 2012 through February 28, 2013, the Company compensated its President under an independent contractor agreement at the rate of $20,833 per month (see Note 3). On February 25, 2013, the Company executed a four-year employment agreement, effective March 1, 2013, with its President. This agreement provides for an annual salary of $250,000 and annual bonus of $50,000, which shall increase to an annual salary of $300,000 and an annual bonus of $100,000 effective as of the later of (a) February 28, 2015 and (b) the closing of the B Round Financing (as defined in “Preferred Stock” above).
Effective February 28, 2013, the Company executed an agreement with Ramat Consulting Corp. (“Ramat”), a related party, for consulting services, including business development and marketing consulting, for a five-year period, subject to annual renewals thereafter. Ramat's annual fee is $50,000, payable in monthly installments of $4,167, plus pre-approved travel and other reimbursable expenses. Ramat is also entitled to an option, with a term of ten years, to purchase 300,000 shares of common stock of the Company at an exercise price of $1.00 per share. The option shall be deemed to have vested with respect to 20% of the shares as of February 28, 2013, and the balance shall vest on a daily basis over the four-year period beginning on February 28, 2013. The Company has not yet issued this option to Mr. Ramat. An entity related to Ramat purchased one million shares of Series A preferred stock on the effective date of this agreement.
F- 11 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Period October 31, 2012 (Inception) Through December 31, 2012
Effective April 10, 2013, the Company executed an agreement with Aptiv Solutions, Inc. for consulting services on the strategy and development of medical device products. Aptiv Solutions, Inc.'s fee is based on hourly rates ranging between $350 and $400, with the total fee not to exceed $60,000.
Effective April 15, 2013, the Company executed an agreement with Weisberg Consulting LLC for consulting services, including assistance in locating appropriate business opportunities with corporate partners related to the licensing of the Company's products and/or technologies to these partners and the consummation of agreements to form strategic alliances with these entities. The initial term of this agreement is for three months at a fee of $12,000 per month plus reimbursable expenses and is subject to renewal on a monthly basis at a fee of $14,000 per month. In addition, the agreement provides for a bonus of $25,000 to be paid upon its execution.
Effective April 17, 2013, the Company executed an agreement with Dominick & Dominick LLC for consulting services related to the structuring of a potential reverse merger with a publicly-held shell company. The fees under this agreement consist of $25,000 payable upon the execution of a merger term sheet and $50,000 payable upon the commencement of due diligence activities related to the merger.
Effective June 2, 2013, the Company executed a consulting agreement with Medical Cash Management Solutions, LLC for services as the Company's chief financial officer on an independent contractor basis through November 30, 2013 at a fee of $20,000 per month plus reimbursable expenses. This agreement is subject to renewal terms as agreed to by the parties.
F- 12 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
BALANCE SHEETS (UNAUDITED)
ASSETS | ||||||||
June 30, 2013 | December 31 ,2012 | |||||||
CURRENT ASSETS | ||||||||
Cash | $ | 7,661,891 | $ | - | ||||
Prepaid expenses | 26,500 | - | ||||||
TOTAL CURRENT ASSETS | 7,688,391 | - | ||||||
TOTAL ASSETS | $ | 7,688,391 | $ | - | ||||
LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses - related party | $ | 987,191 | $ | 1,240,636 | ||||
Accounts payable | 89,964 | 192,342 | ||||||
Advances from related party | 1,612 | 4,815 | ||||||
TOTAL CURRENT LIABILITIES | 1,078,767 | 1,437,793 | ||||||
Commitments and contingencies | ||||||||
Convertible redeemable preferred stock, Series A, $.01 par value, 15,000,000 shares authorized; 10,386,625 shares issued and outstanding | 9,372,962 | - | ||||||
SHAREHOLDERS' DEFICIT | ||||||||
Common
stock - 45,000,000 shares authorized at $0.01 par
value; 19,000,000 shares issued and outstanding |
190,000 | 190,000 | ||||||
Deficit accumulated during the development stage | (2,953,338 | ) | (1,627,793 | ) | ||||
TOTAL SHAREHOLDERS' DEFICIT | (2,763,338 | ) | (1,437,793 | ) | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $ | 7,688,391 | $ | - |
See accompanying notes to financial statements.
F- 13 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS (UNAUDITED)
Period from | ||||||||
October 31, | ||||||||
Six Months | 2012 | |||||||
ended | (inception) to | |||||||
June 30, 2013 | June 30, 2013 | |||||||
OPERATING EXPENSES: | ||||||||
Research and development - related party | $ | 318,894 | $ | 1,302,385 | ||||
General and administrative - related party | 660,327 | 917,472 | ||||||
General and administrative | 346,324 | 543,481 | ||||||
TOTAL OPERATING EXPENSES | 1,325,545 | 2,763,338 | ||||||
NET LOSS | $ | (1,325,545 | ) | $ | (2,763,338 | ) |
See accompanying notes to financial statements.
F- 14 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT (UNAUDITED)
Deficit | ||||||||||||||||
Accumulated | ||||||||||||||||
Additional | During the | |||||||||||||||
Common | Paid-In | Development | ||||||||||||||
Stock | Capital | Stage | Total | |||||||||||||
Balance, October 31, 2012 | $ | - | $ | - | $ | - | $ | - | ||||||||
Issuance of common stock | $ | 190,000 | $ | - | $ | (190,000 | ) | $ | - | |||||||
Net loss | $ | (1,437,793 | ) | $ | (1,437,793 | ) | ||||||||||
Balance, December 31, 2012 | $ | 190,000 | $ | - | $ | (1,627,793 | ) | $ | (1,437,793 | ) | ||||||
Net loss | - | - | (1,325,545 | ) | (1,325,545 | ) | ||||||||||
Balance, June 30, 2013 | $ | 190,000 | $ | - | $ | (2,953,338 | ) | $ | (2,763,338 | ) |
See accompanying notes to financial statements.
F- 15 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (UNAUDITED)
Period from | ||||||||
October 31, | ||||||||
Six Months | 2012 | |||||||
ended | (inception) to | |||||||
June 30, 2013 | June 30, 2013 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (1,325,545 | ) | $ | (2,763,338 | ) | ||
Adjustments to reconcile net loss to net | ||||||||
cash used by operating activities | ||||||||
Change in assets and liabilties | ||||||||
Increase in prepaid expenses | (26,500 | ) | (26,500 | ) | ||||
Decrease (increase) in accounts payable | ||||||||
and accrued expenses - related party | (253,445 | ) | 987,191 | |||||
Decrease (increase) in accounts payable | (102,378 | ) | 89,964 | |||||
Total adjustments | (382,323 | ) | 1,050,655 | |||||
Net Cash Used by Operating Activities | (1,707,868 | ) | (1,712,683 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Issuance of preferred stock | 9,372,962 | 9,372,972 | ||||||
Repayment of (borrowing) advances from related party | (3,203 | ) | 1,612 | |||||
Net Cash Provided by Financing Activities | 9,369,769 | 9,374,584 | ||||||
NET INCREASE IN CASH | 7,661,891 | 7,661,901 | ||||||
CASH AT BEGINNING OF PERIOD | - | - | ||||||
CASH AT END OF PERIOD | $ | 7,661,891 | $ | 7,661,901 |
See accompanying notes to financial statements.
F- 16 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Financial Statements
Six Months Ended June 30, 2013 and the Period
from October 31, 2012 (Inception) through June 30, 2013
Note 1 – Organization and Nature of Planned Business:
Neurotrope BioScience, Inc. (the “Company”) was incorporated in Delaware on October 31, 2012. The Company was formed to advance new diagnostic and therapeutic technologies in the field of neurodegenerative disease, primarily Alzheimer’s Disease. The Company plans to collaborate with Blanchette Rockefeller Neurosciences Institute (“BRNI”), a related party, in this process. The exclusive rights to the licensed technology transferred to the Company on February 28, 2013 (see Note 3).
Note 2 – Basis of Presentation
The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for the interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Results for the six month period ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.
Note 3 – Contractual Commitments :
From January 1, 2013 through February 28, 2013, the Company compensated its President under an independent contractor agreement at the rate of $20,833 per month (see Note 5). On February 25, 2013, the Company executed a four-year employment agreement, effective March 1, 2013, with its President. This agreement provides for an annual salary of $250,000 and annual bonus of $50,000, which shall increase to an annual salary of $300,000 and an annual bonus of $100,000 effective as of the later of (a) February 28, 2015 and (b) the closing of the B Round Financing (as defined in “Preferred Stock” below).
Effective February 28, 2013, the Company executed an agreement with Ramat Consulting Corp. (“Ramat”), a related party, for consulting services, including business development and marketing consulting, for a five-year period, subject to annual renewals thereafter. Ramat's annual fee is $50,000, payable in monthly installments of $4,167, plus pre-approved travel and other reimbursable expenses. Ramat is also entitled to an option, with a term of ten years, to purchase 300,000 shares of common stock of the Company at an exercise price of $1.00 per share. The option shall be deemed to have vested with respect to 20% of the shares as of February 28, 2013, and the balance shall vest on a daily basis over the four-year period beginning on February 28, 2013. The Company has not yet issued this option to Ramat. An entity related to Ramat purchased one million shares of Series A preferred stock on the effective date of this agreement.
Effective April 10, 2013, the Company executed an agreement with Aptiv Solutions, Inc. for consulting services on the strategy and development of medical device products. Aptiv Solutions, Inc.'s fee is based on hourly rates ranging between $350 and $400, with the total fee not to exceed $60,000.
Effective April 15, 2013, the Company executed an agreement with Weisberg Consulting LLC for consulting services, including assistance in locating appropriate business opportunities with corporate partners related to the licensing of the Company's products and/or technologies to these partners and the consummation of agreements to form strategic alliances with these entities. The initial term of this agreement is for three months at a fee of $12,000 per month plus reimbursable expenses and is subject to renewal on a monthly basis at a fee of $14,000 per month. In addition, the agreement provides for a bonus of $25,000 to be paid upon the execution of a transaction. The agreement term ended on July 15, 2013 and has been renewed on a month-to month-basis.
F- 17 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Financial Statements
Six Months Ended June 30, 2013 and the Period
from October 31, 2012 (Inception) through June 30, 2013
Effective April 17, 2013, the Company executed an agreement with Dominick & Dominick LLC for consulting services related to the structuring of a potential reverse merger with a publicly-held shell company. The fees under this agreement consist of $25,000 payable upon the execution of a merger term sheet and $50,000 payable upon the commencement of due diligence activities related to the merger. Through June 30, 2013, the Company has recognized $75,000 of expenses relating to this agreement in general and administrative expenses on the statement of operations.
Effective June 2, 2013, the Company executed a consulting agreement with Medical Cash Management Solutions, LLC for services as the Company's chief financial officer on an independent contractor basis through November 30, 2013 at a fee of $20,000 per month plus reimbursable expenses. This agreement is subject to renewal terms as agreed to by the parties.
Note 4 - Summary of Significant Accounting Policies :
Development Stage:
The Company is considered to be a development stage company, as defined by Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 915-10, in that the Company is devoting substantially all of its efforts to establishing a new business where planned principal operations have commenced, but no revenues have been derived from these operations.
In addition, the Company’s licensed technology may not be ready for commercialization for several years, if at all. The Company expects to continue to incur losses at least until commercialization, because it anticipates that its expenditures on research and development and administrative activities will significantly exceed any potential revenues during the period. The Company cannot predict when, if ever, it will become profitable.
Use of Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
F- 18 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Financial Statements
Six Months Ended June 30, 2013 and the Period
from October 31, 2012 (Inception) through June 30, 2013
Cash and Cash Equivalents:
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less when purchased to be cash equivalents. At times, the Company’s cash balances may exceed the current insured amounts under the Federal Deposit Insurance Corporation.
Research and Development Costs:
All research and development costs, including costs to maintain or expand the patent portfolio which do not meet the criteria for capitalization are expensed when incurred. FASB ASC Topic 730 requires companies involved in research and development activities to capitalize non-refundable advance payments for such services pursuant to contractual arrangements because the right to receive those services represents an economic benefit. Such capitalized advances will be expensed when the services occur and the economic benefit is realized. There were no capitalized research and development services at June 30, 2013 and December 31, 2012.
Income Taxes:
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due and deferred taxes. Deferred taxes are recognized for differences between the bases of assets and liabilities for financial statement and income tax purposes and the tax effects of net operating loss and other carry forwards. The deferred tax assets and liabilities represent the future tax consequences of those differences and carry forwards, which will either be taxable or deductible when the related assets, liabilities or carry forwards are recovered or settled. Deferred tax assets are reduced by a valuation allowance when, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Uncertain Tax Positions:
The Company applies the provisions of FASB ASC 740-10, Accounting for Uncertain Tax Positions , which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The standard also provides guidance on de-recognition, classification, interest and penalties, and accounting in interim periods, disclosure and transitions.
The Company has concluded that there are no significant uncertain tax positions requiring recognition in the accompanying financial statements. The tax period that is subject to examination by major tax jurisdictions is from October 31, 2012 (inception) through December 31, 2012, for which the tax returns have not yet been filed.
In the event the Company was to receive an assessment for interest and/or penalties, it will be classified in the financial statements as selling, general and administrative expense when assessed.
F- 19 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Financial Statements
Six Months Ended June 30, 2013 and the Period
from October 31, 2012 (Inception) through June 30, 2013
Risks and Uncertainties:
The Company operates in an industry that is subject to rapid technological change, intense competition and significant government regulation. The Company’s operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory and other risks including the potential for business failure.
Note 5 – Related Party Transactions :
The Company incurred consulting fees of $41,667 to its President during the period from January 1, 2013 to February 28, 2013 (see Note 3).
One director of the Company is also a director of BRNI. A second director of the Company is both the president and a director of BRNI.
Effective October 31, 2012, the Company executed a Technology License and Services Agreement with BRNI, a related party, and two entities affiliated with BRNI (the “Agreement”). Under the terms of the Agreement, BRNI provides research services and grants the Company the exclusive and nontransferable license right to certain patent and intellectual property which became effective upon the Company's completion of a Series A Preferred Stock financing generating net proceeds to the Company of at least $8,000,000 on February 28, 2013. The Agreement terminates on the latter of the date (i) the last of the licensed patent expires, is abandoned, or is declared unenforceable or invalid or (ii) the last of the intellectual property enters the public domain.
The research services provided under the Agreement commenced on April 2, 2012. The Agreement requires the Company to reimburse BRNI for services rendered (the “Services Reimbursement”) on a pro-rated, thirty month basis, with respect to the period of time elapsed from April 2, 2012 through the date of the Series A Preferred Stock financing on February 28, 2013. BRNI invoiced the Company $1,198,696 for service reimbursements through December 31, 2012 and an additional $266,666 from January 1, 2013 to February 28, 2013. $954,660 is included in accounts payable – related party in the accompanying balance sheet and consisted primarily of reimbursements of BRNI's personnel costs, research facility supplies and expenses and legal fees incurred in conjunction with obtaining the licensed patents.
After the initial Series A Preferred Stock financing, the License Agreement requires the Company to enter into scope of work agreements with BRNI, the preferred service provider for any research and development services or other related scientific assistance and support services. The Company shall not engage any other person other than BRNI to perform research or development services or other related scientific assistance without prior written consent of BRNI.
In addition to the fees under the services reimbursement and scope of work agreements, the Agreement requires the Company to pay BRNI a “Fixed Research Fee”, commencing the earlier of (i) the date that the Company completes a Series B Preferred Stock financing resulting in net proceeds of at least $25,000,000 or (ii) twenty-four months following the conclusion of the Series A Preferred Stock financing. The fixed research fee is (i) a pro rata amount of $1,000,000 in the year the Company completes such financing (ii) $1,000,000 per year for five calendar years subsequent to such financing (iii) an annual fixed research fee in an amount to be negotiated and agreed upon no later than 90 days prior to the end of the fifth calendar year following the completion of such financing to be paid with respect to each remaining calendar year during the term of the Agreement. The Company has not completed this financing at June 30, 2013 (see Note 8) and, accordingly, no such fee was due as of that date.
F- 20 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Financial Statements
Six Months Ended June 30, 2013 and the Period
from October 31, 2012 (Inception) through June 30, 2013
The Agreement also requires the payment of royalties ranging between 2% and 5% of the Company’s revenues generated from the licensed patents and other intellectual property, dependent upon the percentage ownership that Neurosciences Research Ventures, Inc. (NRVI) holds in the Company. Under the Agreement, the Company is required to prepay royalty fees at a rate of 5% of all investor funds raised in the Series A or Series B Preferred Stock financings or any subsequent rounds of financing prior to a public offering, less commissions. On March 25, 2013, the Company prepaid $409,549 in royalties under the Agreement and paid the remainder due of $60,319 in July 2013 relating to the May 7, 2013 Series A preferred stock financing.
Note 6 – Income Taxes :
The Company incurred a net operating loss for income tax purposes of $2,763,348 for the period from October 31, 2012 (inception) through June 30, 2013. This amount is available for carry forward for use in offsetting taxable income of future years through 2032. The net operating loss carry forward resulted in a deferred tax asset of $829,004 at June 30, 2013, which is reduced to zero by an offsetting valuation allowance. As a result, there is no provision for income taxes.
Note 7 – Common Stock:
On February 28, 2013, the Company amended and restated its Certificate of Incorporation to authorize 45,000,000 common shares at a par value of $0.01. On that date, the Company issued 19,000,000 common shares. This recapitalization has been presented retroactively in the accompanying financial statements.
Note 8 – Preferred Stock:
The February 28, 2013 Amended and Restated Certificate of Incorporation (Note 7 above) also authorized 15,000,000 shares of Series A preferred stock at $0.01 par value. Through a private placement, the Company issued 9,073,300 preferred shares at $1 per share on that date, resulting in gross proceeds of $9,073,300. In connection with the February 28, 2013 closing of the private placement, the Company was required to pay the placement agent, Allied Beacon Partners, Inc., a cash fee equal to the sum of (a) 10% of the proceeds received from purchasers sourced by Allied Beacon Partners, Inc. and (b) 5% of the proceeds received from purchasers sourced by the Company. No fee was payable on proceeds received from purchasers who were already stockholders of the Company. The total cash fee that the Company was required to pay in connection with this closing was $882,330. The Company was also obligated to issue to Allied Beacon Partners, Inc. warrants for the purchase of common stock and Series A preferred stock of the Company in connection with the closing. The aggregate number of shares subject to such warrants was the sum of (x) 10% of the number of shares purchased by purchasers sourced by Allied Beacon Partners, Inc. and (b) 5% of the number of shares purchased by purchasers sourced by the Company. No warrants were earned on proceeds received from purchasers who were already stockholders of the Company.
F- 21 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Financial Statements
Six Months Ended June 30, 2013 and the Period
from October 31, 2012 (Inception) through June 30, 2013
On May 17, 2013, the Company issued an additional 1,313,325 shares of Series A preferred stock at $1 per share, resulting in gross proceeds of $1,313,325, on which the Company was obligated to provide the placement agent with cash and warrant compensation under the same terms as applied with respect to the February 28, 2013 closing.
The total number of shares subject to warrants that the Company was required to issue in connection with the February and May 2013 closings was 988,663, consisting of 480,320 shares of common stock and 508,343 shares of Series A preferred stock. These warrants have a term of ten years. The strike price for the common stock warrants is $0.01 per share and the strike price for the Series A preferred stock warrants is $1.00 per share. The warrants have not yet been issued by the Company.
The Series A preferred stock ranks senior with respect to liquidation preference and dividend rights to the common stock and any other class or series of stock that the Company may issue. The Series A preferred stock accrues a dividend at an annual rate of $0.08 per share, when and if declared by the Board of Directors of the Company. No dividends have been declared on the Series A preferred stock. In the event of any voluntary or involuntary liquidation, dissolution or winding-up of our affairs or similar event, a holder of Series A preferred stock will be entitled to be paid, before any distribution or payment may be made to any holders of common stock or other class or series of stock, the liquidation amount (which shall equal $1.00 per share) and the amount of any accrued and unpaid dividends as of such distribution or payment date. Each share of Series A preferred stock is convertible into common stock at the option of the stockholder at a price of $1.00 per share, subject to adjustment. The Series A shares are subject to mandatory conversion upon the vote of holders of a majority of the outstanding shares of Series A preferred stock at any given time, or upon the closing of a sale of common stock to the public at a price of at least $5.00 per share (subject to adjustment in the case of certain events) in a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act, resulting in net proceeds to the Company of at least $30,000,000.The holders of Series A preferred stock are entitled to a class vote on certain Company actions, have the right to elect one of five members of the Company board of directors and have a right of first offer to purchase their pro rata share of equity securities issued by the Company in the future, in addition to certain additional rights and privileges as set forth in the Amended and Restated Certificate of Incorporation and in certain agreements between the Company and the holders thereof.
Subsequent to the end of the period, the Company expanded the Series A preferred stock financing through the issuance of an additional 11,533,375 shares. This additional financing was in conjunction with the Company’s reverse merger with a publicly reporting shell company (see Note 10 below).
F- 22 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Financial Statements
Six Months Ended June 30, 2013 and the Period
from October 31, 2012 (Inception) through June 30, 2013
Note 9 – Warrants :
During the six months ended June 30, 2013, in conjunction with the Series A preferred stock financing (see Note 8), the Company became obligated to issue warrants for 988,663 underlying shares, consisting of warrants for 480,320 underlying shares of common stock and warrants for 508,343 underlying shares of Series A preferred stock to the placement agents. Both warrants have a term of ten years. The strike price for the common stock warrants is $0.01 per share and the strike price for the Series A preferred stock warrants is $1.00 per share. The warrants have not yet been issued by the Company. The Company has reserved 480,320 shares of common stock for the exercise of outstanding warrants on common stock and reserved 508,343 shares of Series A preferred stock for the exercise of outstanding warrants on the Series A preferred stock.
The warrants were valued using the Black-Scholes option pricing model. The following weighted average assumptions were used for warrants issued during the six months ended June 30, 2013; risk free interest rates of 2.57%; expected dividend yield of 0%; expected term of 10 years and expected volatility of 106.0%. The weighted average remaining life of the warrants at June 30, 2013 was assumed to be 10 years. The total calculated fair value of the warrants as of June 30, 2013 is $896,921
Note 10 – Subsequent Events :
The Company’s management has evaluated the effects of events occurring between June 30, 2013 and August 28, 2013, the date these financial statements were available to be issued, and has determined that no events have occurred that would require adjustment to, or disclosure in, the accompanying financial statements, except as described below.
On August 21, 2013, the Company amended its articles of incorporation to increase its authorized shares of common stock from 45,000,000 shares to 57,000,000 shares, and to increase its authorized shares of preferred stock from 15,000,000 shares to 27,000,000 shares. As a result, the Company had a sufficient number of preferred shares to close the August 23, 2013, private placement.
On August 23, 2013, a wholly owned subsidiary of Neurotrope, Inc. (formerly BlueFlash Communications, Inc.) (“Parent”), Neurotrope Acquisition, Inc., a corporation formed in the State of Nevada on August 15, 2013 (“Acquisition Sub”) merged (the “Merger”) with and into the Company. The Company was the surviving corporation in the Merger and became a wholly owned subsidiary of Parent. All of the outstanding Company common stock was converted into shares of Parent common stock on a one-for-one basis.
As a result of the Merger, Parent discontinued its pre-Merger business and acquired the business of the Company, and will continue the existing business operations of the Company as a publicly-traded company under the name Neurotrope, Inc.
Also, on August 23 2013, the Company closed a private placement of 11,533,375 shares of its Series A preferred stock, for a purchase price of $1.00 per share, for aggregate gross proceeds of $11,533,375 (before deducting placement agent fees and expenses of the offering). All of the outstanding Company Series A preferred stock was converted into shares of Parent Series A convertible preferred stock (the “Series A Preferred Stock”) on a one-for-one basis in the Merger.
F- 23 |
NEUROTROPE BIOSCIENCE, INC.
(A Development Stage Company)
Notes to Financial Statements
Six Months Ended June 30, 2013 and the Period
from October 31, 2012 (Inception) through June 30, 2013
The Company agreed to pay the placement agent in the offering a cash commission of 10% of the gross funds raised from investors in the private placement offering (“PPO”). In addition, the placement agent received (a) for the first $12,000,000 of gross PPO proceeds, (i) warrants exercisable for a period of ten (10) years to purchase a number of shares of Common Stock equal to 7.5% of the number of shares of Series A preferred stock sold to investors introduced by it, with a per share exercise price of $0.01, and (ii) warrants exercisable for a period of ten (10) years to purchase a number of shares of Series A preferred stock equal to 2.5% of the number of shares of Series A preferred stock sold to investors introduced by it, with a per share exercise price of $1.00; and (b) on gross PPO proceeds in excess of $12,000,000, warrants exercisable for a period of ten (10) years to purchase a number of shares of Series A preferred stock equal to 10% of the number of shares of Series A preferred stock sold to investors introduced by it, with an exercise price of $1.00 per share (collectively, the “Agent Warrants”). As a result of the foregoing, the placement agent was paid an aggregate commission of $1,128,338 and was issued Agent Warrants to purchase 419,680 shares of the Company’s common stock and Agent Warrants to purchase 708,657 shares of the Company’s Series A preferred stock.
Before the Merger, Parent’s Board of Directors adopted, and our stockholders approved, our 2013 Equity Incentive Plan (the “2013 Plan”), which provides for the issuance of incentive awards of up to 7,000,000 shares of the Company’s common stock to officers, key employees, consultants and directors. Options to purchase an aggregate of 5,154,404 shares of our Common Stock have been issued under the 2013 Plan on August 23, 2013, as follows: An option to purchase 300,000 shares of Common Stock was issued to a consultant with a term of ten years, at an exercise price of $1.00 per share. The option vested with respect to 20% of the shares as of February 28, 2013, and the balance is vesting on a daily basis over the four-year period beginning on February 28, 2013. Options to purchase 3,554,404 shares of Common Stock were issued to founding stockholders of Neurotrope BioScience with a term of ten years, at an exercise price of $1.75 per share. These options are fully vested. Options to purchase 1,300,000 shares of Common Stock were issued to directors and observers (or their affiliates) with a term of ten years, at an exercise price of $1.00 per share. These options vest on a daily basis over five years from August 23, 2013.
Effective August 28, 2013, the Company signed a statement of work (“SOW”) with BRNI pursuant to its licensing agreement (see Note 5 – “Related Party Transactions”), whereby the Company has contracted for the further development of its AD diagnostic product. Pursuant to the SOW, the Company is obligated to pay BRNI a total of $1,645,470 in 12 equal monthly installments of $137,123, payable on the first business day of each month. These payments are for operating expenses associated with BRNI’s diagnostic laboratories. Operating expenses that are incurred in excess of this total amount are the responsibility of BRNI unless prior approval is obtained from the Company. The SOW may be extended if BRNI provides the Company with two months advanced notice that the SOW objectives are not met within the initial 12 month period. The Company will agree to continue funding the SOW at the same monthly rate for a period not to exceed an additional six (6) months to conclude the first anticipated clinical trial for the AD diagnostic product. In addition, the Company has agreed to pay an estimated $877,300 in external costs to complete the first clinical trial. If the results of the first clinical trial are accurate to pre-described tolerances, the Company has agreed to consider paying BRNI additional funds to further related research and development activities.
F- 24 |
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTSNeurotrope, Inc. (f.k.a. BlueFlash Communications, Inc.)
and
Neurotrope BioScience, Inc.
(A Development Stage Company)
Proforma Condensed Combined Balance Sheets
As of June 30, 2013 (Note 1)
(Unaudited)
F- 25 |
Neurotrope, Inc. (f.k.a. BlueFlash Communications, Inc.)
and
Neurotrope BioScience, Inc.
(A Development Stage Company)
Proforma Condensed Combined Statements of Operations
For the Six Months Ended June 30, 2013 (Note 1)
(Unaudited)
Neurotrope BioScience, Inc. Six Months Ended June 30, 2013 | Notes | Neurotrope,Inc. Three Months Ended April 30, 2013 | Adjustments | Notes | Pro Forma | |||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||
Research and development - related party | $ | 318,894 | $ | - | $ | 318,894 | ||||||||||||||
General and administrative - related party | 660,327 | - | 660,327 | |||||||||||||||||
General and administrative | 346,324 | 5,875 | (5,875 | ) | (2) | 346,324 | ||||||||||||||
TOTAL OPERATING EXPENSES | 1,325,545 | 5,875 | (5,875 | ) | 1,325,545 | |||||||||||||||
Other income (expense) - Interest expense | - | (112 | ) | 112 | (2) | - | ||||||||||||||
NET LOSS | $ | (1,325,545 | ) | $ | (5,987 | ) | $ | 5,987 | $ | (1,325,545 | ) | |||||||||
PER SHARE INFORMATION - BASIC
AND FULLY DILUTED (Note 5): |
||||||||||||||||||||
Weighted average shares outstanding | 21,700,000 | |||||||||||||||||||
Net loss per share, basic and fully diluted | $ | (0.06 | ) |
F- 26 |
Neurotrope, Inc. (f.k.a. BlueFlash Communications, Inc.)
and
Neurotrope BioScience, Inc.
(A Development Stage Company)
Proforma Condensed Combined Statements of Operations
For the period October 31, 2012 (Inception) to December 31, 2012
(Unaudited)
Neurotrope BioScience, Inc. period October 31, 2012 (Inception) to December 31, 2012 | Notes | Neurotrope, Inc. Year Ended January 31, 2013 | Adjustments | Notes | Pro Forma | |||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||
Research and development - related party | $ | 983,491 | $ | - | $ | 983,491 | ||||||||||||||
General and administrative - related party | 257,145 | - | 257,145 | |||||||||||||||||
General and administrative | 197,157 | 11,786 | (11,786 | ) | (2) | 197,157 | ||||||||||||||
TOTAL OPERATING EXPENSES | 1,437,793 | 11,786 | (11,786 | ) | 1,437,793 | |||||||||||||||
Other income (expense) - Interest expense | - | (118 | ) | 118 | (2) | - | ||||||||||||||
NET LOSS | $ | (1,437,793 | ) | $ | (11,904 | ) | $ | 11,904 | $ | (1,437,793 | ) | |||||||||
PER SHARE INFORMATION - BASIC AND FULLY DILUTED (Note 5): | ||||||||||||||||||||
Weighted average shares outstanding | 21,700,000 | |||||||||||||||||||
Net loss per share, basic and fully diluted | $ | (0.07 | ) |
F- 27 |
Neurotrope, Inc. (f.k.a. BlueFlash Communications, Inc.)
and
Neurotrope BioScience, Inc.
(A Development Stage Company)
Notes to Proforma Condensed Combined Financial Statements
(Unaudited)
Note 1. Financial Periods for Financial Statements
Neurotrope, Inc. (f.k.a. BlueFlash Communications, Inc.), a Nevada corporation (“Parent”) had a fiscal year ending January 31 during the periods presented. The most recent financial information available for Parent is for the three months ended April 30, 2013. There has been minimal operating activity in Parent after April 30, 2013. As a result, the information presented for Parent as of April 30, 2013 is deemed to be current for these proforma condensed combined financial statements. As of August 9, 2013, Parent changed its fiscal year to a calendar year basis. Neurotrope BioScience, Inc., a Delaware corporation (the “Company”) reports on a calendar year basis and is utilizing financial statements as of June 30, 2013 for these proforma condensed combined financial statements. As of August 9, 2013, Parent redomiciled from Florida to Nevada and changed its name to Neurotrope, Inc.
Note 2. Reincorporation; Reverse Merger Transaction
On August 9, 2013, Parent reincorporated in the State of Nevada by merging into a newly-formed special-purpose subsidiary, Neurotrope, Inc., which was the surviving corporation in the merger. As a result of this reincorporation merger, (i) Parent changed its name to Neurotrope, Inc., (ii) it changed its jurisdiction of incorporation from Florida to Nevada, (iii) it increased its authorized capital stock from 300,000,000 shares of common stock, par value $0.0001, to 300,000,000 shares of common stock, par value $0.0001, and 50,000,000 shares of “blank check” preferred stock, par value $0.0001, (iv) each share of BlueFlash Communications, Inc., common stock outstanding at the time of the reincorporation merger was automatically converted into 2.242 shares of Neurotrope, Inc., common stock, with the result that the 10,200,000 shares of common stock outstanding immediately prior to the reincorporation merger was converted into 22,868,400 shares of common stock outstanding immediately thereafter. All share and per share numbers in this Report relating to the common stock of Neurotrope, Inc., prior to this reincorporation merger have been adjusted to give effect to this conversion, unless otherwise stated.
On August 23, 2013, a wholly owned subsidiary of Parent, Neurotrope Acquisition, Inc., a corporation formed in the State of Delaware on August 15, 2013 (“Acquisition Sub”) merged (the “Merger”) with and into the Company. Neurotrope BioScience, Inc. was the surviving corporation in the Merger and became a wholly owned subsidiary of Parent. All of the outstanding Company common stock and Series A convertible preferred stock (see Note 4) was converted into shares of Parent common stock or Series A convertible preferred stock, resoectively, on a one-for-one basis. As a result of the Merger, Parent discontinued its pre-Merger business and acquired the business of the Company, and will continue the existing business operations of the Company as a publicly-traded company.
For financial reporting purposes, the transaction will be accounted for as a “reverse merger” rather than a business combination, because the sellers of the Company effectively control the combined companies immediately following the transaction. As such, the Company is deemed to be the accounting acquirer in the transaction and, consequently, the transaction is being treated as a reverse acquisition by the Company. Accordingly, the assets and liabilities and the historical operations that will be reflected in Parent’s ongoing financial statements will be those of the Company and will be recorded at the historical cost basis of the Company. All of Parent’s assets and liabilities were split off (See paragraph below) as part of the transaction and results of operations will be those of the Company after consummation of the transaction. Parent’s historic capital accounts and retained earnings will be retroactively adjusted to reflect the equivalent number of shares issued by it in the transaction while the Company’s historical retained earnings will be carried forward. The historical financial statements of Parent before the transaction will be replaced with the historical financial statements of the Company before the transaction in all future filings with the Securities and Exchange Commission, or SEC. The Merger is intended to be treated as a tax-free exchange under Section 368(a) of the Internal Revenue Code of 1986, as amended.
F- 28 |
In connection with the Merger, Parent transferred all of its pre-Merger operating assets and liabilities to its wholly-owned special-purpose subsidiary, Blue Flash Communications, Inc., a Nevada corporation (“Split-Off Subsidiary”), formed on August 15, 2013. Thereafter, pursuant to the Split-Off Agreement, the Company transferred all of the outstanding shares of capital stock of Split-Off Subsidiary to Marisa Watson, the pre-Merger majority stockholder of the Company, and the former sole officer and director of the Company (the “Split-Off”), in consideration of and in exchange for: (i) the surrender and cancellation of an aggregate of 20,178,000 shares of our Common Stock, after giving effect to the stock split, held by Ms. Watson (which were cancelled and will resume the status of authorized but unissued shares of our Common Stock), and; (ii) certain representations, covenants and indemnities.
The Split-Off Agreement resulted in the reduction of all assets, liabilities and retained earnings of Parent in the proforma financial statements and an adjustment to the Company’s common stock value of $751 to give effect to the 20,178,000 shares canceled as outlined in note 2 on the proforma financial statements.
Note 3. Recapitalization of Neurotrope Bioscience, Inc.
The Company is reflecting the change in par value of the common stock of Neuortrope Bioscience, Inc., immediately prior to the Merger, from $0.01 to $0.0001 for the surviving entity and the Company pre-merger. This resulted in an adjustment to the par value of the common stock attributable to the Company of $188,100 as outlined in note 3 in on the proforma financial statements. Further, the Company exchanged its 19,000,000 shares outstanding into 19,000,000 shares of Parent.
Note 4. Financing Transaction
Concurrently with the closing of the Merger and in contemplation of the Merger, the Company held a closing of its private placement offering (“PPO”) of 11,533,375 shares of its Series A preferred stock, at a price of $1.00 per share, for gross proceeds (before deducting commissions and expenses of the PPO) of $11,533,375. The closing of this PPO and the closing of the Merger were conditioned upon each other.
The PPO was conducted on a “best efforts” basis. Neurotrope BioSciences, Inc. agreed to pay the placement agent in the offering, EDI Financial, Inc., a registered broker-dealer, a cash commission of 10% of the gross funds raised from investors in the PPO. In addition, the placement agent received (a) for the first $12,000,000 of gross PPO proceeds, (i) warrants exercisable for a period of ten (10) years to purchase a number of shares of Common Stock equal to 7.5% of the number of shares of Series A Preferred Stock sold to investors introduced by it, with a per share exercise price of $0.01, and (ii) warrants exercisable for a period of ten (10) years to purchase a number of shares of Series A Preferred Stock equal to 2.5% of the number of shares of Series A Preferred Stock sold to investors introduced by it, with a per share exercise price of $1.00; and (b) on gross PPO proceeds in excess of $12,000,000, warrants exercisable for a period of ten (10) years to purchase a number of shares of Series A Preferred Stock equal to 10% of the number of shares of Series A Preferred Stock sold to investors introduced by it, with an exercise price of $1.00 per share (collectively, the “Agent Warrants. The Company was also required to reimburse the placement agent $25,000 for legal expenses incurred in connection with the PPO.
F- 29 |
As a result of the foregoing, the placement agent was paid an aggregate commission of $1,128,337.50 and was issued Agent Warrants to purchase 419,680 shares of the Company’s common stock and Agent Warrants to purchase 708,657 shares of the Company’s Series A preferred stock. The net proceeds received from the PPO of $10,405,038 was reflected as an increase to cash and preferred stock. The value ascribed to the Agent Warrants has been included as an expense netted against the Series A preferred stock and a corresponding increase to the Series A preferred stock with zero net impact on the balance sheet.
Note 5. Earnings Per Share
The proforma weighted average shares outstanding gives effect to the issuance of 19,000,000 shares of common stock in connection with the Merger and the Split-Off as if it occurred at the beginning of the periods presented and the 2,690,400 shares outstanding in Parent post-merger and Split-Off.
The effect of any potentially dilutive instruments including the convertible Series A preferred stock warrants and options were anti-dilutive. Therefore, dilutive earnings per share is equivalent to basic earnings per share.
F- 30 |
SIGNATURES
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.
NEUROTROPE, INC. | |||
Dated: August 29, 2013 | By: | /s/ Jim New | |
Name: | Jim New | ||
Title: | Chief Executive Officer |
Exhibit 2.3
______________________________________________________________________
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
NEUROTROPE, INC.
(formerly BlueFlash Communications, Inc.)
NEUROTROPE ACQUISITION CORP.
and
NEUROTROPE BIOSCIENCE, INC.
August 23, 2013
______________________________________________________________________
TABLE OF CONTENTS
Page | ||
ARTICLE I | THE MERGER | 2 |
1.1 | The Merger | 2 |
1.2 | The Closing | 2 |
1.3 | Actions at the Closing | 2 |
1.4 | Additional Actions | 3 |
1.5 | Conversion of Company Securities | 3 |
1.6 | Dissenting Shares | 4 |
1.7 | Fractional Shares | 5 |
1.8 | Options and Warrants | 5 |
1.9 | Post-Closing Adjustment | 6 |
1.10 | Certificate of Incorporation and Bylaws | 7 |
1.11 | No Further Rights | 7 |
1.12 | Closing of Transfer Books | 7 |
1.13 | Exemption from Registration; Rule 144 | 8 |
ARTICLE II | REPRESENTATIONS AND WARRANTIES OF THE COMPANY | 8 |
2.1 | Organization, Qualification and Corporate Power | 9 |
2.2 | Capitalization | 9 |
2.3 | Authorization of Transaction | 10 |
2.4 | Noncontravention | 10 |
2.5 | Subsidiaries | 11 |
2.6 | Financial Statements | 11 |
2.7 | Absence of Certain Changes | 11 |
2.8 | Undisclosed Liabilities | 12 |
2.9 | Tax Matters | 12 |
2.10 | Assets | 13 |
2.11 | Owned Real Property | 13 |
2.12 | Real Property Leases | 13 |
2.13 | Contracts | 14 |
2.14 | Accounts Receivable | 15 |
2.15 | Powers of Attorney | 15 |
2.16 | Insurance | 15 |
2.17 | Litigation | 15 |
2.18 | Employees | 15 |
2.19 | Employee Benefits | 16 |
2.20 | Environmental Matters | 18 |
2.21 | Legal Compliance | 18 |
2.22 | Customers and Suppliers | 18 |
2.23 | Permits | 18 |
2.24 | Certain Business Relationships with Affiliates | 18 |
2.25 | Brokers’ Fees | 19 |
2.26 | Books and Records | 19 |
2.27 | Intellectual Property | 19 |
2.28 | Disclosure | 20 |
2.29 | Duty to Make Inquiry | 20 |
2.30 | Accountants | 20 |
4.5 | Access to Company Information | 37 |
4.6 | Operation of Parent Business | 38 |
4.7 | Access to Parent Information | 39 |
4.8 | Expenses | 39 |
4.9 | Indemnification | 39 |
4.10 | Listing of Merger Shares | 40 |
4.11 | Name Change | 40 |
4.12 | Split-Off | 40 |
4.14 | Parent Board; Amendment of Charter Documents | 40 |
4.14 | Parent Equity Plan | 40 |
4.15 | Information Provided to Company Stockholders | 40 |
4.16 | No Registration | 41 |
ARTICLE V | CONDITIONS TO CONSUMMATION OF MERGER | 41 |
5.1 | Conditions to Each Party’s Obligations | 41 |
5.2 | Conditions to Obligations of the Parent and the Acquisition Subsidiary | 42 |
5.3 | Conditions to Obligations of the Company | 43 |
ARTICLE VI | INDEMNIFICATION | 45 |
6.1 | Indemnification by the Company Stockholders | 45 |
6.2 | Indemnification by the Parent | 46 |
6.3 | Indemnification Claims | 47 |
6.4 | Survival of Representations and Warranties | 49 |
6.5 | Limitations on Claims for Indemnification | 49 |
ARTICLE VII | DEFINITIONS | 50 |
ARTICLE VIII | TERMINATION | 52 |
8.1 | Termination by Mutual Agreement | 52 |
8.2 | Termination for Failure to Close | 52 |
8.2 | Termination by Operation of Law | 53 |
8.3 | Termination for Failure to Perform Covenants or Conditions | 53 |
8.4 | Effect of Termination or Default; Remedies | 53 |
8.5 | Remedies; Specific Performance | 53 |
ARTICLE IX | MISCELLANEOUS | 53 |
9.1 | Press Releases and Announcements | 53 |
9.2 | No Third Party Beneficiaries | 54 |
9.3 | Entire Agreement | 54 |
9.4 | Succession and Assignment | 54 |
9.5 | Counterparts and Facsimile Signature | 54 |
9.6 | Headings | 54 |
9.7 | Notices | 54 |
9.8 | Governing Law | 55 |
9.9 | Amendments and Waivers | 55 |
9.10 | Severability | 55 |
9.11 | Submission to Jurisdiction | 55 |
9.12 | Waiver of Jury Trial | 56 |
9.13 | Construction | 56 |
EXHIBITS | |
Exhibit A | Form of Split-Off Agreement |
Exhibit B | Form of General Release Agreement |
Exhibit C | Form of Indemnification Shares Escrow Agreement |
Exhibit D | Form of 2013 Equity Incentive Plan |
Exhibit E | [RESERVED] |
Exhibit F | Signatories to Lock-Up and No-Shorting Agreements |
Exhibit G | Form of Lock-Up and No-Shorting Agreement |
Exhibit H | [RESERVED] |
Exhibit I | [RESERVED] |
Exhibit J | [RESERVED] |
Exhibit K | Certificate of Designations of Parent Series A Preferred Stock |
Exhibit L | Form of Common Stockholders’ Agreement |
Exhibit M | Form of Preferred Stockholders Agreement |
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this “Agreement”), dated as of August 23, 2013, by and among Neurotrope, Inc. (successor by merger to BlueFlash Communications, Inc.), a Nevada corporation (the “Parent”), Neurotrope Acquisition Corp. , a Delaware corporation (the “Acquisition Subsidiary”), and Neurotrope BioScience, Inc. , a Delaware corporation (the “Company”). The Parent, the Acquisition Subsidiary and the Company are each a “Party” and referred to collectively herein as the “Parties.”
WHEREAS , this Agreement contemplates a merger of the Acquisition Subsidiary with and into the Company, with the Company remaining as the surviving entity after the merger (the “Merger”), whereby the equity holders of the Company will receive Parent Common Stock (as defined below) or Parent Series A Preferred Stock (as defined below), as applicable, in exchange for their capital stock of the Company; and
WHEREAS , each of the board of directors of the Company and the shareholders of the Company have (i) determined that it is in the best interest of the Company and its shareholders, and declared it advisable, to enter into this Agreement, and (ii) approved the execution, delivery and performance by the Company of this Agreement and consummation of the transactions contemplated hereby, including the Merger; and
WHEREAS , the board of directors of each of the Parent and Acquisition Subsidiary and the shareholder of Acquisition Subsidiary has (i) approved the execution, delivery and performance by the Parent and Acquisition Subsidiary, as the case may be, of this Agreement and the consummation of the transactions contemplated hereby, including the Merger and (ii) declared it advisable for Parent and Acquisition Subsidiary, respectively to enter into this Agreement.
WHEREAS , immediately prior to the closing of the Merger, the Company will complete a private placement offering of a minimum of 17,250,000 shares (which includes 10,386,625 shares the Company previously closed on) (the “Minimum Amount”) of the Company’s Series A Convertible Preferred Stock, par value $0.01 per share (the “Company Series A Preferred Stock”) (the “Private Placement Offering”) at a purchase price of $1.00 per share; and
WHEREAS , simultaneously with the closing of the Merger, the Parent shall split-off its existing business and its wholly owned subsidiary, BlueFlash Communications Corp., a Nevada corporation (the “Split-Off Subsidiary”), through the assignment of all of the Parent’s assets and liabilities (other than those under this Agreement and the other related agreements and transactions contemplated hereby) to, and the sale of all of the outstanding capital stock of, the Split-Off Subsidiary (the “Split-Off”) upon the terms and conditions of a split-off agreement by and among the Parent, the Split-Off Subsidiary and Marissa Watson (the “Buyer”), substantially in the form of Exhibit A attached hereto (the “Split-Off Agreement”); and
WHEREAS , concurrently with the execution of this Agreement, the Parent, Split-Off Subsidiary and Buyer are entering into a general release agreement in substantially the form attached as Exhibit B (the “General Release Agreement”); and
WHEREAS , the Parent, the Acquisition Subsidiary and the Company desire that the Merger qualifies as a “reorganization” under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and that this Agreement constitutes a “plan of reorganization” within the meaning of Section 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulation and not subject the holders of equity securities of the Company to tax liability under the Code;
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NOW, THEREFORE , in consideration of the representations, warranties and covenants herein contained, and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the Parties hereto, intending legally to be bound, agree as follows:
ARTICLE
I
THE MERGER
1.1 The Merger . Upon and subject to the terms and conditions set forth in this Agreement, the Acquisition Subsidiary shall merge with and into the Company at the Effective Time (as defined below). From and after the Effective Time, the separate corporate existence of the Acquisition Subsidiary shall cease and the Company shall continue as the surviving corporation in the Merger (the “Surviving Corporation”). The “Effective Time” shall be the time at which the Certificate of Merger (the “Certificate of Merger”) and other appropriate or required documents prepared and executed in accordance with the relevant provisions of General Corporation Law of the State of Delaware (the “Delaware Act”) are filed with the Secretary of State of the State of Delaware. The Merger shall have the effects set forth in the applicable provisions of the Delaware Act.
1.2 The Closing . The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Gottbetter & Partners, LLP in New York, New York commencing at 12:00 p.m. local time on or before September 22,, 2013, or, if all of the conditions to the obligations of the Parties to consummate the transactions contemplated hereby have not been satisfied or waived by such date, on such mutually agreeable later date as soon as practicable (and in any event not later than three (3) business days) after the satisfaction or waiver of all conditions (excluding the delivery of any documents to be delivered at the Closing by any of the Parties) set forth in Article V hereof (the “Closing Date”).
1.3 Actions at the Closing . At the Closing:
(a) the Company shall deliver to the Parent and the Acquisition Subsidiary the various certificates, instruments and documents referred to in Sections 5.1 and 5.2;
(b) the Parent and the Acquisition Subsidiary shall deliver to the Company the various certificates, instruments and documents referred to in Sections 5.1 and 5.3;
(c) the Surviving Corporation shall file the Certificate of Merger with the Secretary of State of the State of Delaware;
(d) the Buyer shall surrender to the Parent 20,178,000 shares of Parent Common Stock (the “Share Contribution”) in connection with the Split-Off.
(e) each of the holders of Company Common Stock of record immediately prior to the Effective Time (the “Company Common Stockholders”) shall, if requested by the Parent, deliver to the Parent the certificate(s) representing his, her or its Company Common Stock;
(f) the Parent shall deliver certificates for the Initial Shares (as defined below) to each holder of Company Common Stock in accordance with Section 1.5;
(g) except for the investors in the Private Placement Offering, each holder of Company Series A Preferred Stock (as defined below) immediately prior to the Effective Time (the “Company Preferred Stockholders” and, together with the Company Common Stockholders, the “Company Stockholders”) shall, if requested by the Parent, deliver to the Parent the certificate(s) representing his, her or its Company Series A Preferred Stock;
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(h) the Parent shall deliver certificates for the Parent Series A Preferred Stock (as defined below) to each of the Company Preferred Stockholders in accordance with Section 1.5;
(i) each of the holders of Company Warrants (as defined below) shall deliver to the Parent the certificate(s) representing his, her or its Company Warrants, and the Parent shall deliver Parent Warrants to such holders in accordance with Section 1.8; and
(j) the Parent, James New, as indemnification representative (the “Indemnification Representative”), and Gottbetter & Partners, LLP, as escrow agent (the “Indemnification Escrow Agent”), shall execute and deliver the Indemnification Shares Escrow Agreement, in substantially the form attached hereto as Exhibit C (the “Indemnification Escrow Agreement”), and the Parent shall deliver to the Indemnification Escrow Agent a certificate for the Indemnification Escrow Shares (as defined below) being placed in escrow on the Closing Date pursuant to the Indemnification Escrow Agreement.
1.4 Additional Actions . If at any time after the Effective Time the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of either the Company or the Acquisition Subsidiary or (b) otherwise to carry out the purposes of this Agreement, the Surviving Corporation and its proper officers and directors or their designees shall be authorized (to the fullest extent allowed under Applicable Law) to execute and deliver, in the name and on behalf of either the Company or the Acquisition Subsidiary, all such deeds, bills of sale, assignments and assurances and do, in the name and on behalf of the Company or the Acquisition Subsidiary, all such other acts and things necessary, desirable or proper to vest, perfect or confirm its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of the Company or the Acquisition Subsidiary, as applicable, and otherwise to carry out the purposes of this Agreement.
1.5 Conversion of Company Securities . At the Effective Time, by virtue of the Merger and without any action on the part of any Party or the holder of any of the following securities:
(a) Each share of common stock, par value $0.01 per share, of the Company (“Company Common Stock”) issued and outstanding immediately prior to the Effective Time (other than any Company Common Stock owned beneficially by the Parent or the Acquisition Subsidiary and other than Dissenting Shares (as defined below)), shall be converted into and represent the right to receive (subject to the provisions of Section 1.6) such number of shares of common stock, par value $0. 0001 per share, of the Parent (“Parent Common Stock”) as is equal to the Common Conversion Ratio (as defined below). An aggregate of nineteen million (19,000,000) shares of Parent Common Stock shall be issuable to the Company Common Stockholders in connection with the Merger. The shares of Parent Common Stock into which the shares of Company Common Stock are converted pursuant to this Section shall be referred to herein as the “Common Merger Shares.”
(b) The “Common Conversion Ratio” shall be obtained by dividing (i) 19,000,000 shares of Parent Common Stock by (ii) the total number of issued and outstanding shares of Company Common Stock immediately prior to the Effective Time. The parties agree that the Common Conversion Ratio shall be one (1) share of Parent Common Stock for every one (1) share of Company Common Stock.
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(c) Notwithstanding the foregoing, as of the Closing Date, the Company Common Stockholders shall be entitled to receive immediately only 95% of the shares of Parent Common Stock into which their shares of Company Common Stock were converted pursuant to this Section 1.5 (the “Initial Shares”), pro rata in accordance with their respective holdings of Company Common Stock immediately prior to the Closing; the remaining 5% of the shares of Parent Common Stock into which their shares of Company Common Stock were converted pursuant to this Section 1.5, rounded to the nearest whole number (with 0.5 shares rounded upward to the nearest whole number) (the “Indemnification Escrow Shares”), shall be deposited in escrow pursuant to the Indemnification Escrow Agreement and shall be held and released in accordance with the terms of the Indemnification Escrow Agreement.
(d) The Parent shall deliver certificates for the Initial Shares to each Company Common Stockholder entitled thereto who, if requested by the Parent, shall have presented a certificate that immediately prior to the Effective Time represented Company Common Stock to be converted into Common Merger Shares pursuant to this Section 1.5 (the “Common Certificates”) to the Parent or the Surviving Corporation or the Parent’s transfer agent.
(e) Each share of Company Series A Preferred Stock issued and outstanding immediately prior to the Effective Time (other than any Company Series A Preferred Stock owned beneficially by the Parent or the Acquisition Subsidiary and other than Dissenting Shares (as defined below)), shall be converted into and represent the right to receive one (1) share of Series A Convertible Preferred Stock, par value $.0001 per share of the Parent (the “Parent Series A Preferred Stock”), having the powers, contractual obligations, designations, preferences and other rights set forth in the Certificate of Designations of Parent Series A Preferred Stock, attached hereto as Exhibit K . The shares of Parent Series A Preferred Stock into which the shares of Company Series A Preferred Stock are converted pursuant to this Section shall be referred to herein as the “Preferred Merger Shares”, and the Common Merger Shares and Preferred Merger Shares shall be referred to herein as the “Merger Shares.”
(f) The Parent shall deliver certificates for the Parent Series A Preferred Stock to each Company Preferred Stockholder entitled thereto who (except for the investors in the Private Placement Offering), if requested by the Parent, shall have presented a certificate that immediately prior to the Effective Time represented Company Series A Preferred Stock to be converted into Preferred Merger Shares pursuant to this Section 1.5 (the “Preferred Certificates”) to the Parent or the Surviving Corporation or the Parent’s transfer agent.
(g) Each issued and outstanding share of common stock, par value $0.0001 per share, of the Acquisition Subsidiary shall be converted into one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.
1.6 Dissenting Shares .
(a) For purposes of this Agreement, “Dissenting Shares” means shares of Company Common Stock or Company Preferred Stock held as of the Effective Time by a Company Common Stockholder or Company Preferred Stockholder, as the case may be, who has not voted such stock in favor of the adoption of this Agreement and the Merger and with respect to which appraisal shall have been duly demanded and perfected in accordance with Section 262 of the Delaware Act and not effectively withdrawn or forfeited prior to the Effective Time. Dissenting Shares shall not be converted into or represent the right to receive shares of Parent Common Stock or Parent Preferred Stock, as the case may be, unless such Company Stockholder’s right to appraisal shall have ceased in accordance with the Delaware Act. If such Company Stockholder has so forfeited or withdrawn his, her or its right to appraisal of Dissenting Shares, then (i) as of the occurrence of such event, such holder’s Dissenting Shares shall cease to be Dissenting Shares and shall be converted into and represent the right to receive the Common Merger Shares or Preferred Merger Shares, as the case may be, issuable in respect of such Company Common Stock or Company Preferred Stock, as the case may be, pursuant to Section 1.5, and (ii) promptly following the occurrence of such event, the Parent shall deliver to such Company Stockholder (i) in the case of Common Merger Shares, a certificate representing the Initial Shares to which such holder is entitled pursuant to Section 1.5 and shall deliver to the Indemnification Escrow Agent a certificate representing the remaining 5% of the Common Merger Shares to which such holder is entitled pursuant to Section 1.5 (which shares shall be considered Indemnification Escrow Shares for all purposes of this Agreement), or (ii) in the case of Preferred Merger Shares, a certificate representing the Preferred Merger Shares to which such holder is entitled pursuant to Section 1.5.
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(b) The Company shall give the Parent prompt notice of any written demands for appraisal of any Company Stock, withdrawals of such demands, and any other instruments that relate to such demands received by the Company. The Company shall not, except with the prior written consent of the Parent, make any payment with respect to any demands for appraisal of Company Stock or offer to settle or settle any such demands unless required by the court of the State of Delaware having jurisdiction thereof.
1.7 Fractional Shares . No certificates or scrip representing fractional Common Merger Shares shall be issued to Company Common Stockholders on the surrender for exchange of shares of Company Common Stock and such Company Common Stockholders shall not be entitled to any voting rights, rights to receive any dividends or distributions or other rights as a stockholder of the Parent with respect to any fractional Merger Shares that would have otherwise been issued to such Company Common Stockholders. In lieu of any fractional Merger Shares that would have otherwise been issued, each former Company Common Stockholder that would have been entitled to receive a fractional share shall, on proper surrender of such person’s Common Certificates, receive such whole number of Common Merger Shares as is equal to the precise number of Common Merger Shares to which such Company Stockholder would be entitled, rounded up or down to the nearest whole number (with a fractional interest equal to 0.5 rounded upward to the nearest whole number); provided that each such Company Common Stockholder shall receive at least one Merger Share.
1.8 Options and Warrants .
(a) As of the Effective Time, all Company Options (as defined below) to purchase shares of Company Common Stock issued by the Company, whether vested or unvested, shall be canceled and exchanged for options to purchase shares of Parent Common Stock (“Parent Options”) without further action by the holder thereof. Each Parent Option shall constitute an option to acquire such number of shares of Parent Common Stock as is equal to the number of shares of Company Common Stock subject to the unexercised portion of the Company Option multiplied by the Common Conversion Ratio (with any fraction resulting from such multiplication to be rounded to the nearest whole number, and with 0.5 shares rounded upward to the nearest whole number (unless such Company Option provides for different treatment of fractions of a share in such circumstances)). The exercise price per share of each Parent Option shall be equal to the exercise price of the Company Option prior to conversion divided by the Common Conversion Ratio (rounded to the nearest whole cent, and with $0.005 rounded upward to the nearest whole cent (unless such Company Option provides for different treatment of fractions of a cent in such circumstances)).
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(b) As soon as practicable after the Effective Time, the Parent or the Surviving Corporation shall take appropriate actions to collect the Options and the agreements evidencing the Options, which shall be deemed to be canceled and shall entitle the holder to exchange the Options for Parent Options in the Parent.
(c) Any and all outstanding Company Warrants (as defined below) to purchase capital stock of the Company that remain unexercised shall terminate as of the Effective Date and the Parent shall issue new warrants (the “Parent Warrants”) in substitution for the Warrants, on substantially the same terms and conditions of the Warrants, but representing the right to acquire such number of shares of Parent Common Stock or Parent Series A Preferred Stock, as the case may be, as is equal to the number of shares of Company Common Stock or Company Series A Preferred Stock, as the case may be, subject to the unexercised portion of the Warrant multiplied by the Common Conversion Ratio (with any fraction resulting from such multiplication to be rounded to the nearest whole number, and with 0.5 shares rounded upward to the nearest whole number (unless such Company Warrant provides for different treatment of fractions of a share in such circumstances)). The exercise price per share of each Parent Warrant shall be equal to the exercise price of the Warrant prior to substitution divided by the Common Conversion Ratio (rounded to the nearest whole cent, and with $0.005 rounded upward to the nearest whole cent (unless such Company Warrant provides for different treatment of fractions of a cent in such circumstances)).
(d) The Parent shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Parent Common Stock for delivery upon exercise of (i) the Parent Options to be issued for the Options and (ii) the Parent Warrants to be issued for the Warrants, in accordance with this Section 1.8.
1.9 Post-Closing Adjustment .
(a) In the event that (i) during the period commencing from the Closing Date and ending on the third anniversary of the Closing Date, the Parent or the Surviving Corporation incurs any Damages with respect to, in connection with, or arising from any Parent Liabilities (as defined below), or (ii) a Company Stockholder shall be entitled to be indemnified for Damages under Article VI hereof, then, in the case of clause (i) above, promptly following the filing by the Parent with the Securities and Exchange Commission (the “SEC”) of an annual or quarterly report covering the completed fiscal quarter in which such Damages were incurred, or, in the case of clause (ii) above, promptly after such Company Stockholder becomes entitled to receive payment for such indemnification pursuant to Article VI, the Parent shall issue to, in the case of clause (i) above, all of the Company Stockholders and/or their designees, or, in the case of clause (ii) above, such Company Stockholder so entitled to indemnification and/or his designees, such number of shares of the same class of the Parent’s capital stock held by such Company Stockholder prior to the Closing Date (in addition to the Merger Shares to which any such person was or is entitled) as would result from dividing (x) the whole dollar amount representing such Damages by (y) $1.00 (subject to equitable adjustment in the event of any stock split, stock dividend, reverse stock split or similar event affecting the Parent Common Stock or Parent Series A Preferred Stock after the Effective Time), rounded to the nearest whole number (with 0.5 shares rounded upwards to the nearest whole number). Notwithstanding the foregoing, the limit on the aggregate number of shares of Parent Common Stock and Parent Series A Preferred Stock issuable under this Section shall be 500,000 shares. Any shares of Parent Common Stock or Parent Series A Preferred Stock that are issuable under clause (i) above shall be issued to the Company Stockholders pro rata in accordance with their respective holdings of Company Common Stock and Company Series A Preferred Stock immediately prior to the Closing.
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(b) As used in this Section, “Parent Liabilities” shall mean all liabilities, obligations or indebtedness of any nature whatsoever (i) of the Split-Off Subsidiary, whenever accruing, and (ii) of the Parent or the Acquisition Subsidiary, accruing prior to the Effective Time and not set forth in the Parent Disclosure Schedule, including, but not limited to (A) any breach by the Parent or the Acquisition Subsidiary of any of their respective representations or warranties set forth in Article III herein, (B) any litigation threatened, pending or for which a basis exists; (C) any and all outstanding debts, (D) any and all employee-related disputes, arbitrations or administrative proceedings threatened, pending or otherwise outstanding, (E) any and all liens, foreclosures, settlements, or other threatened, pending or otherwise outstanding financial, legal or similar obligations of the Parent or the Acquisition Subsidiary, (F) any and all Taxes for which Parent or the Acquisition Subsidiary or any of their direct or indirect assets may be liable or subject, for any taxable period (or portion thereof) ending on or before the Closing Date, including, without limitation, any and all Taxes resulting from or attributable to Parent’s ownership or operation of the Split-Off Subsidiary’s assets, (G) any and all Taxes for which Parent or its direct or indirect assets may be liable or subject (including, without limitation, the interests and assets of the Surviving Corporation and any Parent Subsidiary) as a consequence of Parent’s acquisition, formation, capitalization, ownership, and Split-Off of the Split-Off Subsidiary, whether related to a taxable period (or portion thereof) ending on or after the Closing Date, and (H) all fees and expenses incurred in connection with effecting the adjustments contemplated by this Section, as such Parent Liabilities are reflected in the Parent’s consolidated financial statements reviewed or audited by its independent auditors.
1.10 Certificate of Incorporation and Bylaws .
(a) The certificate of incorporation of the Acquisition Subsidiary in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation until duly amended or repealed, and the Surviving Corporation may make any necessary filings in the State of Delaware as shall be necessary or appropriate to effectuate or carry out fully the purpose of this Section 1.10(a).
(b) The bylaws of the Acquisition Subsidiary in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation until duly amended or repealed.
1.11 No Further Rights . From and after the Effective Time, no shares of Company Common Stock or Company Series A Preferred Stock shall be deemed to be outstanding, and holders of Company Common Stock or Company Series A Preferred Stock, certificated or uncertificated, shall cease to have any rights with respect thereto, except as provided herein or by law.
1.12 Closing of Transfer Books . At the Effective Time, the stock transfer books of the Company shall be closed and no transfer of Company Common Stock or Company Series A Preferred Stock shall thereafter be made. If, after the Effective Time, Common Certificates or Preferred Certificates are presented to the Parent or the Surviving Corporation, they shall be cancelled and exchanged for Common Merger Shares or Preferred Merger Shares, as the case may be, in accordance with Section 1.5, subject to applicable law in the case of Dissenting Shares.
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1.13 Exemption from Registration; Rule 144 .
(a) The Parent and the Company intend that the shares of Parent Common Stock and Parent Series A Preferred Stock to be issued pursuant to Section 1.5 hereof (including the Indemnification Escrow Shares) or upon exercise of Parent Options and Parent Warrants, if applicable, granted pursuant to Section 1.8 hereof, and any shares of Parent Common Stock that may be issued pursuant to Section 1.9 hereof (if any), in connection with the Merger will be issued in a transaction exempt from registration under the Securities Act of 1933, as amended (“Securities Act”), by reason of Section 4(2) of the Securities Act, Rule 506 of Regulation D promulgated by the SEC thereunder and/or Regulation S promulgated by the SEC and that all recipients of such shares of Parent Common Stock and Parent Series A Preferred Stock shall either be “accredited investors” or not “U.S. Persons” as such terms are defined in Regulation D and Regulation S, respectively. The shares of Parent Common Stock and Parent Series A Preferred Stock to be issued pursuant to Section 1.5 hereof (including the Indemnification Escrow Shares) or upon exercise of Parent Options and Parent Warrants, if applicable, granted pursuant to Section 1.8 hereof, and any shares of Parent Common Stock that may be issued pursuant to Section 1.9 hereof, will be “restricted securities” within the meaning of Rule 144 under the Securities Act and may not be offered, sold, pledged, assigned or otherwise transferred unless (a) a registration statement with respect thereto is effective under the Securities Act and any applicable state securities laws, or (b) an exemption from such registration exists and either the Parent receives an opinion of counsel to the holder of such securities, which counsel and opinion are satisfactory to the Parent, that such securities may be offered, sold, pledged, assigned or transferred in the manner contemplated without an effective registration statement under the Securities Act or applicable state securities laws, or the holder complies with the requirements of Regulation S, if applicable; and the certificates representing such shares of Parent Common Stock and Parent Series A Preferred Stock will bear an appropriate legend and restriction on the books of the Parent’s transfer agent to that effect.
(b) The Parent is a “shell company” as defined in Rule 12b-2 under the Exchange Act of 1934). The Company acknowledges that pursuant to Rule 144(i), securities issued by a former shell company (such as the Merger Shares) that otherwise meet the holding period and other requirements of Rule 144 nevertheless cannot be sold in reliance on Rule 144 until one year after the Company (a) is no longer a shell company; and (b) has filed current “Form 10 information“ (as defined in Rule 144(i)) with the SEC reflecting that it is no longer a shell company, and provided that at the time of a proposed sale pursuant to Rule 144, the Parent is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act and has filed all reports and other materials required to be filed by section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports. As a result, the restrictive legends on certificates for the Merger Shares cannot be removed except in connection with an actual sale meeting the foregoing requirements or pursuant to an effective registration statement.
ARTICLE
II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent that the statements contained in this Article II are true and correct, except as set forth in the disclosure schedule provided by the Company to the Parent on the date hereof and accepted in writing by the Parent (the “Company Disclosure Schedule”). The Company Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article II; and to the extent that it is clear from the context thereof that such disclosure also applies to any other numbered paragraph contained in this Article II, the disclosures in any numbered paragraph of the Disclosure Schedule shall qualify such other corresponding numbered paragraph in this Article II. For purposes of this Article II, the phrase “to the knowledge of the Company” or any phrase of similar import shall be deemed to refer to the actual knowledge of any officer of the Company as well as any other knowledge which such person would have possessed had such person made reasonable inquiry of appropriate officers, directors and key employees of the Company and the accountants and attorneys of the Company.
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2.1 Organization, Qualification and Corporate Power . The Company is a corporation duly organized, validly existing and in corporate and tax good standing under the laws of the State of Delaware. The Company is duly qualified to conduct business and is in corporate and tax good standing under the laws of each jurisdiction in which the nature of its businesses or the ownership or leasing of its properties requires such qualification, except where the failure to be so qualified or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect (as defined below). The Company has all requisite corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. The Company has furnished or made available to the Parent complete and accurate copies of its certificate of incorporation and bylaws. The Company is not in default under or in violation of any provision of its certificate of incorporation, as amended to date, or its bylaws, as amended to date. For purposes of this Agreement, “Company Material Adverse Effect” means a material adverse effect on the assets, business, financial condition, or results of operations or future prospects of the Company taken as a whole.
2.2 Capitalization . The authorized capital stock of the Company consists of 57,000,000 shares of Company Common Stock and 27,000,000 shares of preferred stock. As of the date of this Agreement, 19,000,000 shares of Company Common Stock are issued and outstanding, 21,920,000 shares of Company Series A Preferred Stock are issued and outstanding, no other shares of Company preferred stock are issued and outstanding, and no shares of Company Common Stock or shares of preferred stock of the Company were held in the treasury of the Company. As of the date of this Agreement, there are no outstanding options to purchase shares of Company Common Stock (“Company Options”). As of the date of this Agreement, there are outstanding warrants to purchase 1,217,000 shares of Company Series A Preferred Stock and 900,000 shares of Company Common Stock (“Company Warrants”). As of immediately prior to the Effective Time, 19,000,000 shares of Company Common Stock and 21,920,000 shares of Company Series A Preferred Stock will be issued and outstanding. Section 2.2 of the Company Disclosure Schedule sets forth a complete and accurate list of (i) all stockholders of the Company, indicating the number and class of Company stock held by each stockholder, (ii) all stock option plans and other stock or equity-related plans of the Company (“Company Equity Plans”) and the number of shares of Company Common Stock remaining available for future awards thereunder, (iii) all outstanding Company Options and Company Warrants, indicating (A) the holder thereof, (B) the number of shares of Company Common Stock subject to each Company Option and Company Warrant, (C) the Company Equity Plan under which each Company Option issued, (D) the exercise price, date of grant, vesting schedule and expiration date for each Company Option or Company Warrant, and (E) any terms regarding the acceleration of vesting, and (iv) all outstanding debt convertible into Company stock, indicating (A) the date of issue, (B) the holder thereof, (C) the unpaid principal amount thereof, (D) the interest rate thereon, (E) the accrued and unpaid interest thereon, (F) the number and class of Company stock into which such debt is convertible, and (G) the conversion price thereof. All of the issued and outstanding shares of Company Common Stock and Company Series A Preferred Stock are, and all shares of Company Common Stock that may be issued upon exercise of Company Options or Company Warrants or conversion of convertible debt will be (upon issuance in accordance with their terms), duly authorized, validly issued, fully paid, nonassessable and free of all preemptive rights. Other than the Company Options and Company Warrants and convertible debt listed in Section 2.2 of the Company Disclosure Schedule, there are no outstanding or authorized options, warrants, securities, rights, agreements or commitments to which the Company is a party or which are binding upon the Company providing for the issuance or redemption of any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Company. Other than as listed in Section 2.2 of the Company Disclosure Schedule, there are no agreements to which the Company is a party or by which it is bound with respect to the voting (including without limitation voting trusts or proxies), registration under the Securities Act, or sale or transfer (including without limitation agreements relating to pre-emptive rights, rights of first refusal, co-sale rights or “drag-along” rights) of any securities of the Company. To the knowledge of the Company, there are no agreements among other parties, to which the Company is not a party and by which it is not bound, with respect to the voting (including without limitation voting trusts or proxies) or sale or transfer (including without limitation agreements relating to rights of first refusal, co-sale rights or “drag-along” rights) of any securities of the Company. All of the issued and outstanding shares of Company Common Stock were issued in compliance with applicable securities laws.
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2.3 Authorization of Transaction . The Company has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by the Company of this Agreement and, subject to the adoption of this Agreement and the approval of the Merger by no less than a majority of the votes represented by the outstanding shares of Company Common Stock and Company Series A Preferred Stock entitled to vote on this Agreement and the Merger voting together as one class (the “Stockholder Approval”), the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company. Without limiting the generality of the foregoing, the board of directors of the Company (i) determined that the Merger is fair and in the best interests of the Company and the Company Stockholders, (ii) adopted this Agreement in accordance with the provisions of the Delaware Act, and (iii) directed that this Agreement and the Merger be submitted to the Company Stockholders for their adoption and approval and resolved to recommend that the Company Stockholders vote in favor of the adoption of this Agreement and the approval of the Merger. This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited under applicable bankruptcy, insolvency and similar laws, rules or regulations affecting creditors’ rights and remedies generally and to general principles of equity, whether applied in a court of law or a court of equity.
2.4 Noncontravention . Subject to the receipt of Stockholder Approval and the filing of the Certificate of Merger as required by the Delaware Act, neither the execution and delivery by the Company of this Agreement nor the consummation by the Company of the transactions contemplated hereby will (a) conflict with or violate any provision of the certificate of incorporation or bylaws of the Company, as amended to date, (b) require on the part of the Company any filing with, or any permit, authorization, consent or approval of, any court, arbitrational tribunal, administrative agency or commission or other governmental or regulatory authority or agency (a “Governmental Entity”), except for such permits, authorizations, consents and approvals for which the Company is obligated to use its Reasonable Best Efforts to obtain pursuant to Section 4.2(a), (c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party the right to terminate, modify or cancel, or require any notice, consent or waiver under, any contract or instrument to which the Company is a party or by which the Company is bound or to which any of their assets is subject, except for (i) any conflict, breach, default, acceleration, termination, modification or cancellation in any contract or instrument set forth in Section 2.4 of the Company Disclosure Schedule, for which the Company is obligated to use its Reasonable Best Efforts to obtain waiver, consent or approval pursuant to Section 4.2(b), (ii) any conflict, breach, default, acceleration, termination, modification or cancellation which would not have a Company Material Adverse Effect and would not adversely affect the consummation of the transactions contemplated hereby or (iii) any notice, consent or waiver the absence of which would not have a Company Material Adverse Effect and would not adversely affect the consummation of the transactions contemplated hereby, (d) result in the imposition of any Security Interest (as defined below) upon any assets of the Company or (e) violate any federal, state, local, municipal, foreign, international, multinational, Governmental Entity or other constitution, law, statute, ordinance, principle of common law, rule, regulation, code, governmental determination, order, writ, injunction, decree, treaty, convention, governmental certification requirement or other public limitation, U.S. or non-U.S., including Tax and U.S. antitrust laws (collectively, “Laws”) applicable to the Company or any of its properties or assets. For purposes of this Agreement: “Security Interest” means any mortgage, pledge, security interest, encumbrance, charge or other lien (whether arising by contract or by operation of law), other than (i) mechanic’s, materialmen’s and similar liens, (ii) liens arising under worker’s compensation, unemployment insurance, social security, retirement and similar legislation, and (iii) liens on goods in transit incurred pursuant to documentary letters of credit, in each case arising in the Ordinary Course of Business (as defined below) of the Company and not material to the Company; and “Ordinary Course of Business” means the ordinary course of the Company’s business, consistent with past custom and practice (including with respect to frequency and amount).
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2.5 Subsidiaries .
(a) The Company has no Subsidiaries. For purposes of this Agreement, a “Subsidiary” shall mean any corporation, partnership, joint venture or other entity in which a Party has, directly or indirectly, an equity interest representing 50% or more of the equity securities thereof or other equity interests therein; a “Company Subsidiary” is a Subsidiary of the Company and a “Parent Subsidiary” is a Subsidiary of the Parent.
(b) The Company does not control directly or indirectly or have any direct or indirect equity participation or similar interest in any corporation, partnership, limited liability company, joint venture, trust or other business association which is not a Company Subsidiary.
2.6 Financial Statements . The Company has provided or made available to the Parent: (a) the audited consolidated balance sheet of the Company (the “Company Balance Sheet”) at December 31, 2012 (the “Company Balance Sheet Date”), and the related consolidated statements of operations and cash flows for the period from inception to December 31, 2012 (the “Company Year-End Financial Statements”); and (b) the unaudited balance sheet of the Company (the “Company Interim Balance Sheet”) at June 30, 2013 (the “Company Interim Balance Sheet Date”) and the related statement of operations and cash flows for the six months ended June 30, 2013 (the “Company Interim Financial Statements” and together with the Company Balance Sheet and the Company Year-End Financial Statements, the “Company Financial Statements”). The Company Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods covered thereby, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of the respective dates thereof and for the periods referred to therein, comply as to form with the applicable rules and regulations of the SEC for inclusion of such Company Financial Statements in the Parent’s filings with the SEC as required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are consistent in all material respects with the books and records of the Company.
2.7 Absence of Certain Changes . Since the Company Interim Balance Sheet Date, and except as set forth in Section 2.7 of the Company Disclosure Schedule, (a) to the knowledge of the Company, there has occurred no event or development which, individually or in the aggregate, has had, or could reasonably be expected to have in the future, a Company Material Adverse Effect, and (b) the Company has not taken any of the actions set forth in paragraphs (a) through (n) of Section 4.4.
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2.8 Undisclosed Liabilities . The Company has no liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) liabilities shown on the Company Interim Balance Sheet referred to in Section 2.6, (b) liabilities not exceeding $250,000 that have arisen since the Company Interim Balance Sheet Date in the Ordinary Course of Business, (c) contingent liabilities disclosed in the footnotes to the Company Financial Statements and (d) contractual and other liabilities incurred in the Ordinary Course of Business which are not required by GAAP to be reflected on a balance sheet.
2.9 Tax Matters .
(a) For purposes of this Agreement, the following terms shall have the following meanings:
(i) “Taxes” means all taxes, charges, fees, levies or other similar assessments or liabilities, including without limitation income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, transfer, withholding, employment, unemployment insurance, social security, business license, business organization, environmental, workers compensation, payroll, profits, license, lease, service, service use, severance, stamp, occupation, windfall profits, customs, duties, franchise and other taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof.
(ii) “Tax Returns” means all United States of America, state, local or foreign government reports, returns, declarations, statements or other information required to be supplied to a taxing authority in connection with the Taxes.
(b) The Company is not and has never been a member of a group of corporations with which it has filed (or been required to file) consolidated, combined or unitary Tax Returns. The Company has paid on a timely basis all Taxes that were due and payable. The unpaid Taxes of the Company for tax periods through the Company Balance Sheet Date do not exceed the accruals and reserves for Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Company Balance Sheet. The Company has no actual or potential liability for any Tax obligation of any taxpayer other than the Company. All Taxes that the Company is or was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Entity.
(c) Except as set forth in Section 2.9 of the Company Disclosure Schedule, the Company has delivered or made available to the Parent complete and accurate copies of all examination reports and statements of deficiencies assessed against or agreed to by the Company since the date of the Company’s incorporation (the “Organization Date”). No examination or audit of any Tax Return of the Company by any Governmental Entity is currently in progress or, to the knowledge of the Company, threatened or contemplated. The Company has not been informed by any jurisdiction that the jurisdiction believes that the Company was required to file any Tax Return that was not filed. The Company has not waived any statute of limitations with respect to Taxes or agreed to an extension of time with respect to a Tax assessment or deficiency.
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(d) The Company: (i) is not a “consenting corporation” within the meaning of Section 341(f) of the Code, and none of the assets of the Company are subject to an election under Section 341(f) of the Code; (ii) has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code; (iii) has not made any payments, is obligated to make any payments, or is a party to any agreement that could obligate it to make any payments that may be treated as an “excess parachute payment” under Section 280G of the Code; (iv) has no actual or potential liability for any Taxes of any person (other than the Company) under Treasury Regulation Section 1.1502-6 (or any similar provision of federal, state, local, or foreign law), or as a transferee or successor, by contract, or otherwise; or (v) is not and has not been required to make a basis reduction pursuant to Treasury Regulation Section 1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(e) None of the assets of the Company: (i) is property that is required to be treated as being owned by any other person pursuant to the provisions of former Section 168(f)(8) of the Code; (ii) is “tax-exempt use property” within the meaning of Section 168(h) of the Code; or (iii) directly or indirectly secures any debt the interest on which is tax exempt under Section 103(a) of the Code.
(f) The Company has not undergone a change in its method of accounting resulting in an adjustment to its taxable income pursuant to Section 481 of the Code.
(g) No state or federal “net operating loss” of the Company determined as of the Closing Date is subject to limitation on its use pursuant to Section 382 of the Code or comparable provisions of state law as a result of any “ownership change” within the meaning of Section 382(g) of the Code or comparable provisions of any state law occurring prior to the Closing Date.
2.10 Assets . The Company owns or leases all tangible assets reasonably necessary for the conduct of its businesses as presently conducted and as presently proposed to be conducted. Except as set forth in Section 2.10 of the Company Disclosure Schedule, each such tangible asset is free from material defects, has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear) and is suitable for the purposes for which it presently is used. Except as set forth in Section 2.10 of the Company Disclosure Schedule, no asset of the Company (tangible or intangible) (including without limitation any shares or other equity interests in or securities of any corporation, partnership, association or other business organization or division thereof), is subject to any Security Interest.
2.11 Owned Real Property . The Company owns no real property.
2.12 Real Property Leases . The Company is not a party to any lease or sublease agreement with respect to real property.
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2.13 Contracts .
(a) Section 2.13 of the Company Disclosure Schedule lists the following agreements (written or oral) to which the Company is a party as of the date of this Agreement (other than the Transaction Documentation):
(i) any agreement (or group of related agreements) for the lease of personal property from or to third parties providing for lease payments in excess of $25,000 per annum or having a remaining term longer than 12 months;
(ii) any agreement (or group of related agreements) for the purchase or sale of products or for the furnishing or receipt of services (A) which calls for performance over a period of more than one year, (B) which involves more than the sum of $25,000, or (C) in which the Company has granted manufacturing rights, “most favored nation” pricing provisions or exclusive marketing or distribution rights relating to any products or territory or has agreed to purchase a minimum quantity of goods or services or has agreed to purchase goods or services exclusively from a certain party;
(iii) any agreement which, to the knowledge of the Company, establishes a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness (including capitalized lease obligations) involving more than $25,000 or under which it has imposed (or may impose) a Security Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any employment or consulting agreement with a term of more than one year;
(vii) any agreement involving any officer, director or stockholder of the Company or any affiliate (as defined in Rule 12b-2 under the Exchange Act) thereof (an “Affiliate”);
(viii) any agreement or commitment for capital expenditures in excess of $25,000, for a single project (it being represented and warranted that the liability under all undisclosed agreements and commitments for capital expenditures does not exceed $100,000 in the aggregate for all projects);
(ix) any agreement under which the consequences of a default or termination would reasonably be expected to have a Company Material Adverse Effect;
(x) any agreement which contains any provisions requiring the Company to indemnify any other party thereto (excluding indemnities contained in agreements for the purchase, sale or license of products entered into in the Ordinary Course of Business);
(xi) any other agreement (or group of related agreements) either involving more than $25,000 or not entered into in the Ordinary Course of Business; and
(xii) any agreement, other than as contemplated by this Agreement, relating to the future sales of securities of the Company.
(b) The Company has delivered or made available to the Parent a complete and accurate copy of each agreement listed in Section 2.13 of the Company Disclosure Schedule. With respect to each agreement so listed, and except as set forth in Section 2.13 of the Company Disclosure Schedule: (i) the agreement is legal, valid, binding and enforceable and in full force and effect; (ii) the agreement will continue to be legal, valid, binding and enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing; and (iii) neither the Company nor, to the knowledge of the Company, any other party, is in breach or violation of, or default under, any such agreement, and no event has occurred, is pending or, to the knowledge of the Company, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a breach or default by the Company or, to the knowledge of the Company, any other party under such contract, except for any breach, violation or default that has not had and would not reasonably be anticipated to have a Company Material Adverse Effect.
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2.14 Accounts Receivable . The Company has no outstanding accounts receivable.
2.15 Powers of Attorney . Except as set forth in Section 2.15 of the Company Disclosure Schedule, there are no outstanding powers of attorney executed on behalf of the Company.
2.16 Insurance . Except as set forth in Section 2.16 of the Company Disclosure Schedule, the Company is not a party to any insurance policy.
2.17 Litigation . Except as set forth in Section 2.17 of the Company Disclosure Schedule, as of the date of this Agreement, there is no action, suit, proceeding, claim, arbitration or investigation before any Governmental Entity or before any arbitrator (a “Legal Proceeding”) which is pending or, to the Company’s knowledge, threatened against the Company which (a) seeks either damages in excess of $25,000 individually or $50,000 in the aggregate, (b) if determined adversely to the Company could have, individually or in the aggregate, a Company Material Adverse Effect or (c) in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement.
2.18 Employees .
(a) Section 2.18 of the Company Disclosure Schedule contains a list of all employees of the Company whose annual rate of compensation exceeds $50,000 per year, along with the position and the annual rate of compensation of each such person. Each such person is a party to a non-competition agreement with the Company; the forms of such agreements have been made available to the Parent. To the knowledge of the Company, no key employee or group of employees has any plans to terminate employment with the Company.
(b) The Company is not a party to or bound by any collective bargaining agreement, nor has any of them experienced any strikes, grievances, claims of unfair labor practices or other collective bargaining disputes. To the knowledge of the Company, (i) no organizational effort has been made or threatened, either currently or within the past two years, by or on behalf of any labor union with respect to employees of the Company, and (ii) there are no circumstances or facts which could individually or collectively give rise to a suit based on discrimination of any kind.
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2.19 Employee Benefits .
(a) For purposes of this Agreement, the following terms shall have the following meanings:
(i) “Employee Benefit Plan” means any “employee pension benefit plan” (as defined in Section 3(2) of ERISA), any “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), and any other written or oral plan, agreement or arrangement involving direct or indirect compensation, including without limitation insurance coverage, severance benefits, disability benefits, deferred compensation, bonuses, stock options, stock purchase, phantom stock, stock appreciation or other forms of incentive compensation or post-retirement compensation.
(ii) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
(iii) “ERISA Affiliate” means any entity which is, or at any applicable time was, a member of (1) a controlled group of corporations (as defined in Section 414(b) of the Code), (2) a group of trades or businesses under common control (as defined in Section 414(c) of the Code), or (3) an affiliated service group (as defined under Section 414(m) of the Code or the regulations under Section 414(o) of the Code), any of which includes or included the Company.
(b) Section 2.19(b) of the Company Disclosure Schedule contains a complete and accurate list of all Employee Benefit Plans maintained, or contributed to, by the Company(collectively, the “Company Benefit Plans”). Complete and accurate copies of (i) all Company Benefit Plans which have been reduced to writing, (ii) written summaries of all unwritten Company Benefit Plans, (iii) all related trust agreements, insurance contracts and summary plan descriptions, and (iv) all annual reports filed on IRS Form 5500, 5500C or 5500R and (for all funded plans) all plan financial statements for the last year for each Company Benefit Plan, have been made available to the Parent. Each Company Benefit Plan has been administered in all material respects in accordance with its terms and the Company has in all material respects met its obligations with respect to such Company Benefit Plan and has made all required contributions thereto. The Company and each Company Benefit Plan are in compliance in all material respects with the currently applicable provisions of ERISA and the Code and the regulations thereunder (including without limitation Section 4980B of the Code, Subtitle K, Chapter 100 of the Code and Sections 601 through 608 and Section 701 et seq. of ERISA). All filings and reports as to each Company Benefit Plan required to have been submitted to the Internal Revenue Service or to the United States Department of Labor have been duly submitted. The Company has no ERISA Affiliates.
(c) To the knowledge of the Company, there are no Legal Proceedings (except claims for benefits payable in the normal operation of the Company Benefit Plans and proceedings with respect to qualified domestic relations orders) against or involving any Company Benefit Plan or asserting any rights or claims to benefits under any Company Benefit Plan that could give rise to any material liability.
(d) All the Company Benefit Plans that are intended to be qualified under Section 401(a) of the Code have received determination letters from the Internal Revenue Service to the effect that such Company Benefit Plans are qualified and the plans and the trusts related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, no such determination letter has been revoked and revocation has not been threatened, and no such Company Benefit Plan has been amended since the date of its most recent determination letter or application therefor in any respect, and no act or omission has occurred, that would adversely affect its qualification or materially increase its cost. Each Company Benefit Plan which is required to satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been tested for compliance with, and satisfies the requirements of, Section 401(k)(3) and Section 401(m)(2) of the Code for each plan year ending prior to the Closing Date.
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(e) The Company has never maintained an Employee Benefit Plan subject to Section 412 of the Code or Title IV of ERISA.
(f) At no time has the Company been obligated to contribute to any “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any Company Benefit Plan providing benefits after termination of employment to any employee of the Company (or to any beneficiary of any such employee), including but not limited to retiree health coverage and deferred compensation, but excluding continuation of health coverage required to be continued under Section 4980B of the Code or other applicable Law and insurance conversion privileges under state law. The assets of each Company Benefit Plan which is funded are reported at their fair market value on the books and records of such Company Benefit Plan.
(h) No act or omission has occurred and no condition exists with respect to any Company Benefit Plan maintained by the Company that would subject the Company to (i) any material fine, penalty, tax or liability of any kind imposed under ERISA or the Code or (ii) any contractual indemnification or contribution obligation protecting any fiduciary, insurer or service provider with respect to any Company Benefit Plan.
(i) No Company Benefit Plan is funded by, associated with or related to a “voluntary employee’s beneficiary association” within the meaning of Section 501(c)(9) of the Code.
(j) Each Company Benefit Plan is amendable and terminable unilaterally by the Company at any time without liability to the Company as a result thereof and no Company Benefit Plan, plan documentation or agreement, summary plan description or other written communication distributed generally to employees by its terms prohibits the Company from amending or terminating any such Company Benefit Plan.
(k) Section 2.19(k) of the Company Disclosure Schedule discloses each: (i) agreement with any stockholder, director, executive officer or other key employee of the Company (A) the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving the Company of the nature of any of the transactions contemplated by this Agreement, (B) providing any term of employment or compensation guarantee or (C) providing severance benefits or other benefits after the termination of employment of such director, executive officer or key employee; (ii) agreement, plan or arrangement under which any person may receive payments from the Company that may be subject to the tax imposed by Section 4999 of the Code or included in the determination of such person’s “parachute payment” under Section 280G of the Code; and (iii) agreement or plan binding the Company, including without limitation any stock option plan, stock appreciation right plan, restricted stock plan, stock purchase plan, severance benefit plan or Company Benefit Plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. The accruals for vacation, sickness and disability expenses are accounted for on the Company Interim Balance Sheet and are adequate and materially reflect the expenses associated therewith in accordance with GAAP.
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2.20 Environmental Matters . The Company has complied with all applicable Environmental Laws (as defined below), except for violations of Environmental Laws that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. There is no pending or, to the knowledge of the Company, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation, inquiry or information request by any Governmental Entity, relating to any Environmental Law involving the Company, except for litigation, notices of violations, formal administrative proceedings or investigations, inquiries or information requests that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. For purposes of this Agreement, “Environmental Law” means any Law relating to the environment, including without limitation any Law pertaining to (i) treatment, storage, disposal, generation and transportation of industrial, toxic or hazardous materials or substances or solid or hazardous waste; (ii) air, water and noise pollution; (iii) groundwater and soil contamination; (iv) the release or threatened release into the environment of industrial, toxic or hazardous materials or substances, or solid or hazardous waste, including without limitation emissions, discharges, injections, spills, escapes or dumping of pollutants, contaminants or chemicals; (v) the protection of wild life, marine life and wetlands, including without limitation all endangered and threatened species; (vi) storage tanks, vessels, containers, abandoned or discarded barrels, and other closed receptacles; (vii) the reclamation of mines; (viii) health and safety of employees and other persons; and (ix) manufacturing, processing, using, distributing, treating, storing, disposing, transporting or handling of materials regulated under any law as pollutants, contaminants, toxic or hazardous materials or substances or oil or petroleum products or solid or hazardous waste. As used above, the terms “release” and “environment” shall have the meaning set forth in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”).
2.21 Legal Compliance . The Company and the conduct and operations of its business are in compliance with each Law applicable to the Company or any of its properties or assets, except for any violations or defaults that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
2.22 Customers . The Company has no customers of goods or services that account for revenues of the Company.
2.23 Permits . Section 2.23 of the Company Disclosure Schedule sets forth a list of all material permits, licenses, registrations, certificates, orders or approvals from any Governmental Entity (including without limitation those issued or required under Environmental Laws and those relating to the occupancy or use of owned or leased real property) (“Permits”) issued to or held by the Company. Such listed Permits are the only material Permits that are required for the Company to conduct its business as presently conducted except for those the absence of which, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. Each such Permit is in full force and effect and, to the knowledge of the Company, no suspension or cancellation of such Permit is threatened and, to the knowledge of the Company, there is no reasonable basis for believing that such Permit will not be renewable upon expiration. Each such Permit will continue in full force and effect immediately following the Closing.
2.24 Certain Business Relationships with Affiliates . Except as listed in Section 2.24 of the Company Disclosure Schedule, no Affiliate of the Company (a) owns any material property or right, tangible or intangible, which is used in the business of the Company, (b) to the knowledge of the Company, has any claim or cause of action against the Company, or (c) owes any money to, or is owed any money by, the Company. Section 2.24 of the Company Disclosure Schedule describes any transactions involving the receipt or payment in excess of $25,000 in any fiscal year between the Company and any Affiliate of the Company thereof which have occurred or existed since the Organization Date, other than employment agreements.
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2.25 Brokers’ Fees . Other than obligations arising under the Placement Agreement, dated November 6, 2012, between the Company and Allied Beacon Partners, Inc. (the “Allied Agreement”) and the Placement Agreement, dated June 25, 2013, between the Company and EDI Financial, Inc. (the “EDI Agreement”), the Company has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.
2.26 Books and Records . The minute books and other similar records of the Company contain complete and accurate records in all material respects of all actions taken at any meetings of the Company’s stockholders, board of directors or any committees thereof and of all written consents executed in lieu of the holding of any such meetings.
2.27 Intellectual Property .
(a) The Company owns, is licensed or otherwise possesses legally enforceable rights to use, license and exploit all issued patents, copyrights, trademarks, service marks, trade names, trade secrets, and registered domain names and all applications for registration therefor (collectively, the “Intellectual Property Rights”) and all computer programs and other computer software, databases, know-how, proprietary technology, formulae, and development tools, together with all goodwill related to any of the foregoing (collectively, the “Intellectual Property”), in each case as is necessary to conduct their respective businesses as presently conducted, the absence of which would be considered reasonably likely to result in a Company Material Adverse Effect.
(b) Section 2.27(b) of the Company Disclosure Schedule sets forth, with respect to all issued patents and all registered copyrights, trademarks, service marks and domain names registered with any Governmental Entity by the Company or for which an application for registration has been filed with any Governmental Entity by the Company, (i) the registration or application number, the date filed and the title, if applicable, of the registration or application and (ii) the names of the jurisdictions covered by the applicable registration or application. Section 2.27(b) of the Company Disclosure Schedule identifies each agreement currently in effect containing any ongoing royalty or payment obligations of the Company in excess of $25,000 per annum with respect to Intellectual Property Rights and Intellectual Property that are licensed or otherwise made available to the Company.
(c) Except as set forth on Section 2.27(c) of the Company Disclosure Schedule, all Intellectual Property Rights of the Company that have been registered by the Company with any Governmental Entity are valid and subsisting, except as would not reasonably be expected to have a Company Material Adverse Effect. As of the Effective Date, in connection with such Intellectual Property Rights registered by the Company, all necessary registration, maintenance and renewal fees will have been paid and all necessary documents and certificates will have been filed with the relevant Governmental Entities.
(d) The Company is not, and will not as a result of the consummation of the Merger or other transactions contemplated by this Agreement be, in breach in any material respect of any license, sublicense or other agreement relating to the Intellectual Property Rights of the Company, or any licenses, sublicenses or other agreements as to which the Company is a party and pursuant to which the Company uses any patents, copyrights (including software), trademarks or other intellectual property rights of or owned by third parties (the “Third Party Intellectual Property Rights”), the breach of which would be reasonably likely to result in a Company Material Adverse Effect.
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(e) Except as set forth on Section 2.27(e) of the Company Disclosure Schedule, The Company has not been named as a defendant in any suit, action or proceeding which involves a claim of infringement or misappropriation of any Third Party Intellectual Property Right and the Company has not received any notice or other communication (in writing or otherwise) of any actual or alleged infringement, misappropriation or unlawful or unauthorized use of any Third Party Intellectual Property Right. With respect to its product candidates and products in research or development, after the same are marketed, the Company will not, to its knowledge, infringe any Third Party Intellectual Property Rights in any material manner.
(f) To the knowledge of the Company, except as set forth on Section 2.27(f) of the Company Disclosure Schedule, no other person is infringing, misappropriating or making any unlawful or unauthorized use of any Intellectual Property Rights of the Company in a manner that has a material impact on the business of the Company, except for such infringement, misappropriation or unlawful or unauthorized use as would not be reasonably expected to have a Company Material Adverse Effect.
2.28 Disclosure . No representation or warranty by the Company contained in this Agreement, and no statement contained in the Company Disclosure Schedule, the Company’s Private Placement Memorandum dated June 25, 2013, as supplemented by Supplement No. 1 thereto dated August 18, 2013, or any other document, certificate or other instrument delivered or to be delivered by or on behalf of the Company pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein not misleading.
2.29 Duty to Make Inquiry . To the extent that any of the representations or warranties in this Article II are qualified by “knowledge” or “belief,” the Company represents and warrants that it has made reasonable inquiry and investigation concerning the matters to which such representations and warranties relate, including, but not limited to, reasonable inquiry by its directors, officers and key personnel.
2.30 Accountants . Friedman, LLP (the “Company Auditor”) is and has been throughout the periods covered by the Company Financial Statements (a) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002) and (b) “independent” with respect to the Company within the meaning of Regulation S-X. Except as set forth on Section 2.30 of the Company Disclosure Schedule, the reports of the Company Auditor on the financial statements of the Company for the past fiscal year and any subsequent interim period did not contain an adverse opinion or a disclaimer of opinion, or were qualified as to uncertainty, audit scope, or accounting principles. During the Company’s most recent fiscal year and the subsequent interim periods, there were no disagreements with the Company Auditor on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures. None of the reportable events listed in Item 304(a)(1)(iv) or (v) of Regulation S-K occurred with respect to the Company Auditor.
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2.31 FDA and Related Matters . Without limiting the generality of any of the foregoing representations and warranties of the Company:
(a) Except as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company holds all Permits, including all authorizations under the Federal Food, Drug and Cosmetic Act of 1938, as amended (the “FDCA”), the Public Health Service Act of 1944, as amended (the “PHSA”), and the regulations of the Food and Drug Administration (the “FDA”) promulgated thereunder, and any other Governmental Entity that is concerned with the quality, identity, strength, purity, safety, efficacy, manufacturing or distribution of the Company’s products (a “Company Regulatory Agency”) necessary for the lawful operating of the businesses of the Company, and all such permits are valid, and in full force and effect. There has not occurred any violation of, default (with or without notice or lapse of time or both) under, or event giving to others any right of termination, amendment or cancellation of, with or without notice or lapse of time or both, any such permit except as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company is in compliance in all material respects with the terms of all such permits, and no event has occurred that, to the knowledge of the Company, would reasonably be expected to result in the revocation, cancellation, non-renewal or adverse modification of any such permit, except as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(b) Except as has not had and would not reasonably be expected to have, either individually or in the aggregate, a Company Material Adverse Effect, all applications, submissions, information and data utilized by the Company as the basis for, or submitted by or, to the knowledge of the Company, on behalf of the Company in connection with, any and all requests for any permit relating to the Company and its business and products, when submitted to the FDA or other Company Regulatory Agency, were true and correct in all material respects as of the date of submission, and any updates, changes, corrections or modification to such applications, submissions, information and data required under applicable Laws have been submitted to the FDA or other Company Regulatory Agency.
(c) The Company has not committed any act, made any statement or failed to make any statement that would reasonably be expected to provide a basis for the FDA or any other Company Regulatory Agency to invoke its policy with respect to “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities”, or similar policies, set forth in any applicable Laws.
ARTICLE
III
REPRESENTATIONS AND WARRANTIES OF THE PARENT
AND THE ACQUISITION SUBSIDIARY
Each of the Parent and the Acquisition Subsidiary represents and warrants to the Company that the statements contained in this Article III are true and correct, except as set forth in the disclosure schedule provided by the Parent and the Acquisition Subsidiary to the Company on the date hereof and accepted in writing by the Company (the “Parent Disclosure Schedule”). The Parent Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article III; and to the extent that it is clear from the context thereof that such disclosure also applies to any other numbered paragraph contained in this Article III, the disclosures in any numbered paragraph of the Disclosure Schedule shall qualify such other corresponding numbered paragraph in this Article III. For purposes of this Article III, the phrase “to the knowledge of the Parent” or any phrase of similar import shall be deemed to refer to the actual knowledge of any officer or director of the Parent (which shall include the Buyer) as well as any other knowledge which such person would have possessed had such person made reasonable inquiry of appropriate officers, directors, key employees, accountants and attorneys of the Parent with respect to the matter in question.
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3.1 Organization, Qualification and Corporate Power . The Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and the Acquisition Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Parent is duly qualified to conduct business and is in corporate and tax good standing under the laws of each jurisdiction in which the nature of its businesses or the ownership or leasing of its properties requires such qualification, except where the failure to be so qualified or in good standing would not have a Parent Material Adverse Effect (as defined below). The Parent has all requisite corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. The Parent has furnished or made available to the Company complete and accurate copies of its articles of incorporation and bylaws. Neither the Parent nor the Acquisition Subsidiary is in default under or in violation of any provision of its certificate or articles of incorporation, as amended to date, or its bylaws, as amended to date. For purposes of this Agreement, “Parent Material Adverse Effect” means a material adverse effect on the assets, business, condition (financial or otherwise), or results of operations of the Parent and its subsidiaries, taken as a whole.
3.2 Capitalization . As of immediately prior to the Effective Time, but prior to giving effect to the issuance of the Merger Shares or the Share Contribution (as defined below), the authorized capital stock of the Parent will consist of 300,000,000 shares of Parent Common Stock, of which 22,868,406 shares will be issued and outstanding, and 50,000,000 shares of preferred stock, $0.0001 par value per share, of which no shares are outstanding. The Parent Common Stock is presently eligible for quotation and trading on the Over-The-Counter Bulletin Board (“OTCBB”) and is not subject to any notice of suspension or delisting. All of the issued and outstanding shares of Parent Common Stock are duly authorized, validly issued, fully paid, nonassessable and free of all preemptive rights. Except as contemplated by the Transaction Documentation (as hereinafter defined) or as described in Section 3.2 of the Parent Disclosure Schedule, there are no outstanding or authorized options, warrants, rights, agreements or commitments to which the Parent is a party or which are binding upon the Parent providing for the issuance or redemption of any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Parent. Except as contemplated by the Transaction Documentation, there are no agreements to which the Parent is a party or by which it is bound with respect to the voting (including without limitation voting trusts or proxies), registration under the Securities Act, or sale or transfer (including without limitation agreements relating to pre-emptive rights, rights of first refusal, co-sale rights or “drag-along” rights) of any securities of the Parent. There are no agreements among other parties, to which the Parent is not a party and by which it is not bound, with respect to the voting (including without limitation voting trusts or proxies) or sale or transfer (including without limitation agreements relating to rights of first refusal, co-sale rights or “drag-along” rights) of any securities of the Parent. All of the issued and outstanding shares of Parent Common Stock were issued in compliance with applicable federal and state securities laws. The Merger Shares to be issued at the Closing pursuant to Section 1.5 hereof, when issued and delivered in accordance with the terms hereof and of the Certificate of Merger, shall be duly and validly issued, fully paid and nonassessable and free of all preemptive rights and will be issued in compliance with applicable federal and state securities laws. At the Effective Time, after giving effect to the surrender by the Buyer of 20,178,000 shares of Parent Common Stock (the “Share Contribution”) in connection with the Split-Off, but prior to giving effect to the issuance of the Merger Shares (including the Indemnification Escrow Shares), there will be 2,690,406 shares of Parent Common Stock issued and outstanding.
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3.3 Authorization of Transaction . Each of the Parent and the Acquisition Subsidiary has all requisite power and authority to execute and deliver this Agreement and (in the case of the Parent) the Split-Off Agreement, the General Release Agreement and the Indemnification Escrow Agreement and to perform its obligations hereunder and thereunder. The execution and delivery by the Parent and the Acquisition Subsidiary of this Agreement and (in the case of the Parent) the Split-Off Agreement, the General Release Agreement and the Indemnification Escrow Agreement, and the agreements contemplated hereby and thereby (collectively, the “Transaction Documentation”), and the consummation by the Parent and the Acquisition Subsidiary of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of the Parent and the Acquisition Subsidiary, respectively. Each of the documents included in the Transaction Documentation has been duly and validly executed and delivered by the Parent or the Acquisition Subsidiary, as the case may be, and constitutes a valid and binding obligation of the Parent or the Acquisition Subsidiary, as the case may be, enforceable against them in accordance with its terms, except as such enforceability may be limited under applicable bankruptcy, insolvency and similar laws, rules or regulations affecting creditors’ rights and remedies generally and to general principles of equity, whether applied in a court of law or a court of equity.
3.4 Noncontravention . Subject to the filing of the Certificate of Merger as required by the Delaware Act, neither the execution and delivery by the Parent or the Acquisition Subsidiary, as the case may be, of this Agreement or the Transaction Documentation, nor the consummation by the Parent or the Acquisition Subsidiary, as the case may be, of the transactions contemplated hereby or thereby, will (a) conflict with or violate any provision of the organizational documents or bylaws of the Parent or the Acquisition Subsidiary, as the case may be, (b) require on the part of the Parent or the Acquisition Subsidiary, as the case may be, any filing with, or permit, authorization, consent or approval of, any Governmental Entity other than required notification to the Financial Industry Regulatory Authority (“FINRA”), (c) conflict with, result in breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party any right to terminate, modify or cancel, or require any notice, consent or waiver under, any contract or instrument to which the Parent or the Acquisition Subsidiary, as the case may be, is a party or by which either is bound or to which any of their assets are subject, except for (i) any conflict, breach, default, acceleration, termination, modification or cancellation which would not reasonably be expected to have a Parent Material Adverse Effect and would not reasonably be expected to adversely affect the consummation of the transactions contemplated hereby or (ii) any notice, consent or waiver the absence of which would not reasonably be expected to have a Parent Material Adverse Effect and would not reasonably be expected to adversely affect the consummation of the transactions contemplated hereby, (d) result in the imposition of any Security Interest upon any assets of the Parent or the Acquisition Subsidiary or (e) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Parent or the Acquisition Subsidiary or any of their properties or assets.
3.5 Subsidiaries .
(a) The Parent has no Subsidiaries other than the Acquisition Subsidiary and the Split-Off Subsidiary. Each of the Acquisition Subsidiary and the Split-Off Subsidiary is an entity duly organized, validly existing and in corporate and tax good standing under the laws of the jurisdiction of its organization. The Acquisition Subsidiary was formed solely to effectuate the Merger, the Split-Off Subsidiary was formed solely to effectuate the Split-Off, and neither of them has conducted any business operations since its organization. The Parent has delivered or made available to the Company complete and accurate copies of the charter, bylaws or other organizational documents of the Acquisition Subsidiary and the Split-Off Subsidiary. The Acquisition Subsidiary has no assets other than minimal paid-in capital, has no liabilities or other obligations, and is not in default under or in violation of any provision of its charter, bylaws or other organizational documents. All of the issued and outstanding shares of capital stock of the Acquisition Subsidiary are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. All shares of the Acquisition Subsidiary are owned by the Parent free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), claims, Security Interests, options, warrants, rights, contracts, calls, commitments, equities and demands. There are no outstanding or authorized options, warrants, rights, agreements or commitments to which the Parent or the Acquisition Subsidiary is a party or which are binding on any of them providing for the issuance, disposition or acquisition of any capital stock of the Parent, the Acquisition Subsidiary or the Split-Off Subsidiary (except as contemplated by this Agreement and the Split-Off Agreement). There are no outstanding stock appreciation, phantom stock or similar rights with respect to the Acquisition Subsidiary. There are no voting trusts, proxies or other agreements or understandings with respect to the voting of any capital stock of the Acquisition Subsidiary.
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(b) At all times from January 11, 2011 (inception) through the date of this Agreement, the business and operations of the Parent have been conducted exclusively through the Parent.
(c) The Parent does not control directly or indirectly or have any direct or indirect participation or similar interest in any corporation, partnership, limited liability company, joint venture, trust or other business association which is not a Subsidiary.
3.6 SEC Reports .
(a) The Parent has filed on a timely basis all registration statements, forms, reports and documents required to be filed by it with the SEC for the period from January 11, 2011 to the date hereof. Except to the extent available in full without redaction on the SEC’s web site through the Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”) two days prior to the date of this Agreement, the Parent has made available to the Company copies in the form filed with the SEC (including the full text of any document filed subject to a request for confidential treatment or as an exhibit to such filing) all of the following that have been filed with the SEC prior to the date hereof: (i) the Parent’s Annual Reports on Forms 10-K, (ii) the Parent’s Quarterly Reports on Forms 10-Q, (iii) all proxy and information statements relating to the Parent’s meetings of stockholders (whether annual or special) held, or by stockholder consents, (iv) the Parent’s Current Reports on Form 8-K, (v) all other forms, reports, registration statements and other documents filed by the Parent with the SEC (the forms, reports, registration statements and other documents referred to in clauses (i), (ii), (iii), (iv) and (v) above, whether or not available through EDGAR, together with the exhibits filed or furnished therewith, are, collectively, the “Parent Reports,” and, to the extent available in full without redaction through EDGAR at least two business days prior to the date of this Agreement, the “Filed Parent Reports”).
(b) Each of the Parent Reports filed on or after January 11, 2011, as of the date of the filing of such report (or, if amended or superseded by a subsequent filing prior to the date hereof, on the date of such filing), (i) complied as to form in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and, to the extent then applicable, SOX, including in each case, the rules and regulations thereunder, and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.
(c) The certifications of officers of the Parent required by Rules 13a-14 and 15d-14 promulgated under the Exchange Act and Sections 302 and 906 of SOX which are contained in the Parent Reports filed on or after January 11, 2011 complied with such laws and the rules and regulations of the SEC promulgated thereunder.
(d) From January 11, 2011 to the date hereof, the Parent has been in compliance in all material respects with (i) the applicable rules and regulations of FINRA in respect of which the Parent Common Stock is qualified for quotation and trading on the OTCBB, and (ii) the applicable provisions of SOX. The Parent has made available to the Company true, correct and complete copies of (A) all correspondence between the Parent and the OTCBB since January 11, 2011, and (B) all correspondence between the Parent and FINRA since January 11, 2011.
3.7 Compliance with Laws . Each of the Parent and its Subsidiaries:
(a) and the conduct and operations of their respective businesses, are in compliance with each Law applicable to the Parent, any Parent Subsidiary or any of their properties or assets, except for any violations or defaults that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect;
(b) has complied with all federal and state securities laws and regulations, including being current in all of its reporting obligations under such federal and state securities laws and regulations;
(c) has not, and the past and present officers, directors and Affiliates of the Parent have not, been the subject of, nor does any officer or director of the Parent have any reason to believe that the Parent or any of its officers, directors or Affiliates will be the subject of, any civil or criminal proceeding or investigation by any federal or state agency alleging a violation of securities laws;
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(d) has not been the subject of any voluntary or involuntary bankruptcy proceeding, nor has it been a party to any material litigation;
(e) has not, and the past and present officers, directors and Affiliates have not, been the subject of, nor does any officer or director of the Parent have any reason to believe that the Parent or any of its officers, directors or Affiliates will be the subject of, any civil, criminal or administrative investigation or proceeding brought by any federal or state agency having regulatory authority over such entity or person;
(f) does not and will not on the Closing, have any liabilities, contingent or otherwise, including but not limited to notes payable and accounts payable, and is not a party to any executory agreements; and
(g) is not a “blank check company” as such term is defined by Rule 419 of the Securities Act.
3.8 Financial Statements . The audited financial statements and unaudited interim financial statements of the Parent included in the Parent Reports (collectively, the “Parent Financial Statements”) (i) complied as to form in all material respects with applicable accounting requirements and, as appropriate, the published rules and regulations of the SEC with respect thereto when filed, (ii) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (except as may be indicated therein or in the notes thereto, and in the case of quarterly financial statements, as permitted by Form 10-Q under the Exchange Act), (iii) fairly present in all material respects the financial condition, results of operations and cash flows of the Parent as of the respective dates thereof and for the periods referred to therein, and (iv) are consistent in all material respects with the books and records of the Parent. Section 3.8 of the Parent Disclosure Schedule lists, and the Parent has made available to the Company copies of, the documents creating or governing all of the Parent’s off-balance sheet arrangements which are not required by GAAP to be reflected on a balance sheet.
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3.9 Absence of Certain Changes . Since the date of the balance sheet contained in the most recent Parent Report, (a) there has occurred no event or development which, individually or in the aggregate, has had, or could reasonably be expected to have in the future, a Parent Material Adverse Effect and (b) neither the Parent nor the Acquisition Subsidiary has taken any of the actions set forth in paragraphs (a) through (m) of Section 4.6.
3.10 Litigation . Except as disclosed in Section 3.10 of the Parent Disclosure Schedule, as of the date of this Agreement, there is no Legal Proceeding which is pending or, to the Parent’s knowledge, threatened (i) against the Parent or any Subsidiary of the Parent which, if determined adversely to the Parent or such Subsidiary, could have, individually or in the aggregate, a Parent Material Adverse Effect or which in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement or (ii) against any director or officer of any of the Parent in his or her capacity as such pursuant to Section 8A or 20(b) of the Securities Act or Section 21(d) or 21C of the Exchange Act. For purposes of this Section 3.10, any such pending or threatened Legal Proceedings where the amount at issue exceeds or could reasonably be expected to exceed the lesser of $10,000 per Legal Proceeding or $25,000 in the aggregate shall be considered to possibly result in a Parent Material Adverse Effect hereunder.
3.11 Undisclosed Liabilities . None of the Parent and its Subsidiaries has any liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) liabilities shown on the balance sheet contained in the most recent Parent Report, (b) liabilities which have arisen since the date of the balance sheet contained in the most recent Parent Report in the Ordinary Course of Business which do not exceed $10,000 in the aggregate and (c) contractual and other liabilities incurred in the Ordinary Course of Business which are not required by GAAP to be reflected on a balance sheet.
3.12 Tax Matters .
(a) Each of the Parent and its Subsidiaries has filed on a timely basis all Tax Returns that it was required to file, and all such Tax Returns were complete and accurate in all material respects. Neither the Parent nor any of its Subsidiaries is or has ever been a member of a group of corporations with which it has filed (or been required to file) consolidated, combined or unitary Tax Returns, other than a group of which only the Parent and its Subsidiaries are or were members. Each of the Parent and its Subsidiaries has paid on a timely basis all Taxes that were due and payable. The unpaid Taxes of the Parent and its Subsidiaries for tax periods through the date of the balance sheet contained in the most recent Parent Report do not exceed the accruals and reserves for Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences between book and Tax income) set forth on such balance sheet. Neither the Parent nor any of its Subsidiaries has any actual or potential liability for any Tax obligation of any taxpayer (including without limitation any affiliated group of corporations or other entities that included the Parent or any of its Subsidiaries during a prior period) other than the Parent and its Subsidiaries. All Taxes that the Parent or any of its Subsidiaries is or was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Entity.
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(b) The Parent has delivered or made available to the Company complete and accurate copies of all federal income Tax Returns, examination reports and statements of deficiencies assessed against or agreed to by the Parent or any of its Subsidiaries since July 9, 2007 (which was the date of the Parent’s incorporation). No examination or audit of any Tax Return of the Parent or any of its Subsidiaries by any Governmental Entity is currently in progress or, to the knowledge of the Parent, threatened or contemplated. Neither the Parent nor any of its Subsidiaries has been informed by any jurisdiction that the jurisdiction believes that the Parent or its Subsidiaries was required to file any Tax Return that was not filed. Neither the Parent nor any of its Subsidiaries has waived any statute of limitations with respect to Taxes or agreed to an extension of time with respect to a Tax assessment or deficiency.
(c) Neither the Parent nor any of its Subsidiaries: (i) has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code; (ii) has made any payments, is obligated to make any payments, or is a party to any agreement that could obligate it to make any payments that may be treated as an “excess parachute payment” under Section 280G of the Code; (iii) has any actual or potential liability for any Taxes of any person (other than the Parent and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of federal, state, local or foreign law), or as a transferee or successor, by contract or otherwise; or (iv) is or has been required to make a basis reduction pursuant to Treasury Regulation Section 1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(d) None of the assets of the Parent or any of its Subsidiaries: (i) is property that is required to be treated as being owned by any other person pursuant to the provisions of former Section 168(f)(8) of the Code; (ii) is “tax-exempt use property” within the meaning of Section 168(h) of the Code; or (iii) directly or indirectly secures any debt the interest of which is tax exempt under Section 103(a) of the Code.
(e) Neither the Parent nor any of its Subsidiaries has undergone a change in its method of accounting resulting in an adjustment to its taxable income pursuant to Section 481 of the Code.
(f) No state or federal “net operating loss” of the Parent determined as of the Closing Date is subject to limitation on its use pursuant to Section 382 of the Code or comparable provisions of state law as a result of any “ownership change” within the meaning of Section 382(g) of the Code or comparable provisions of any state law occurring prior to the Closing Date.
3.13 Assets . Each of the Parent and the Acquisition Subsidiary owns or leases all tangible assets necessary for the conduct of its businesses as presently conducted and as presently proposed to be conducted. Each such tangible asset is free from material defects, has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear) and is suitable for the purposes for which it presently is used. No asset of the Parent or the Acquisition Subsidiary (tangible or intangible) is subject to any Security Interest.
3.14 Owned Real Property . Except as set forth in Section 3.14 of the Parent Disclosure Schedule, neither the Parent nor any of its Subsidiaries owns any real property.
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3.15 Real Property Leases . Section 3.15 of the Parent Disclosure Schedule lists all real property leased or subleased to or by the Parent or any of its Subsidiaries and lists the term of such lease, any extension and expansion options, and the rent payable thereunder. The Parent has delivered or made available to the Company complete and accurate copies of the leases and subleases listed in Section 3.15 of the Parent Disclosure Schedule. With respect to each lease and sublease listed in Section 3.15 of the Parent Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding, enforceable and in full force and effect;
(b) the lease or sublease will continue to be legal, valid, binding, enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing;
(c) neither the Parent nor any of its Subsidiaries nor, to the knowledge of the Parent, any other party, is in breach or violation of, or default under, any such lease or sublease, and no event has occurred, is pending or, to the knowledge of the Parent, is threatened, which, after the giving of notice, with lapse of time or otherwise, would constitute a breach or default by the Parent or any of its Subsidiaries or, to the knowledge of the Parent, any other party under such lease or sublease;
(d) neither the Parent nor any of its Subsidiaries has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold or subleasehold; and
(e) to the knowledge of the Parent, there is no Security Interest, easement, covenant or other restriction applicable to the real property subject to such lease, except for recorded easements, covenants and other restrictions which do not materially impair the current uses or the occupancy by the Parent or any of its Subsidiaries of the property subject thereto.
3.16 Contracts .
(a) Section 3.16 of the Parent Disclosure Schedule lists the following agreements (written or oral) to which the Parent or any of its Subsidiaries is a party as of the date of this Agreement:
(i) any agreement (or group of related agreements) for the lease of personal property from or to third parties;
(ii) any agreement (or group of related agreements) for the purchase or sale of products or for the furnishing or receipt of services;
(iii) any agreement establishing a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness (including capitalized lease obligations) or under which it has imposed (or may impose) a Security Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any employment or consulting agreement;
(vii) any agreement involving any current or former officer, director or stockholder of the Parent or any Affiliate thereof;
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(viii) any agreement under which the consequences of a default or termination would reasonably be expected to have a Parent Material Adverse Effect;
(ix) any agreement which contains any provisions requiring the Parent or any of its Subsidiaries to indemnify any other party thereto (excluding indemnities contained in agreements for the purchase, sale or license of products entered into in the Ordinary Course of Business);
(x) any other agreement (or group of related agreements) either involving more than $5,000 or not entered into in the Ordinary Course of Business; and
(xi) any agreement, other than as contemplated by this Agreement and the Split-Off, relating to the sales of securities of the Parent or any of its Subsidiaries to which the Parent or such Subsidiary is a party.
(b) The Parent has delivered or made available to the Company a complete and accurate copy of each agreement listed in Section 3.16 of the Parent Disclosure Schedule. With respect to each agreement so listed: (i) the agreement is legal, valid, binding and enforceable and in full force and effect; (ii) the agreement will continue to be legal, valid, binding and enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing; and (iii) neither the Parent nor any of its Subsidiaries nor, to the knowledge of the Parent, any other party, is in breach or violation of, or default under, any such agreement, and no event has occurred, is pending or, to the knowledge of the Parent, is threatened, which, after the giving of notice, with lapse of time or otherwise, would constitute a breach or default by the Parent or any of its Subsidiaries or, to the knowledge of the Parent, any other party under such contract.
3.17 Accounts Receivable . All accounts receivable of the Parent and its Subsidiaries reflected on the Parent Reports are valid receivables subject to no setoffs or counterclaims and are current and collectible (within 90 days after the date on which it first became due and payable), net of the applicable reserve for bad debts on the balance sheet contained in the most recent Parent Report. All accounts receivable reflected in the financial or accounting records of the Parent that have arisen since the date of the balance sheet contained in the most recent Parent Report are valid receivables subject to no setoffs or counterclaims and are collectible (within 90 days after the date on which it first became due and payable), net of a reserve for bad debts in an amount proportionate to the reserve shown on the balance sheet contained in the most recent Parent Report.
3.18 Powers of Attorney . There are no outstanding powers of attorney executed on behalf of the Parent or any of its Subsidiaries.
3.19 Insurance . Section 3.19 of the Parent Disclosure Schedule lists each insurance policy (including fire, theft, casualty, general liability, workers compensation, business interruption, environmental, product liability and automobile insurance policies and bond and surety arrangements) to which the Parent or any of its Subsidiaries is a party. Such insurance policies are of the type and in amounts customarily carried by organizations conducting businesses or owning assets similar to those of the Parent and its Subsidiaries. There is no material claim pending under any such policy as to which coverage has been questioned, denied or disputed by the underwriter of such policy. All premiums due and payable under all such policies have been paid, neither the Parent nor any of its Subsidiaries may be liable for retroactive premiums or similar payments, and the Parent and its Subsidiaries are otherwise in compliance in all material respects with the terms of such policies. The Parent has no knowledge of any threatened termination of, or material premium increase with respect to, any such policy. Each such policy will continue to be enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing.
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3.20 Warranties . No product or service sold or delivered by the Parent or any of its Subsidiaries is subject to any guaranty, warranty, right of credit or other indemnity other than the applicable standard terms and conditions of sale of the Parent or the appropriate Subsidiary, which are set forth in Section 3.20 of the Parent Disclosure Schedule.
3.21 Employees .
(a) Section 3.21 of the Parent Disclosure Schedule contains a list of all employees of the Parent and each of its Subsidiaries, along with the position and the annual rate of compensation of each such person. Each current or past employee of the Parent or any of its Subsidiaries has entered into a confidentiality/assignment of inventions agreement with the Parent or such Subsidiaries, a copy or form of which has previously been delivered to the Company. Section 3.21 of the Parent Disclosure Schedule contains a list of all employees of the Parent or any of its Subsidiaries who are a party to a non-competition agreement with the Parent or any of its Subsidiaries; copies of such agreements have previously been delivered to the Company. To the knowledge of the Parent, no employee or group of employees has any plans to terminate employment with the Parent or any of its Subsidiaries.
(b) Neither the Parent nor any of its Subsidiaries is a party to or bound by any collective bargaining agreement, nor have any of them experienced any strikes, grievances, claims of unfair labor practices or other collective bargaining disputes. The Parent has no knowledge of any organizational effort made or threatened, either currently or since the date of organization of the Parent, by or on behalf of any labor union with respect to employees of the Parent or any of its Subsidiaries.
3.22 Employee Benefits .
(a) Section 3.22(a) of the Parent Disclosure Schedule contains a complete and accurate list of all Employee Benefit Plans maintained, or contributed to, by the Parent, any of its Subsidiaries or any ERISA Affiliate (collectively, the “Parent Benefit Plans”). Complete and accurate copies of (i) all Parent Benefit Plans which have been reduced to writing, (ii) written summaries of all unwritten Parent Benefit Plans, (iii) all related trust agreements, insurance contracts and summary plan descriptions, and (iv) all annual reports filed on IRS Form 5500, 5500C or 5500R and (for all funded plans) all plan financial statements for the last five plan years for each Parent Benefit Plan, have been delivered or made available to the Parent. Each Parent Benefit Plan has been administered in all material respects in accordance with its terms and each of the Parent, its Subsidiaries and the ERISA Affiliates has in all material respects met its obligations with respect to such Parent Benefit Plan and has made all required contributions thereto. The Parent, each of its Subsidiaries, each ERISA Affiliate and each Parent Benefit Plan are in compliance in all material respects with the currently applicable provisions of ERISA and the Code and the regulations thereunder (including without limitation Section 4980B of the Code, Subtitle K, Chapter 100 of the Code and Sections 601 through 608 and Section 701 et seq. of ERISA). All filings and reports as to each Parent Benefit Plan required to have been submitted to the Internal Revenue Service or to the United States Department of Labor have been duly submitted.
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(b) To the knowledge of the Parent, there are no Legal Proceedings (except claims for benefits payable in the normal operation of the Parent Benefit Plans and proceedings with respect to qualified domestic relations orders) against or involving any Parent Benefit Plan or asserting any rights or claims to benefits under any Parent Benefit Plan that could give rise to any material liability.
(c) All the Parent Benefit Plans that are intended to be qualified under Section 401(a) of the Code have received determination letters from the Internal Revenue Service to the effect that such Parent Benefit Plans are qualified and the plans and the trusts related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, no such determination letter has been revoked and revocation has not been threatened, and no such Parent Benefit Plan has been amended since the date of its most recent determination letter or application therefor in any respect, and no act or omission has occurred, that would adversely affect its qualification or materially increase its cost. Each Parent Benefit Plan which is required to satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been tested for compliance with, and satisfies the requirements of, Section 401(k)(3) and Section 401(m)(2) of the Code for each plan year ending prior to the Closing Date.
(d) Neither the Parent, any of its Subsidiaries, nor any ERISA Affiliate has ever maintained an Employee Benefit Plan subject to Section 412 of the Code or Title IV of ERISA.
(e) At no time has the Parent, any of its Subsidiaries or any ERISA Affiliate been obligated to contribute to any “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA).
(f) There are no unfunded obligations under any Parent Benefit Plan providing benefits after termination of employment to any employee of the Parent or any of its Subsidiaries (or to any beneficiary of any such employee), including but not limited to retiree health coverage and deferred compensation, but excluding continuation of health coverage required to be continued under Section 4980B of the Code or other applicable Law and insurance conversion privileges under state law. The assets of each Parent Benefit Plan which is funded are reported at their fair market value on the books and records of such Parent Benefit Plan.
(g) No act or omission has occurred and no condition exists with respect to any Parent Benefit Plan maintained by the Parent, any of its Subsidiaries or any ERISA Affiliate that would subject the Parent, any of its Subsidiaries or any ERISA Affiliate to (i) any material fine, penalty, tax or liability of any kind imposed under ERISA or the Code or (ii) any contractual indemnification or contribution obligation protecting any fiduciary, insurer or service provider with respect to any Parent Benefit Plan.
(h) No Parent Benefit Plan is funded by, associated with or related to a “voluntary employee’s beneficiary association” within the meaning of Section 501(c)(9) of the Code.
(i) Each Parent Benefit Plan is amendable and terminable unilaterally by the Parent at any time without liability to the Parent as a result thereof and no Parent Benefit Plan, plan documentation or agreement, summary plan description or other written communication distributed generally to employees by its terms prohibits the Parent from amending or terminating any such Parent Benefit Plan.
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(j) Section 3.22(j) of the Parent Disclosure Schedule discloses each: (i) agreement with any stockholder, director, executive officer or other employee of the Parent or any of its Subsidiaries (A) the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving the Parent or any of its Subsidiaries of the nature of any of the transactions contemplated by this Agreement, (B) providing any term of employment or compensation guarantee or (C) providing severance benefits or other benefits after the termination of employment of such director, executive officer or employee; (ii) agreement, plan or arrangement under which any person may receive payments from the Parent or any of its Subsidiaries that may be subject to the tax imposed by Section 4999 of the Code or included in the determination of such person’s “parachute payment” under Section 280G of the Code; and (iii) agreement or plan binding the Parent or any of its Subsidiaries, including without limitation any stock option plan, stock appreciation right plan, restricted stock plan, stock purchase plan, severance benefit plan or Parent Benefit Plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. The accruals for vacation, sickness and disability expenses are accounted for on the balance sheet contained in the most recent Parent Report and are adequate and materially reflect the expenses associated therewith in accordance with GAAP.
3.23 Environmental Matters .
(a) Each of the Parent and its Subsidiaries has complied with all applicable Environmental Laws, except for violations of Environmental Laws that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect. There is no pending or, to the knowledge of the Parent, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation, inquiry or information request by any Governmental Entity, relating to any Environmental Law involving the Parent or any of its Subsidiaries, except for litigation, notices of violations, formal administrative proceedings or investigations, inquiries or information requests that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
(b) Set forth in Section 3.23(b) of the Parent Disclosure Schedule is a list of all documents (whether in hard copy or electronic form) that contain any environmental reports, investigations and audits relating to premises currently or previously owned or operated by the Parent or any of its Subsidiaries (whether conducted by or on behalf of the Parent or its Subsidiaries or a third party, and whether done at the initiative of the Parent or any of its Subsidiaries or directed by a Governmental Entity or other third party) which were issued or conducted during the past five years and which the Parent has possession of or access to. A complete and accurate copy of each such document has been provided to the Company.
(c) The Parent is not aware of any material environmental liability of any solid or hazardous waste transporter or treatment, storage or disposal facility that has been used by the Parent or any of its Subsidiaries.
3.24 Permits . Section 3.24 of the Parent Disclosure Schedule sets forth a list of all permits, licenses, registrations, certificates, orders or approvals from any Governmental Entity (including without limitation those issued or required under Environmental Laws and those relating to the occupancy or use of owned or leased real property) (“Parent Permits”) issued to or held by the Parent or any of its Subsidiaries. Such listed permits are the only Parent Permits that are required for the Parent and any of its Subsidiaries to conduct their respective businesses as presently conducted except for those the absence of which, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect. Each such Parent Permit is in full force and effect and, to the knowledge of the Parent, no suspension or cancellation of such Parent Permit is threatened and there is no basis for believing that such Parent Permit will not be renewable upon expiration. Each such Parent Permit will continue in full force and effect immediately following the Closing.
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3.25 Certain Business Relationships with Affiliates . No Affiliate of the Parent or of any of its Subsidiaries (a) owns any property or right, tangible or intangible, which is used in the business of the Parent or any of its Subsidiaries, (b) has any claim or cause of action against the Parent or any of its Subsidiaries, or (c) owes any money to, or is owed any money by, the Parent or any of its Subsidiaries. Section 3.25 of the Parent Disclosure Schedule describes any transactions involving the receipt or payment in excess of $1,000 in any fiscal year between the Parent or any of its Subsidiaries and any Affiliate thereof which have occurred or existed since the beginning of the time period covered by the Parent Financial Statements.
3.26 Tax-Free Reorganization .
(a) The Parent (i) is not an “investment company” as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code; (ii) has no present plan or intention to liquidate the Surviving Corporation or to merge the Surviving Corporation with or into any other corporation or entity, or to sell or otherwise dispose of the stock of the Surviving Corporation which the Parent will acquire in the Merger, or to cause the Surviving Corporation to sell or otherwise dispose of its assets, all except in the ordinary course of business or if such liquidation, merger or disposition is described in Section 368(a)(2)(C) or Treasury Regulation Section 1.368-2(d)(4) or Section 1.368-2(k); and (iii) has no present plan or intention, following the Merger, to issue any additional shares of stock of the Surviving Corporation or to create any new class of stock of the Surviving Corporation.
(b) The Acquisition Subsidiary is a wholly-owned subsidiary of the Parent, formed solely for the purpose of engaging in the Merger, and will carry on no business prior to the Merger.
(c) Immediately prior to the Merger, the Parent will be in control of Acquisition Subsidiary within the meaning of Section 368(c) of the Code.
(d) Immediately following the Merger, the Surviving Corporation will hold at least 90% of the fair market value of the net assets and at least 70% of the fair market value of the gross assets held by the Company immediately prior to the Merger (for purposes of this representation, amounts used by the Company to pay reorganization expenses, if any, will be included as assets of the Company held immediately prior to the Merger).
(e) The Parent has no present plan or intention to reacquire any of the Merger Shares.
(f) The Acquisition Subsidiary will have no liabilities assumed by the Surviving Corporation and will not transfer to the Surviving Corporation any assets subject to liabilities in the Merger.
(g) Following the Merger, the Surviving Corporation will continue the Company’s historic business or use a significant portion of the Company’s historic business assets in a business as required by Section 368 of the Code and the Treasury Regulations promulgated thereunder.
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(h) Each of the Split-Off Agreement and the General Release Agreement will constitute a legally binding obligation among the Parent, the Split-Off Subsidiary and the Buyer prior to the Effective Time; immediately following consummation of the Merger, the Parent will distribute the stock of the Split-Off Subsidiary to the Buyer in cancellation of the Purchase Price Securities (as such term is defined in the Split-Off Agreement); no property other than the capital stock of Split-Off Subsidiary will be distributed by the Parent to the Buyer in connection with or following the Merger; upon execution and delivery of the Split-Off Agreement and the General Release Agreement, the Buyer will have no right to sell or transfer the Purchase Price Securities to any person without the Parent’s prior written consent, and the Parent will not consent (nor will it permit others to consent) to any such sale or transfer; upon execution of the Split-Off Agreement and the General Release Agreement, there will be no other plan, arrangement, agreement, contract, intention or understanding, whether written or verbal and whether or not enforceable in law or equity, that would permit the Buyer to vote the Purchase Price Securities or receive any property or other distributions from the Parent with respect to the Purchase Price Securities other than the capital stock of the Split-Off Subsidiary.
3.27 Split-Off . As of the Effective Time, the Parent will have discontinued all of its business operations which it conducted prior to the Effective Time by closing the transactions contemplated by the Split-Off Agreement and the General Release Agreement. Upon the closing of the transactions contemplated by the Split-Off Agreement and the General Release Agreement, the Parent will have no liabilities, contingent or otherwise, in any way related to its pre-Effective Time business operations, the Split-Off Subsidiary or the Split-Off Agreement.
3.28 Brokers’ Fees . Except as set forth on Section 3.28 of the Parent Disclosure Schedule, neither the Parent nor the Acquisition Subsidiary has any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.
3.29 Disclosure . No representation or warranty by the Parent contained in this Agreement, and no statement contained in the any document, certificate or other instrument delivered or to be delivered by or on behalf of the Parent pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein not misleading. The Parent has disclosed to the Company all material information relating to the business of the Parent or any of its Subsidiaries or the transactions contemplated by this Agreement.
3.30 Interested Party Transactions . Except for the Split-Off Agreement and the General Release Agreement, to the knowledge of the Parent, no officer, director or stockholder of the Parent or any “affiliate” (as such term is defined in Rule 12b-2 under the Exchange Act) or “associate” (as such term is defined in Rule 405 under the Securities Act) of any such person currently has or has had, either directly or indirectly, (a) an interest in any person that (i) furnishes or sells services or products that are furnished or sold or are proposed to be furnished or sold by the Parent or any of its Subsidiaries or (ii) purchases from or sells or furnishes to the Parent or any of its Subsidiaries any goods or services, or (b) a beneficial interest in any contract or agreement to which the Parent or any of its Subsidiaries is a party or by which it may be bound or affected. Neither the Parent nor any of its Subsidiaries has extended or maintained credit, arranged for the extension of credit, or renewed an extension of credit, in the form of a personal loan to or for any director or executive officer (or equivalent thereof) of the Parent or any of its Subsidiaries.
3.31 Duty to Make Inquiry . To the extent that any of the representations or warranties in this Article III are qualified by “knowledge” or “belief,” the Parent represents and warrants that it has made due and reasonable inquiry and investigation concerning the matters to which such representations and warranties relate, including, but not limited to, diligent inquiry by its directors, officers and key personnel.
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3.32 Accountants . Lake & Associates CPA’s LLC (the “Parent Auditor”) is and has been throughout the periods covered by the financial statements of the Parent for the past fiscal year (a) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002), (b) “independent” with respect to the Parent within the meaning of Regulation S-X and (c) in compliance with subsections (g) through (l) of Section 10A of the Exchange Act and the related rules of the SEC and the Public Company Accounting Oversight Board. Schedule 3.32 of the Parent Disclosure Schedule lists all non-audit services performed by Parent Auditor for the Parent and/or any of its Subsidiaries. Except as set forth on Section 3.32 of the Parent Disclosure Schedule, the report of the Parent Auditor on the financial statements of the Parent for the past fiscal year did not contain an adverse opinion or a disclaimer of opinion, or was qualified as to uncertainty, audit scope, or accounting principles, although it did express uncertainty as to the Parent’s ability to continue as a going concern. During the Parent’s most recent fiscal year and the subsequent interim periods, there were no disagreements with the Parent Auditor on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures. None of the reportable events listed in Item 304(a)(1)(iv) or (v) of Regulation S-K occurred with respect to the Parent Auditor.
3.33 Minute Books . The minute books and other similar records of the Parent and each of its Subsidiaries contain, in all material respects, complete and accurate records of all actions taken at any meetings of directors (or committees thereof) and stockholders or actions by written consent in lieu of the holding of any such meetings since the time of organization of each such corporation through the date of this Agreement. The Parent has provided true and complete copies of all such minute books and other similar records to the Company’s representatives.
3.34 Board Action . The Parent’s Board of Directors (a) has unanimously determined that the Merger is advisable and in the best interests of the Parent’s stockholders and is on terms that are fair to such Parent stockholders and (b) has caused the Parent, in its capacity as the sole stockholder of the Acquisition Subsidiary, and the Board of Directors of the Acquisition Subsidiary, to approve the Merger and this Agreement by unanimous written consent.
ARTICLE
IV
COVENANTS
4.1 Closing Efforts . Each of the Parties shall use its best efforts, to the extent commercially reasonable in light of the circumstances (“Reasonable Best Efforts”), to take all actions and to do all things necessary, proper or advisable to consummate the transactions contemplated by this Agreement, including without limitation using its Reasonable Best Efforts to ensure that (i) its representations and warranties remain true and correct in all material respects through the Closing Date and (ii) the conditions to the obligations of the other Parties to consummate the Merger are satisfied.
4.2 Governmental and Third-Party Notices and Consents .
(a) Each Party shall use its Reasonable Best Efforts to obtain, at its expense, all waivers, permits, consents, approvals or other authorizations from Governmental Entities, and to effect all registrations, filings and notices with or to Governmental Entities, as may be required for such Party to consummate the transactions contemplated by this Agreement and to otherwise comply with all applicable Laws in connection with the consummation of the transactions contemplated by this Agreement.
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(b) The Company shall use its Reasonable Best Efforts to obtain, at its expense, all such waivers, consents or approvals from third parties, and to give all such notices to third parties, as are required to be listed in Section 2.4 of the Company Disclosure Schedule.
4.3 Super 8-K . Promptly after the execution of this Agreement, the Parties shall prepare a Current Report on Form 8-K relating to this Agreement and the transactions contemplated hereby (including the “Form 10 information” required by Items 2.01(f) and 5.01(a)(8) of Form 8-K and the financial statements required thereby) (the “Super 8-K”). Each of the Company and the Parent shall use its Reasonable Best Efforts to cause the Super 8-K to be filed with the SEC within four business days of the execution of this Agreement and to otherwise comply with all requirements of applicable federal and state securities laws. Further, the Parent shall prepare and file with the SEC an amendment to the Super 8-K within four business days after the Closing Date, if such Super 8-K was filed before the Closing Date.
4.4 Operation of Company Business . Except as contemplated by this Agreement, during the period from the date of this Agreement to the Effective Time, the Company shall conduct its operations in the Ordinary Course of Business and in material compliance with all Laws applicable to the Company or any of its properties or assets and, to the extent consistent therewith, use its Reasonable Best Efforts to preserve intact its current business organization, keep its physical assets in good working condition, keep available the services of its current officers and employees and preserve its relationships with customers, suppliers and others having business dealings with it to the end that its goodwill and ongoing business shall not be impaired in any material respect. Without limiting the generality of the foregoing, prior to the Effective Time, the Company shall not, without the written consent of the Parent (which shall not be unreasonably withheld or delayed):
(a) except as contemplated by the Private Placement Offering, issue or sell, or redeem or repurchase, any stock or other securities of the Company or any warrants, options or other rights to acquire any such stock or other securities (except pursuant to the conversion or exercise of outstanding convertible securities or Company Options or Company Warrants outstanding on the date hereof), or amend any of the terms of (including without limitation the vesting of) any such convertible securities or options or warrants;
(b) split, combine or reclassify any shares of its capital stock; declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock;
(c) create, incur or assume any indebtedness for borrowed money (including obligations in respect of capital leases) except in the Ordinary Course of Business or in connection with the transactions contemplated by this Agreement; assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person or entity; or make any loans, advances or capital contributions to, or investments in, any other person or entity;
(d) enter into, adopt or amend any Employee Benefit Plan or any employment or severance agreement or arrangement or (except for normal increases in the Ordinary Course of Business for employees who are not Affiliates) increase in any manner the compensation or fringe benefits of, or materially modify the employment terms of, its directors, officers or employees, generally or individually, or pay any bonus or other benefit to its directors, officers or employees;
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(e) acquire, sell, lease, license or dispose of any assets or property (including without limitation any shares or other equity interests in or securities of any corporation, partnership, association or other business organization or division thereof), other than purchases and sales of assets in the Ordinary Course of Business;
(f) mortgage or pledge any of its property or assets (including without limitation any shares or other equity interests in or securities of any corporation, partnership, association or other business organization or division thereof), or subject any such property or assets to any Security Interest;
(g) discharge or satisfy any Security Interest or pay any obligation or liability other than in the Ordinary Course of Business;
(h) amend its charter, by-laws or other organizational documents;
(i) change in any material respect its accounting methods, principles or practices, except insofar as may be required by a generally applicable change in GAAP;
(j) enter into, amend, terminate, take or omit to take any action that would constitute a violation of or default under, or waive any rights under, any material contract or agreement;
(k) institute or settle any Legal Proceeding;
(l) take any action or fail to take any action permitted by this Agreement with the knowledge that such action or failure to take action would result in (i) any of the representations and warranties of the Company set forth in this Agreement becoming untrue in any material respect or (ii) any of the conditions to the Merger set forth in Article V not being satisfied; or
(m) agree in writing or otherwise to take any of the foregoing actions.
4.5 Access to Company Information .
(a) The Company shall permit representatives of the Parent to have full access (at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Company) to all premises, properties, financial and accounting records, contracts, other records and documents, and personnel, of or pertaining to the Company.
(b) Each of the Parent and the Acquisition Subsidiary (i) shall treat and hold as confidential any Company Confidential Information (as defined below), (ii) shall not use any of the Company Confidential Information except in connection with this Agreement, and (iii) if this Agreement is terminated for any reason whatsoever, shall return to the Company all tangible embodiments (and all copies) thereof which are in its possession. For purposes of this Agreement, “Company Confidential Information” means any information of the Company that is furnished to the Parent or the Acquisition Subsidiary by the Company in connection with this Agreement; provided, however, that it shall not include any information (A) which, at the time of disclosure, is available publicly other than as a result of non-permitted disclosure by the Parent, the Acquisition Subsidiary or their respective directors, officers, or employees, (B) which, after disclosure, becomes available publicly through no fault of the Parent or the Acquisition Subsidiary or their respective directors, officers, or employees, (C) which the Parent or the Acquisition Subsidiary knew or to which the Parent or the Acquisition Subsidiary had access prior to disclosure, provided that the source of such information is not known by the Parent or the Acquisition Subsidiary to be bound by a confidentiality obligation to the Company, or (D) which the Parent or the Acquisition Subsidiary rightfully obtains from a source other than the Company, provided that the source of such information is not known by the Parent or the Acquisition Subsidiary to be bound by a confidentiality obligation to the Company.
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4.6 Operation of Parent Business . Except as contemplated by this Agreement, during the period from the date of this Agreement to the Effective Time, the Parent shall (and shall cause each of its Subsidiaries to) conduct its operations in the Ordinary Course of Business and in material compliance with all Laws applicable to the Parent, any Parent Subsidiary or any of their properties or assets and, to the extent consistent therewith, use its Reasonable Best Efforts to preserve intact its current business organization, keep its physical assets in good working condition, keep available the services of its current officers and employees and preserve its relationships with customers, suppliers and others having business dealings with it to the end that its goodwill and ongoing business shall not be impaired in any material respect. Without limiting the generality of the foregoing, prior to the Effective Time, the Parent shall not (and shall cause each of its Subsidiaries not to), without the written consent of the Company:
(a) issue or sell, or redeem or repurchase, any stock or other securities of the Parent or any rights, warrants or options to acquire any such stock or other securities, except as contemplated by, and in connection with, the Merger and the Split-Off;
(b) split, combine or reclassify any shares of its capital stock; declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, except as contemplated by, and in connection with, the Stock Split;
(c) create, incur or assume any indebtedness (including obligations in respect of capital leases); assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person or entity; or make any loans, advances or capital contributions to, or investments in, any other person or entity;
(d) enter into, adopt or amend any Parent Benefit Plan or any employment or severance agreement or arrangement or increase in any manner the compensation or fringe benefits of, or materially modify the employment terms of, its directors, officers or employees, generally or individually, or pay any bonus or other benefit to its directors, officers or employees, except the adoption of the Parent Equity Plan (as defined below);
(e) acquire, sell, lease, license or dispose of any assets or property (including without limitation any shares or other equity interests in or securities of any Subsidiary of the Parent or any corporation, partnership, association or other business organization or division thereof), except as contemplated by, and in connection with, the Split-Off;
(f) mortgage or pledge any of its property or assets or subject any such property or assets to any Security Interest;
(g) discharge or satisfy any Security Interest or pay any obligation or liability other than in the Ordinary Course of Business;
(h) amend its charter, by-laws or other organizational documents;
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(i) change in any material respect its accounting methods, principles or practices, except insofar as may be required by a generally applicable change in GAAP;
(j) enter into, amend, terminate, take or omit to take any action that would constitute a violation of or default under, or waive any rights under, any contract or agreement;
(k) institute or settle any Legal Proceeding;
(l) take any action or fail to take any action permitted by this Agreement with the knowledge that such action or failure to take action would result in (i) any of the representations and warranties of the Parent and/or the Acquisition Subsidiary set forth in this Agreement becoming untrue in any material respect or (ii) any of the conditions to the Merger set forth in Article V not being satisfied; or
(m) agree in writing or otherwise to take any of the foregoing actions.
4.7 Access to Parent Information .
(a) The Parent shall (and shall cause the Acquisition Subsidiary to) permit representatives of the Company to have full access (at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Parent and the Acquisition Subsidiary) to all premises, properties, financial and accounting records, contracts, other records and documents, and personnel of or pertaining to the Parent, the Acquisition Subsidiary and the Split-Off Subsidiary.
(b) The Company (i) shall treat and hold as confidential any Parent Confidential Information (as defined below), (ii) shall not use any of the Parent Confidential Information except in connection with this Agreement, and (iii) if this Agreement is terminated for any reason whatsoever, shall return to the Parent all tangible embodiments (and all copies) thereof which are in its possession. For purposes of this Agreement, “Parent Confidential Information” means any information of the Parent or any Parent Subsidiary that is furnished to the Company by the Parent or its Subsidiaries in connection with this Agreement; provided, however, that it shall not include any information (A) which, at the time of disclosure, is available publicly other than as a result of non-permitted disclosure by the Company or its directors, officers, or employees, (B) which, after disclosure, becomes available publicly through no fault of the Company or its directors, officers, or employees, (C) which the Company knew or to which the Company had access prior to disclosure, provided that the source of such information is not known by the Company to be bound by a confidentiality obligation to the Parent or any Subsidiary of the Parent or (D) which the Company rightfully obtains from a source other than the Parent or a Subsidiary of the Parent, provided that the source of such information is not known by the Company to be bound by a confidentiality obligation to the Parent or any Subsidiary of the Parent.
4.8 Expenses . The costs and expenses of the Parent and the Company (including legal fees and expenses of the Parent and the Company) incurred in connection with this Agreement and the transactions contemplated hereby shall be payable at Closing from the proceeds of the Private Placement Offering.
4.9 Indemnification .
(a) The Parent shall not, for a period of seven years after the Effective Time, take any action to alter or impair any exculpatory or indemnification provisions now existing in the certificate of incorporation or bylaws of the Company for the benefit of any individual who served as a director or officer of the Company at any time prior to the Effective Time, except for any changes which may be required to conform with changes in applicable Law and any changes which do not affect the application of such provisions to acts or omissions of such individuals prior to the Effective Time.
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(b) From and after the Effective Time, the Parent agrees that it will, and will cause the Surviving Corporation to, indemnify and hold harmless each present and former director and officer of the Company (the “Indemnified Executives”) against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages, liabilities or amounts paid in settlement incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent permitted under Delaware law (and the Parent and the Surviving Corporation shall also advance expenses as incurred to the fullest extent permitted under Delaware law, provided the Indemnified Executive to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such Indemnified Executive is not entitled to indemnification).
4.10 Quotation of Merger Shares . The Parent shall take whatever steps are necessary to cause the Merger Shares, and any shares of Parent Common Stock that may be issued pursuant to Section 1.8, to be eligible for quotation on the OTCBB .
4.11 Name and Fiscal Year Change . The Parent shall take all necessary steps to enable it to change its corporate name to such name as is agreeable to the Company as of the Effective Time, if the Parent has not already done so prior to the Effective Time. The Parent shall change its fiscal year end to December 31 on or promptly after the Effective Date, if the Parent’s fiscal year end is not December 31 prior to the Effective Time.
4.12 Split-Off . The Parent shall take, and shall cause the Acquisition Subsidiary to take, whatever steps are necessary to enable it to effect the Split-Off prior to or as of the Effective Time.
4.13 Parent Board; Amendment of Charter Documents . The Parent shall take such actions as are necessary (a) to authorize the Parent’s Board of Directors to consist of seven (7) members and (b) to amend its articles of incorporation and bylaws in a manner satisfactory to the Company.
4.14 Parent Equity Plan . Prior to or as of the Effective Time, the Board of Directors and shareholders of Parent shall adopt the equity incentive plan attached hereto as Exhibit D (the “Parent Equity Plan”) reserving for issuance 7,000,000 shares of Parent Common Stock for equity awards to be made thereunder. Upon the approval of the Board of Directors, Parent may issue options for up to 5,700,000 shares of Parent Common Stock after the Closing hereunder to the persons and with the terms set forth in Schedule 4.14 hereto .
4.15 Information Provided to Company Stockholders . The Company shall prepare, with the cooperation of the Parent, information to be sent to the holders of shares of Company Common Stock and Company Series A Preferred Stock in connection with receiving their approval of the Merger, this Agreement and related transactions. Such information shall constitute a disclosure of the offer and issuance of the shares of Parent Common Stock and Parent Series A Preferred Stock to be received by the Company Common Stockholders and Company Preferred Stockholders, respectively, in the Merger. The Parent and the Company shall each use Reasonable Best Efforts to cause information provided to such holders to comply with applicable federal and state securities laws requirements. Each of the Parent and the Company agrees to provide promptly to the other such information concerning its business and financial statements and affairs as, in the reasonable judgment of the providing party or its counsel, may be required or appropriate for inclusion in the information sent, or in any amendments or supplements thereto, and to cause its counsel and auditors to cooperate with the other’s counsel and auditors in the preparation of the information to be sent to the holders of Company Common Stock and Company Series A Preferred Stock. The Company will promptly advise the Parent, and the Parent will promptly advise the Company, in writing if at any time prior to the Effective Time either the Company or the Parent shall obtain knowledge of any facts that might make it necessary or appropriate to amend or supplement the information sent in order to make the statements contained or incorporated by reference therein not misleading or to comply with applicable Law. The information sent shall contain the recommendation of the Board of Directors of the Company that the holders of shares of Company Common Stock and Company Series A Preferred Stock approve the Merger and this Agreement and the conclusion of the Board of Directors of the Company that the terms and conditions of the Merger are advisable and fair and in the best interests of the Company and such holders. Anything to the contrary contained herein notwithstanding, the Company shall not include in the information sent to such holders any information with respect to the Parent or its affiliates or associates, the form and content of which information shall not have been approved by the Parent in its reasonable discretion prior to such inclusion.
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4.16 No Registration . For a period of 24 months following the Effective Time, the Parent shall not register, nor shall it take any action to facilitate registration of, under the Securities Act, the Merger Shares or any shares of Parent Common Stock issuable upon exercise of Parent Options and Parent Warrants or that may be issued pursuant to Section 1.8, except to the extent provided in the Registration Rights Agreement entered into in connection with the Private Placement Offering. In addition, the Company shall use its Reasonable Best Efforts to cancel any agreements, understandings or undertakings to register Company securities under the federal securities laws, which agreements, understandings or undertakings might otherwise survive the Closing.
4.17 Additional Directors . In additional to the five (5) directors referred to in Section 5.3(j), the Parent shall as soon as practicable after the Closing cause to be appointed two (2) additional “independent” (as defined in applicable SEC rules and the rules of The Nasdaq Stock Market) directors, one of whom shall be nominated by Hannah Rose Holdings LLC, subject to Parent’s approval, not to be unreasonably withheld.
ARTICLE
V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Each Party’s Obligations . The respective obligations of each Party to consummate the Merger are subject to the satisfaction of the following conditions:
(a) this Agreement and the Merger shall have received the approval of at least 90% of the votes represented by the outstanding shares of Company Common Stock and of 51% of the shares of Company Series A Preferred Stock entitled to vote on this Agreement and the Merger;
(b) the Parent, the Indemnification Representative and the Indemnification Escrow Agent, shall have executed and delivered the Indemnification Shares Escrow Agreement;
(c) the Parent, Split-Off Subsidiary and the Buyer shall have executed and delivered the Split-Off Agreement and a General Release Agreement, and all other documents anticipated by such agreements, and the Split-Off shall be effective simultaneous with the Effective Time;
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(d) the Parent, the Company and the other parties thereto shall have executed and delivered the Stockholders’ Agreement, substantially in the form of Exhibit L attached hereto;
(e) the Parent and the holders of Company Series A Preferred Stock shall have executed and delivered the Preferred Stockholders Agreement, substantially in the form of Exhibit M attached hereto;
(f) the Buyer shall have surrendered to the Parent the certificates for Parent Common Stock representing the Share Contribution, duly endorsed to the Parent or in blank, with signatures guaranteed by a member of one of the “Medallion” guarantee programs (Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP), or New York Stock Exchange Medallion Signature Program (MSP));
(g) the Parent shall have delivered to the Buyer certificates representing the Shares (as defined in the Split-Off Agreement) of stock of Split-Off Subsidiary deliverable to the Buyer under the Split-Off Agreement, duly registered in the name of the Buyer or as directed by the Buyer; and
(h) the Parent and the Company shall have completed all necessary legal due diligence satisfactorily to each of them in their sole discretion; and
(i) the closing of at least the Minimum Amount of the Private Placement Offering shall have occurred, or shall occur simultaneously with the Closing.
5.2 Conditions to Obligations of the Parent and the Acquisition Subsidiary . The obligation of each of the Parent and the Acquisition Subsidiary to consummate the Merger is subject to the satisfaction (or waiver by the Parent) of the following additional conditions:
(a) the number of Dissenting Shares shall not exceed 10% of the number of outstanding shares of Company Common Stock as of the Effective Time;
(b) the Company shall have obtained (and shall have provided copies thereof to the Parent) the written consents of (i) all of the members of its Board of Directors, (ii) Company Common Stockholders holding at least 90% of the shares of Company Common Stock outstanding immediately prior to the Effective Time and (iii) Company Stockholders holding 51% of the shares of Company Series A Preferred Stock outstanding immediately prior to the Effective Time to the execution, delivery and performance by the Company of this Agreement and the other Transaction Documentation to which it is a party, in form and substance satisfactory to the Parent;
(c) the Company shall have obtained (and shall have provided copies thereof to the Parent) all other waivers, permits, consents, approvals or other authorizations, and effected all of the registrations, filings and notices, referred to in Section 4.2 which are required on the part of the Company, except for any the failure of which to obtain or effect does not, individually or in the aggregate, have a Company Material Adverse Effect or a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement;
(d) the representations and warranties of the Company set forth in this Agreement (when read without regard to any qualification as to materiality or Company Material Adverse Effect contained therein) shall be true and correct as of the date of this Agreement and shall be true and correct as of the Effective Time as though made as of the Effective Time ( provided , however , that to the extent such representation and warranty expressly relates to an earlier date, such representation and warranty shall be true and correct as of such earlier date), except for any untrue or incorrect representation and warranty that, individually or in the aggregate, do not have a Company Material Adverse Effect or a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement;
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(e) the Company shall have performed or complied with its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Effective Time, except when any non-performance or non-compliance does not have a Company Material Adverse Effect or a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement;
(f) no Legal Proceeding shall be pending wherein an unfavorable judgment, order, decree, stipulation or injunction would (i) prevent consummation of any of the transactions contemplated by this Agreement or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, and no such judgment, order, decree, stipulation or injunction shall be in effect;
(g) [ reserved ]
(h) the Company shall have delivered to the Parent and the Acquisition Subsidiary a certificate (the “Company Certificate”) to the effect that each of the conditions specified in clause (h) (with respect to the Company’s due diligence of the Parent) of Section 5.1 and clauses (a) through (f) (insofar as clause (f) relates to Legal Proceedings involving the Company) of this Section 5.2 is satisfied in all respects, and covering such other matters as the Parent shall reasonably request;
(i) each of the individuals set forth on Exhibit F to this Agreement shall have executed and delivered to the Parent an agreement substantially in the form of Exhibit G attached hereto (the “Lock-Up and No-Shorting Agreements”);
(j) Jim New shall have entered into an employment agreement with the Parent or the Company mutually satisfactory to the Company, the Parent and to the Mr. New; and
(k) the Company shall have delivered to the Parent audited and interim unaudited financial statements of the Company pro forma the Merger, compliant with applicable SEC regulations for inclusion under Item 2.01 (f) and/or 5.01(a)(8) of Form 8-K.
5.3 Conditions to Obligations of the Company . The obligation of the Company to consummate the Merger is subject to the satisfaction of the following additional conditions:
(a) the Parent shall have obtained (and shall have provided copies thereof to the Company) the written consents of (i) all of the members of its Board of Directors, (ii) all of the members of the Board of Directors of Acquisition Subsidiary, (iii) the sole stockholder of Acquisition Subsidiary, (iv) all of the members of the Board of Directors of Split-Off Subsidiary, (v) the sole stockholder of Split-Off Subsidiary, and (vi) holders of more than 50% of the Parent Common Stock outstanding immediately prior to the Effective Time, in each case to the execution, delivery and performance by the each such entity of this Agreement and/or the other Transaction Documentation to which each such entity a party, in form and substance satisfactory to the Parent;
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(b) the Parent shall have obtained (and shall have provided copies thereof to the Company) all of the other waivers, permits, consents, approvals or other authorizations, and effected all of the registrations, filings and notices, referred to in Section 4.2 which are required on the part of the Parent or any of its Subsidiaries, except for any the failure of which to obtain or effect does not, individually or in the aggregate, have a Parent Material Adverse Effect or a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement;
(c) the representations and warranties of the Parent set forth in this Agreement (when read without regard to any qualification as to materiality or Parent Material Adverse Effect contained therein) shall be true and correct as of the date of this Agreement and shall be true and correct as of the Effective Time as though made as of the Effective Time ( provided , however , that to the extent such representation and warranty expressly relates to an earlier date, such representation and warranty shall be true and correct as of such earlier date), except for any untrue or incorrect representation and warranty that, individually or in the aggregate, do not have a Parent Material Adverse Effect or a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement;
(d) each of the Parent and the Acquisition Subsidiary shall have performed or complied with its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Effective Time, except when any non-performance or non-compliance does not have a Parent Material Adverse Effect or a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement;
(e) no Legal Proceeding shall be pending wherein an unfavorable judgment, order, decree, stipulation or injunction would (i) prevent consummation of any of the transactions contemplated by this Agreement or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, and no such judgment, order, decree, stipulation or injunction shall be in effect;
(f) the Parent shall have delivered to the Company a certificate (the “Parent Certificate”) to the effect that each of the conditions specified in clause (h) (with respect to the Parent’s due diligence of the Company) of Section 5.1 and clauses (a) through (e) (insofar as clause (e) relates to Legal Proceedings involving the Parent or the Acquisition Subsidiary) of this Section 5.3 is satisfied in all respects, and covering such other matters as the Company shall reasonably request;
(g) Jim New shall have entered into an employment agreement with the Parent or the Company mutually satisfactory to the Company, the Parent and to Mr. New;
(h) the Board of Directors of the Parent shall have adopted, and the shareholders of the Parent shall have approved, the Parent Equity Plan;
(i) the Company shall have received a certificate of Parent’s transfer agent and registrar certifying that as of the Closing Date there are 21,246,600 shares of Parent Common Stock issued and outstanding (without giving effect to the retirement of 20,178,000 shares of Parent Common Stock in connection with the Share Contribution); and
(j) the Parent shall have delivered to the Company (i) evidence that the Parent’s Board of Directors is authorized to consist of seven (7) individuals, (ii) evidence of the resignations of all individuals who served as directors and/or officers of the Parent immediately prior to the Effective Time, which resignations shall be effective as of the Effective Time, (iii) evidence of the appointment of five (5) directors to serve immediately following the Effective Time, of whom four (4) members shall have been designated by the controlling shareholders of the Company prior to the Merger, and at least one (1) other member shall be “independent” (as defined in applicable SEC rules and the rules of The Nasdaq Stock Market), and (iv) evidence of the appointment of such executive officers of the Parent to serve immediately following the Effective Time as shall have been designated by the Company.
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ARTICLE
VI
INDEMNIFICATION
6.1 Indemnification by the Company Stockholders . The Company Common Stockholders (the “Indemnifying Stockholders”) receiving Merger Shares pursuant to Section 1.5 shall, for a period commencing from the Closing Date and ending on the third anniversary of the Closing Date, severally, not jointly, pro rata in such proportion as the number of Merger Shares received by each Indemnifying Stockholder pursuant to Section 1.5 bears to the total number of Merger Shares received by all Indemnifying Stockholders pursuant to Section 1.5, indemnify the Parent in respect of, and hold it harmless against, any and all debts, obligations losses, liabilities, deficiencies, damages, fines, fees, penalties, interest obligations, expenses or costs (whether absolute, accrued, contingent, fixed or otherwise, or whether known or unknown, or due or to become due or otherwise) (including without limitation amounts paid in settlement, interest, court costs, costs of investigators, fees and expenses of attorneys, accountants, financial advisors and other experts, and other expenses of litigation) (collectively, “Damages”) incurred or suffered by the Surviving Corporation or the Parent or any Affiliate thereof resulting from:
(a) any misrepresentation or breach of warranty by, or failure to perform any covenant or agreement of, the Company contained in this Agreement or the Company Certificate;
(b) any claim by a stockholder or former stockholder of the Company, or any other person or entity, seeking to assert, or based upon: (i) ownership or rights to ownership of any shares of stock of the Company prior to the Effective Time; (ii) any rights of a stockholder prior to the Effective Time (other than the right to receive the Merger Shares pursuant to this Agreement or appraisal rights under the applicable provisions of the Delaware Act), including any option, preemptive rights or rights to notice or to vote; (iii) any rights under the certificate of incorporation or bylaws of the Company prior to the Effective Time; or (iv) any claim that his, her or its shares were wrongfully repurchased by the Company prior to the Effective Time;
(c) any claim for brokers’ or finders’ fees or agents’ commissions arising from or through the Company, any of its pre-Merger Affiliates or any Company Stockholder in connection with the negotiation or consummation of the transactions contemplated by this Agreement; and
(d) any violation of, or any liability under, any Environmental Law (an “Environmental Claim”) relating to or arising from the activities and operations of the Company or any of its Subsidiaries prior to the Effective Time, regardless of when the environmental hazard giving rise to such Environmental Claim is discovered, and any liability in regards to any Mining Interests, for any all obligations, whether arising under contract, applicable Laws or otherwise, to abandon mines and close, decommission, dismantle and remove structures, buildings, equipment and other facilities and to restore and reclaim the sites for any of the foregoing and any lands used to gain access thereto (collectively, “Abandonment and Reclamation Liabilities”) of the Company or any of its Subsidiaries (or their respective successors) relating to any mines, structures, buildings, equipment and other facilities or any lands that were, or were required pursuant to applicable Law to have been, abandoned, decommissioned or reclaimed, as the case may be, prior to the Effective Time.
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Notwithstanding the foregoing, except with respect to any fraud or willful misconduct by the Company in connection with this Agreement, the Parent’s sole and exclusive right to collect any Damages with respect to claims resulting from or relating to any misrepresentation or breach of warranty of or failure to perform any covenant or agreement by the Company Stockholders contained in this Agreement shall be pursuant to a sale, in the manner set forth in the Indemnification Escrow Agreement, of Indemnification Escrow Shares issued to such Indemnifying Stockholder by the Parent pursuant to Section 1.5(c) above.
6.2 Indemnification by the Parent . Subject to the limitations provided herein, the Parent shall, for a period commencing from the Closing Date and ending on the third anniversary of the Closing Date, indemnify the Company Stockholders in respect of, and hold them harmless against, any and all Damages incurred or suffered by the Company Stockholders resulting from:
(a) any misrepresentation or breach of warranty by or failure to perform any covenant or agreement of the Parent or the Acquisition Subsidiary contained in this Agreement or the Parent Certificate;
(b) any claim by a stockholder or former stockholder of the Parent, or any other person or entity, seeking to assert, or based upon: (i) ownership or rights to ownership of any shares of stock of the Parent prior to the Effective Time; (ii) any rights of a stockholder prior to the Effective Time, including any option, preemptive rights or rights to notice or to vote; or (iii) any rights under the certificate of incorporation or bylaws of the Parent prior to the Effective Time;
(c) any claim for brokers’ or finders’ fees or agents’ commissions arising from or through the Parent or any of its pre-Merger Affiliates in connection with the negotiation or consummation of the transactions contemplated by this Agreement; and
(d) any Environmental Claim relating to or arising from the activities and operations of the Company, the Surviving Corporation or any of their Subsidiaries after the Effective Time, regardless of when the environmental hazard giving rise to such Environmental Claim is discovered, and any liability for any Abandonment and Reclamation Obligations of the Company, the Surviving Corporation or any of their Subsidiaries (or their respective successors) other than those relating to any mines, structures, buildings, equipment and other facilities or any lands that were, or were required pursuant to applicable Law to have been, abandoned, decommissioned or reclaimed, as the case may be, prior to the Effective Time.
Notwithstanding the foregoing, except with respect to any fraud or willful misconduct by the Parent or any of its Affiliates in connection with this Agreement, the post-Closing adjustment mechanism set forth in Section 1.9 shall be the exclusive means for the Company Stockholders to collect any Damages for which they are entitled to indemnification under this Article VI.
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6.3 Indemnification Claims .
(a) In the event the Parent or the Company Stockholders are entitled, or seek to assert rights, to indemnification under this Article VI, the Parent or the Company Stockholders (as the case may be) shall give written notification to the Company Stockholders or the Parent (as the case may be) of the commencement of any suit or proceeding relating to a third party claim for which indemnification pursuant to this Article VI may be sought. Such notification shall be given within 20 business days after receipt by the party seeking indemnification of notice of such suit or proceeding, and shall describe in reasonable detail (to the extent known by the party seeking indemnification) the facts constituting the basis for such suit or proceeding and the amount of the claimed damages; provided , however , that no delay on the part of the party seeking indemnification in notifying the indemnifying party shall relieve the indemnifying party of any liability or obligation hereunder except to the extent of any damage or liability caused by or arising out of such failure. Within 20 days after delivery of such notification, the indemnifying party may, upon written notice thereof to the party seeking indemnification, assume control of the defense of such suit or proceeding with counsel reasonably satisfactory to the party seeking indemnification; provided that the indemnifying party may not assume control of the defense of a suit or proceeding involving criminal liability or in which equitable relief is sought against the party seeking indemnification. If the indemnifying party does not so assume control of such defense, the party seeking indemnification shall control such defense. The party not controlling such defense (the “Non-Controlling Party”) may participate therein at its own expense; provided that if the indemnifying party assumes control of such defense and the party seeking indemnification reasonably concludes that the indemnifying party and the party seeking indemnification have conflicting interests or different defenses available with respect to such suit or proceeding, the reasonable fees and expenses of counsel to the party seeking indemnification shall be considered “Damages” for purposes of this Agreement. The party controlling such defense (the “Controlling Party”) shall keep the Non-Controlling Party advised of the status of such suit or proceeding and the defense thereof and shall consider in good faith recommendations made by the Non-Controlling Party with respect thereto. The Non-Controlling Party shall furnish the Controlling Party with such information as it may have with respect to such suit or proceeding (including copies of any summons, complaint or other pleading which may have been served on such party and any written claim, demand, invoice, billing or other document evidencing or asserting the same) and shall otherwise cooperate with and assist the Controlling Party in the defense of such suit or proceeding. The indemnifying party shall not agree to any settlement of, or the entry of any judgment arising from, any such suit or proceeding without the prior written consent of the party seeking indemnification, which shall not be unreasonably withheld or delayed; provided that the consent of the party seeking indemnification shall not be required if the indemnifying party agrees in writing to pay any amounts payable pursuant to such settlement or judgment and such settlement or judgment includes a complete release of the party seeking indemnification from further liability and has no other materially adverse effect on the party seeking indemnification. The party seeking indemnification shall not agree to any settlement of, or the entry of any judgment arising from, any such suit or proceeding without the prior written consent of the indemnifying party, which shall not be unreasonably withheld or delayed.
(b) In order to seek indemnification under this Article VI, the party seeking indemnification shall give written notification (a “Claim Notice”) to the indemnifying party which contains (i) a description and the amount (the “Claimed Amount”) of any Damages incurred or reasonably expected to be incurred by the party seeking indemnification, (ii) a statement that the party seeking indemnification is entitled to indemnification under this Article VI for such Damages and a reasonable explanation of the basis therefor, and (iii) a demand for payment (in the manner provided in paragraph (c) below) in the amount of the Claimed Amount.
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(c) Within 20 days after delivery of a Claim Notice, the indemnifying party shall deliver to the party seeking indemnification a written response (the “Response”) in which the indemnifying party shall: (i) agree that the party seeking indemnification is entitled to receive all of the Claimed Amount, (ii) agree that the party seeking indemnification is entitled to receive part, but not all, of the Claimed Amount (the “Agreed Amount”) or (iii) dispute that the party seeking indemnification is entitled to receive any of the Claimed Amount. If the indemnifying party in the Response disputes its liability for all or part of the Claimed Amount, the indemnifying party and the party seeking indemnification shall follow the procedures set forth in Section 6.3(d) for the resolution of such dispute (a “Dispute”).
(d) During the 60-day period following the delivery of a Response that reflects a Dispute, the indemnifying party and the party seeking indemnification shall use good faith efforts to resolve the Dispute. If the Dispute is not resolved within such 60-day period, the indemnifying party and the party seeking indemnification shall discuss in good faith the submission of the Dispute to a mutually acceptable alternative dispute resolution procedure (which may be non-binding or binding upon the parties, as they agree in advance) (the “ADR Procedure”). In the event the indemnifying party and the party seeking indemnification agree upon an ADR Procedure, such parties shall, in consultation with the chosen dispute resolution service (the “ADR Service”), promptly agree upon a format and timetable for the ADR Procedure, agree upon the rules applicable to the ADR Procedure, and promptly undertake the ADR Procedure. The provisions of this Section 6.3(d) shall not obligate the indemnifying party and the party seeking indemnification to pursue an ADR Procedure or prevent either such Party from pursuing the Dispute in a court of competent jurisdiction; provided that, if the indemnifying party and the party seeking indemnification agree to pursue an ADR Procedure, neither the indemnifying party nor the party seeking indemnification may commence litigation or seek other remedies with respect to the Dispute prior to the completion of such ADR Procedure. Any ADR Procedure undertaken by the indemnifying party and the party seeking indemnification shall be considered a compromise negotiation for purposes of federal and state rules of evidence, and all statements, offers, opinions and disclosures (whether written or oral) made in the course of the ADR Procedure by or on behalf of the indemnifying party, the party seeking indemnification or the ADR Service shall be treated as confidential and, where appropriate, as privileged work product. Such statements, offers, opinions and disclosures shall not be discoverable or admissible for any purposes in any litigation or other proceeding relating to the Dispute (provided that this sentence shall not be construed to exclude from discovery or admission any matter that is otherwise discoverable or admissible). The fees and expenses of any ADR Service used by the indemnifying party and the party seeking indemnification shall be considered to be Damages; provided, that if the indemnifying party are determined not to be liable for Damages in connection with such Dispute, the party seeking indemnification shall pay all such fees and expenses.
(e) For purposes of this Section 6.3 and the last two sentences of Section 6.4, any references to the Company Stockholders or the Indemnifying Stockholders (except provisions relating to an obligation to make, or a right to receive, any payments provided for in Section 6.3 or Section 6.4) shall be deemed to refer to the Indemnification Representative. The Indemnification Representative shall have full power and authority on behalf of each Company Stockholders or Indemnifying Stockholder to take any and all actions on behalf of, execute any and all instruments on behalf of, and execute or waive any and all rights of, the Company Stockholders or Indemnifying Stockholders under this Article VI. The Indemnification Representative shall have no liability to any Company Stockholder or Indemnifying Stockholder for any action taken or omitted on behalf of the Company Stockholders or Indemnifying Stockholders pursuant to this Article VI.
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6.4 Survival of Representations and Warranties . All representations and warranties contained in this Agreement, the Company Certificate or the Parent Certificate shall (a) survive the Closing and any investigation at any time made by or on behalf of the Parent or the Company and (b) shall expire on the date three (3) years following the Closing Date. If an party entitled to indemnification delivers to a party rom whom it may seek indemnification hereunder, before expiration of a representation or warranty, either a Claim Notice based upon a breach of such representation or warranty, or a notice that, as a result a legal proceeding instituted by or written claim made by a third party, the party entitled to indemnification reasonably expects to incur Damages as a result of a breach of such representation or warranty (an “Expected Claim Notice”), then such representation or warranty shall survive until, but only for purposes of, the resolution of the matter covered by such Expected Claim Notice.
6.5 Limitations on Claims for Indemnification .
(a) (i) Notwithstanding anything to the contrary herein, the Parent shall not be entitled to recover, or be indemnified for, Damages under this Article VI unless and until the aggregate of all such Damages paid or payable by the Indemnifying Stockholders collectively exceeds $50,000 (the “Damages Threshold”) and then, if such aggregate Damages Threshold is reached, the Parent shall only be entitled to recover for Damages in excess of such Damages Threshold.
(ii) Except with respect to claims based on fraud or willful misconduct, after the Closing, the rights of the Parent under this Article VI shall be the exclusive remedy of the Parent with respect to claims resulting from or relating to any misrepresentation or breach of warranty of or failure to perform any covenant or agreement by the Company Stockholders contained in this Agreement.
(iii) Except as provided in the next sentence, the Parent shall only have the right to recover any Damages to which it is entitled from any Indemnifying Stockholder under this Article VI, in whole or in part, pursuant to a sale, in the manner set forth in the Indemnification Escrow Agreement, of Indemnification Escrow Shares issued to such Indemnifying Stockholder by the Parent pursuant to Section 1.5 above. Notwithstanding anything in this Agreement to the contrary, except with respect to any fraud or willful misconduct by the Parent in connection with this Agreement, the foregoing right shall be the exclusive remedy of the Parent to satisfy any Damages that it is entitled to recover from any Indemnifying Stockholder under this Article VI.
(b) (i) Notwithstanding anything to the contrary herein, the Company Stockholders shall not be entitled to recover, or be indemnified for, Damages under this Article VI unless and until the aggregate of all such Damages paid or payable by the Parent collectively exceeds the Damages Threshold and then, if such aggregate Damages Threshold is reached, the Company Stockholders shall only be entitled to recover for Damages in excess of such Damages Threshold.
(ii) Except with respect to claims based on fraud or willful misconduct, after the Closing, the rights of the Company Stockholders under this Article VI shall be the exclusive remedy of the Company Stockholders with respect to claims resulting from or relating to any misrepresentation or breach of warranty of or failure to perform any covenant or agreement by the Parent contained in this Agreement.
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(iii) Notwithstanding anything in this Agreement to the contrary, except with respect to any fraud or willful misconduct by the Parent or its Affiliates in connection with this Agreement, the delivery to a Company Stockholder entitled to indemnification by the Parent under this Article VI of shares of Parent Common Stock pursuant to Section 1.9 shall be the exclusive means for the Company Stockholders to collect any Damages for which they are entitled to indemnification under this Article VI.
(c) No Indemnifying Stockholder shall have any right of contribution against the Surviving Corporation with respect to any breach by the Company of any of its representations, warranties, covenants or agreements. The amount of Damages recoverable by the Parent under this Article VI with respect to an indemnity claim shall be reduced by (i) any proceeds received by the Parent with respect to the Damages to which such indemnity claim relates, from an insurance carrier and (ii) the amount of any tax savings actually realized by the Parent, for the tax year in which such Damages are incurred, which are clearly attributable to the Damages to which such indemnity claim relates (net of any increased tax liability which may result from the receipt of the indemnity payment or any insurance proceeds relating to such Damages).
ARTICLE
VII
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is defined in the Section of this Agreement indicated below.
Defined Term |
Section |
Abandonment and Reclamation Obligations | 6.1(d) |
Acquisition Subsidiary | Introduction |
ADR Procedure | 6.3(d) |
ADR Service | 6.3(d) |
Affiliate | 2.12(a)(vii) |
Agreed Amount | 6.3(c) |
Agreement | Introduction |
Buyer | Introduction |
CERCLA | 2.20 |
Certificate of Merger | 1.1 |
Certificates | 1.5(c) |
Claim Notice | 6.3(b) |
Claimed Amount | 6.3(b) |
Closing | 1.2 |
Closing Date | 1.2 |
Code | Introduction |
Common Conversion Ratio | 1.5(b) |
Common Merger Shares | 1.5(a) |
Company | Introduction |
Company Auditor | 2.30 |
Company Balance Sheet | 2.6 |
Company Balance Sheet Date | 2.6 |
Company Benefit Plans | 2.19(b) |
Company Certificate | 5.2(e) |
Company Common Stockholders | 1.3(f) |
Company Confidential Information | 4.5(b) |
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Defined Term |
Section |
Company Disclosure Schedule | Article II |
Company Equity Plan | 2.2 |
Company Financial Statements | 2.6 |
Company Interim Balance Sheet | 2.6 |
Company Interim Balance Sheet Date | 2.6 |
Company Interim Financial Statements | 2.6 |
Company Material Adverse Effect | 2.1 |
Company Options | 2.2 |
Company Preferred Stockholders | 1.3(h) |
Company Series A Preferred Stock | Introduction |
Company Stockholders | 1.3(d) |
Company Subsidiary | 2.5(a) |
Company Warrants | 2.2 |
Company Year-End Financial Statements | 2.6 |
Contemplated Transactions | 8.3 |
Controlling Party | 6.3(a) |
Damages | 6.1 |
Damages Threshold | 6.5(a) |
Defaulting Party | 8.6 |
Delaware Act | 1.1 |
Dispute | 6.3(c) |
Dissenting Shares | 1.6(a) |
Effective Time | 1.1 |
Employee Benefit Plan | 2.19(a)(i) |
Environmental Law | 2.20(a) |
ERISA | 2.19(a)(ii) |
ERISA Affiliate | 2.19(a)(iii) |
Exchange Act | 2.6 |
Expected Claim Notice | 6.4 |
GAAP | 2.6 |
Governmental Entity | 2.4 |
Indemnification Escrow Agreement | 1.3(g) |
Indemnification Escrow Agent | 1.3(g) |
Indemnification Escrow Shares | 1.3(g) |
Indemnification Representative | 6.3(f) |
Indemnified Executives | 4.9(b) |
Indemnifying Stockholders | 6.1 |
Initial Shares | 1.5(c) |
Intellectual Property | 2.27(a) |
Intellectual Property Rights | 2.27(a) |
Laws | 2.21 |
Legal Proceeding | 2.17 |
Merger | Introduction |
Merger Shares | 1.5(e) |
Minimum Amount | Introduction |
Non-Controlling Party | 6.3(a) |
Non-Defaulting Party | 8.6 |
Notes | Introduction |
Ordinary Course of Business | 2.4 |
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ARTICLE
VIII
TERMINATION
8.1 Termination by Mutual Agreement . This Agreement may be terminated at any time by mutual consent of the Parties, provided that such consent to terminate is in writing and is signed by each of the Parties.
8.2 Termination for Failure to Close . This Agreement shall be automatically terminated if the Closing Date shall not have occurred by September 22, 2013.
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8.3 Termination by Operation of Law . This Agreement may be terminated by any Party hereto if there shall be any statute, rule or regulation that renders consummation of the transactions contemplated by this Agreement (the “Contemplated Transactions”) illegal or otherwise prohibited, or a court of competent jurisdiction or any government (or governmental authority) shall have issued an order, decree or ruling, or has taken any other action restraining, enjoining or otherwise prohibiting the consummation of such transactions and such order, decree, ruling or other action shall have become final and non-appealable.
8.4 Termination for Failure to Perform Covenants or Conditions . This Agreement may be terminated prior to the Effective Time:
(a) by the Parent and the Acquisition Subsidiary if: (i) any of the conditions set forth in Section 5.2 hereof have not been fulfilled in all material respects by the Closing Date; (ii) the Company shall have failed to observe or perform any of its material obligations under this Agreement or (iii) as otherwise set forth herein; or
(b) by the Company if: (i) any of the conditions set forth in Section 5.3 hereof have not been fulfilled in all material respects by the Closing Date; (ii) the Parent or the Acquisition Subsidiary shall have failed to observe or perform any of their material respective obligations under this Agreement or (iii) as otherwise set forth herein.
8.5 Effect of Termination or Default; Remedies . In the event of termination of this Agreement as set forth above, this Agreement shall forthwith become void and there shall be no liability on the part of any Party hereto, provided that such Party is a Non-Defaulting Party (as defined below). The foregoing shall not relieve any Party from liability for damages actually incurred as a result of such Party’s breach of any term or provision of this Agreement.
8.6 Remedies; Specific Performance . In the event that any Party shall fail or refuse to consummate the Contemplated Transactions or if any default under or breach of any representation, warranty, covenant or condition of this Agreement on the part of any Party (the “Defaulting Party”) shall have occurred that results in the failure to consummate the Contemplated Transactions, then in addition to the other remedies provided herein, the non-defaulting Party (the “Non-Defaulting Party”) shall be entitled to seek and obtain money damages from the Defaulting Party, or may seek to obtain an order of specific performance thereof against the Defaulting Party from a court of competent jurisdiction, provided that the Non-Defaulting Party seeking such protection must file its request with such court within forty-five (45) days after it becomes aware of the Defaulting Party’s failure, refusal, default or breach. In addition, the Non-Defaulting Party shall be entitled to obtain from the Defaulting Party court costs and reasonable attorneys’ fees incurred in connection with or in pursuit of enforcing the rights and remedies provided hereunder.
ARTICLE
IX
MISCELLANEOUS
9.1 Press Releases and Announcements . No Party shall issue any press release or public announcement relating to the subject matter of this Agreement without the prior written approval of the other Parties; provided , however , that any Party may make any public disclosure it believes in good faith is required by Applicable Law or stock market rule (in which case the disclosing Party shall use reasonable efforts to advise the other Parties and provide them with a copy of the proposed disclosure prior to making the disclosure).
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9.2 No Third Party Beneficiaries . This Agreement shall not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns; provided , however , that (a) the provisions in Article I concerning issuance of the Merger Shares and Article VI concerning indemnification are intended for the benefit of the Company Stockholders and (b) the provisions in Section 4.9 concerning indemnification are intended for the benefit of the individuals specified therein and their successors and assigns. In addition and notwithstanding the foregoing, the placement agent (the “Placement Agent”) for the Private Placement Offering is a third party beneficiary to the representations, warranties and covenants made by (i) the Company in Article II and Article IV of this Agreement and (ii) Parent and Acquisition Subsidiary in Article III and Article IV of this Agreement.
9.3 Entire Agreement . This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior or (other than as set forth in the Transaction Documents) contemporaneous understandings, agreements or representations by or among the Parties, written or oral, with respect to the subject matter hereof.
9.4 Succession and Assignment . This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other Parties; provided that the Acquisition Subsidiary may assign its rights, interests and obligations hereunder to a wholly-owned subsidiary of the Parent (other than Split-Off Subsidiary).
9.5 Counterparts and Facsimile Signature . 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. Facsimile signatures delivered by fax and/or e-mail/.pdf transmission shall be sufficient and binding as if they were originals and such delivery shall constitute valid delivery of this Agreement.
9.6 Headings . The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.
9.7 Notices . All notices, requests, demands, claims and other communications hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly delivered four business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next business day delivery via a reputable nationwide overnight courier service, in each case to the intended recipient as set forth below:
If to the Company or the Company Stockholders:
Neurotrope BioScience, Inc. 10732 Hawk’s Vista St. Plantation, FL 33324
Attn: Dr. James New Facsimile: (954) 452-4656
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Copy to (which copy shall not constitute notice hereunder):
Ellenoff Grossman & Schole LLP 150 E. 42 nd Street New York, NY 10017 Attn: Barry I. Grossman, Esq. Facsimile: (212) 370-7889 |
If to the Parent or the Acquisition Subsidiary (prior to the Closing):
Neurotrope Inc. c/o Gottbetter & Partners, LLP 488 Madison Avenue, 12th Floor New York, NY 10022 |
Copy to (which copy shall not constitute notice hereunder):
Gottbetter & Partners, LLP 488 Madison Avenue, 12 th Floor New York, NY 10022
Attn: Adam S. Gottbetter, Esq. Facsimile: (212) 400-6901 |
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Any Party may give any notice, request, demand, claim or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the Party for whom it is intended. Any Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.
9.8 Governing Law . This Agreement shall be governed by and construed in accordance with the internal laws of the State Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdictions other than those of the State of Delaware.
9.9 Amendments and Waivers . The Parties may mutually amend any provision of this Agreement at any time prior to the Effective Time. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by all of the Parties. No waiver of any right or remedy hereunder shall be valid unless the same shall be in writing and signed by the Party giving such waiver. No waiver by any Party with respect to any default, misrepresentation or breach of warranty or covenant hereunder shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.
9.10 Severability . Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified.
9.11 Submission to Jurisdiction . Each of the Parties (a) submits to the jurisdiction of any state or federal court sitting in the County of New York in the State of New York in any action or proceeding arising out of or relating to this Agreement, (b) agrees that all claims in respect of such action or proceeding may be heard and determined in any such court, and (c) agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Each of the Parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other Party with respect thereto. Any Party may make service on another Party by sending or delivering a copy of the process to the Party to be served at the address and in the manner provided for the giving of notices in Section 9.7. Nothing in this Section 9.11, however, shall affect the right of any Party to serve legal process in any other manner permitted by law.
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9.12 WAIVER OF JURY TRIAL . EACH OF THE PARTIES IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BETWEEN THE PARTIES ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
9.13 Construction .
(a) The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.
(b) Any reference to any federal, state, local or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties have executed this Agreement and Plan of Merger and Reorganization as of the date first above written.
PARENT: | |||
NEUROTROPE, INC. | |||
By: | /s/ Ronald A. Warren | ||
Name: | Ronald A. Warren | ||
Title: | Chief Executive Officer | ||
ACQUISITION SUBSIDIARY: | |||
NEUROTROPE ACQUISITION CORP. | |||
By: | /s/ Ronald A. Warren | ||
Name: | Ronald A. Warren | ||
Title: | President | ||
COMPANY: | |||
NEUROTROPE BIOSCIENCE, INC. | |||
By: | /s/ James New | ||
Name: | James New | ||
Title: | President and Chief Executive Officer |
Exhibit 3.4
STATE OF DELAWARE
CERTIFICATE OF MERGER
OF
DOMESTIC CORPORATIONS
_______________________
Pursuant to Title 8, Section 251(c) of the Delaware General Corporation Law, the undersigned corporation executed the following Certificate of Merger:
FIRST: The name of the surviving corporation is Neurotrope BioScience, Inc. , and the name of the corporation being merged into this surviving corporation is Neurotrope Acquisition Corp .
SECOND: The Agreement of Merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations.
THIRD : The name of the surviving corporation is Neurotrope BioScience, Inc., a Delaware corporation.
FOURTH : The Certificate of Incorporation of the Company shall be amended and restated in its entirety as set forth in Exhibit A attached hereto and, as so amended and restated, shall constitute the Certificate of Incorporation of the Surviving Corporation.
FIFTH: The merger is to become effective upon filing with the Secretary of State of the State of Delaware.
SIXTH: The Agreement of Merger is on file at 10732 Hawk’s Vista St., Plantation, FL 33324, the place of business of the surviving corporation.
SEVENTH: A copy of the Agreement of Merger will be furnished by the surviving corporation on request, without cost, to any stockholder of the constituent corporations.
IN WITNESS WHEREOF , said surviving corporation has caused this certificate to be signed by an authorized officer, the 23 rd day of August, 2013.
NEUROTROPE BIOSCIENCE, INC. | ||
By: | /s/ James New | |
Authorized Officer | ||
Name: | James New | |
Title: | Chief Executive Officer |
Exhibit A
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NEUROTROPE BIOSCIENCE, INC.
FIRST : The name of this corporation is Neurotrope BioScience, Inc. (the “Corporation”).
SECOND : The address of the registered office of the Corporation in Delaware is 160 Greentree Drive, Suite 101 Dover , Delaware 19904, Kent County. The name of the registered agent at that address is National Registered Agents, Inc.
THIRD : The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.
FOURTH : The total number of shares that the Corporation is authorized to issue is 100 shares of common stock, par value $0.0001 per share.
FIFTH : The board of directors of the Corporation is expressly authorized to adopt, amend or repeal bylaws of the Corporation.
SIXTH : No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law, (i) for 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) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this Article 6 shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment.
Exhibit 10.1
SPLIT-OFF AGREEMENT
This SPLIT-OFF AGREEMENT, dated as of August 23, 2013 (this “ Agreement ”), is entered into by and among Neurotrope, Inc. (successor by merger to BlueFlash Communications, Inc.), a Nevada corporation (the “ Parent ”), (“ Seller ”), BlueFlash Communications Corp, a Nevada corporation (“ Split-Off Subsidiary ”), and Marissa Watson (“ Buyer ”).
R E C I T A L S:
WHEREAS, Seller is the owner of all of the issued and outstanding capital stock of Split-Off Subsidiary; Split-Off Subsidiary is a wholly owned subsidiary of Seller which will acquire the business assets and liabilities previously held by Seller; and Seller has no other businesses or operations prior to the Merger (as defined herein);
WHEREAS, contemporaneously with the execution of this Agreement, Seller, Neurotrope BioScience, Inc. , a Delaware corporation (“ PrivateCo ”), and a newly -formed wholly -owned Delaware subsidiary of Seller, Neurotrope Acquisition Corp. (“ Acquisition Sub ”), will enter into an Agreement and Plan of Merger and Reorganization (the “ Merger Agreement ”) pursuant to which Acquisition Sub will merge with and into PrivateCo with PrivateCo remaining as the surviving entity (the “ Merger ”); and the equity holders of PrivateCo will receive securities of Seller in exchange for their equity interests in PrivateCo;
WHEREAS, the execution and delivery of this Agreement is required by PrivateCo as a condition to its execution of the Merger Agreement, and the consummation of the assignment, assumption, purchase and sale transactions contemplated by this Agreement is also a condition to the completion of the Merger pursuant to the Merger Agreement, and Seller has represented to PrivateCo in the Merger Agreement that the transactions contemplated by this Agreement will be consummated contemporaneously with the closing of the Merger, and PrivateCo relied on such representation in entering into the Merger Agreement;
WHEREAS, Buyer desires to purchase the Shares (as defined in Section 2.1) from Seller, and to assume, as between Seller and Buyer, all responsibility for any debts, obligations and liabilities of Seller (prior to the Merger) and Split-Off Subsidiary, on the terms and subject to the conditions specified in this Agreement; and
WHEREAS, Seller desires to sell and transfer the Shares to Buyer, on the terms and subject to the conditions specified in this Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants, promises and agreements herein set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending legally to be bound, agree as follows:
I. | ASSIGNMENT AND ASSUMPTION OF SELLER’S ASSETS AND LIABILITIES. |
Subject to the terms and conditions provided below:
1.1 Assignment of Assets . Seller hereby contributes, assigns, conveys and transfers to Split-Off Subsidiary, and Split-Off Subsidiary hereby receives, acquires and accepts, all assets and properties of Seller as of the Closing Date (as defined below) immediately prior to giving effect to the Effective Time, including but not limited to the following, but excluding in all cases (i) the right, title and assets of Seller in, to and under the Transaction Documents, and (ii) the capital stock of PrivateCo and Split-Off Subsidiary :
(a) all cash and cash equivalents (having an approximate value of $0);
(b) all accounts receivable (having an approximate value of $0);
(c) all inventories of raw materials, work in process, parts, supplies and finished products;
(d) all right, title and interest, of record, beneficial or otherwise, in and to and stock, membership interests, partnership interests or other equity or ownership interests in any corporation, limited liability company, partnership or other entity, and all bonds, debentures, notes or other securities;
(e) all of Seller’s rights, title and interests in, to and under all contracts, agreements, leases, licenses (including software licenses), supply agreements, consulting agreements, commitments, purchase orders, customer orders and work orders, and including all of Seller’s rights thereunder to use and possess equipment provided by third parties, and all representations, warranties, covenants and guarantees related to the foregoing (provided that, to the extent any of the foregoing or any claim or right or benefit arising thereunder or resulting therefrom is not assignable by its terms or the assignment thereof shall require the consent or approval of another party thereto, this Agreement shall not constitute an assignment thereof if an attempted assignment would be in violation of the terms thereof or if such consent is not obtained prior to the Effective Time, and in lieu thereof Seller shall reasonably cooperate with Split-Off Subsidiary in any reasonable arrangement designed to provide Split-Off Subsidiary the benefits thereunder or any claim or right arising thereunder);
(f) all intellectual property, including but not limited to issued patents, patent applications (whether or not patents are issued thereon and whether modified, withdrawn or resubmitted), unpatented inventions, product designs, copyrights (whether registered or unregistered), know-how, technology, trade secrets, technical information, notebooks, drawings, software, computer coding (both object and source) and all documentation, manuals and drawings related thereto, trademarks or service marks and applications therefor, unregistered trademarks or service marks, trade names, logos and icons and all rights to sue or recover for the infringement or misappropriation thereof;
(g) all fixed assets, including but not limited to the machinery, equipment, furniture, vehicles, office equipment and other tangible personal property owned or leased by Seller;
(h) all customer lists, business records, customer records and files, customer financial records, and all other files and information related to customers, all customer proposals, all open service agreements with customers and all uncompleted customer contracts and agreements; and
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(i) to the extent legally assignable, all licenses, permits, certificates, approvals and authorizations issued by Governmental Entities and necessary to own, lease or operate the assets and properties of Seller and to conduct Seller’s business as it is presently conducted;
all of the foregoing being referred to herein as the “ Assigned Assets .”
1.2 Assignment and Assumption of Liabilities . Seller hereby assigns to Split-Off Subsidiary, and Split-Off Subsidiary hereby assumes and agrees to pay, honor and discharge all debts, adverse claims, liabilities, judgments and obligations, including tax obligations, of Seller as of the Closing Date immediately prior to the Effective Time, whether accrued, contingent or otherwise and whether known or unknown, including those arising under any law (including the common law) or any rule or regulation of any Governmental Entity or imposed by any court or any arbitrator in a binding arbitration resulting from, arising out of or relating to the assets, activities, operations, actions or omissions of Seller, or products manufactured or sold thereby or services provided thereby, or under contracts, agreements (whether written or oral), leases, commitments or undertakings thereof, but excluding in all cases the obligations of Seller under the Transaction Documents (all of the foregoing being referred to herein as the “ Assigned Liabilities ”).
The assignment and assumption of Seller’s assets and liabilities provided for in this Article I is referred to as the “ Assignment .”
II. | PURCHASE AND SALE OF STOCK. |
2.1 Purchased Shares . Subject to the terms and conditions provided below, Seller shall sell and transfer to Buyer and Buyer shall purchase from Seller, on the Closing Date (as defined in Section 3.1), all of the issued and outstanding shares of capital stock of Split-Off Subsidiary (the “Shares”), as set forth in Exhibit A attached hereto.
2.2 Purchase Price . The purchase price for the Shares shall be the transfer and delivery by Buyer to Seller of the type and number of shares of common stock and other securities of Seller that Buyer owns (the “ Purchase Price Securities ”), as set forth in Exhibit A attached hereto, deliverable as provided in Section 3.3.
III. | CLOSING. |
3.1 Closing . The closing of the transactions contemplated in this Agreement (the “ Closing ”) shall take place simultaneously with the closing of the Merger immediately prior to the Effective Time. The date on which the Closing occurs shall be referred to herein as the “ Closing Date .”
3.2 Transfer of Shares . At the Closing, Seller shall deliver to Buyer certificates representing the Shares purchased by Buyer, duly endorsed to Buyer or as directed by Buyer, which delivery shall vest Buyer with good and marketable title to such Shares, free and clear of all liens and encumbrances.
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3.3 Payment of Purchase Price . At the Closing, Buyer shall deliver to Seller a certificate or certificates representing Buyer’s Purchase Price Securities duly endorsed to Seller, which delivery shall vest Seller with good and marketable title to the Purchase Price Securities, free and clear of all liens and encumbrances.
3.4 Transfer of Records . On or before the Closing, Seller shall transfer to Split-Off Subsidiary all existing corporate books and records in Seller’s possession relating to Split-Off Subsidiary and its business, including but not limited to all agreements, litigation files, real estate files, personnel files and filings with governmental agencies; provided, however , when any such documents relate to both Seller and Split-Off Subsidiary, only copies of such documents need be furnished. On or before the Closing, Buyer and Split-Off Subsidiary shall transfer to Seller all existing corporate books and records in the possession of Buyers or Split-Off Subsidiary relating to Seller, including but not limited to all corporate minute books, stock ledgers, certificates and corporate seals of Seller and all agreements, litigation files, real property files, personnel files and filings with governmental agencies; provided, however , when any such documents relate to both Seller and Split-Off Subsidiary or its business, only copies of such documents need be furnished.
3.5 Instruments of Assignment . At the Closing, Seller and Split-Off Subsidiary shall deliver to each other such instruments providing for the Assignment as the other may reasonably request (the “ Instruments of Assignment ”).
IV. | BUYER’S REPRESENTATIONS AND WARRANTIES . Buyer represents and warrants to Seller and Split-Off Subsidiary that: |
4.1 Capacity and Enforceability . Buyer has the legal capacity to execute and deliver this Agreement and the documents to be executed and delivered by Buyer at the Closing pursuant to the transactions contemplated hereby. This Agreement and all such documents constitute valid and binding agreements of Buyer, enforceable in accordance with their terms.
4.2 Compliance . Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby by Buyer will result in the breach of any term or provision of, or constitute a default under, or violate any agreement, indenture, instrument, order, law or regulation to which Buyer is a party or by which Buyer is bound.
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4.3 Purchase for Investment . Buyer is financially able to bear the economic risks of acquiring the Shares and the other transactions contemplated hereby, and has no need for liquidity in his or her investment in the Shares. Buyer has such knowledge and experience in financial and business matters in general, and with respect to businesses of a nature similar to the business of Split-Off Subsidiary (after giving effect to the Assignment), so as to be capable of evaluating the merits and risks of, and making an informed business decision with regard to, the acquisition of the Shares and the other transactions contemplated hereby. Buyer is acquiring the Shares solely for his or her own account and not with a view to or for resale in connection with any distribution or public offering thereof, within the meaning of any applicable securities laws and regulations, unless such distribution or offering is registered under the Securities Act of 1933, as amended (the “Securities Act”), or an exemption from such registration is available. Buyer has (i) received all the information he or she has deemed necessary to make an informed decision with respect to the acquisition of the Shares and the other transactions contemplated hereby; (ii) had an opportunity to make such investigation as he or she has desired pertaining to Split-Off Subsidiary (after giving effect to the Assignment) and the acquisition of an interest therein and the other transactions contemplated hereby, and to verify the information which is, and has been, made available to him or her; and (iii) had the opportunity to ask questions of Seller concerning Split-Off Subsidiary (after giving effect to the Assignment). Buyer acknowledges that Buyer is a current or former director and officer of Seller, and a current director and officer of Split-Off Subsidiary and, as such, has actual knowledge of the business, operations and financial affairs of Split-Off Subsidiary (after giving effect to the Assignment). Buyer has received no public solicitation or advertisement with respect to the offer or sale of the Shares. Buyer realizes that the Shares are “restricted securities” as that term is defined in Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act, the resale of the Shares is restricted by federal and state securities laws and, accordingly, the Shares must be held indefinitely unless their resale is subsequently registered under the Securities Act or an exemption from such registration is available for their resale. Buyer understands that any resale of the Shares by him or her must be registered under the Securities Act (and any applicable state securities law) or be effected in circumstances that, in the opinion of counsel for Split-Off Subsidiary at the time, create an exemption or otherwise do not require registration under the Securities Act (or applicable state securities laws). Buyer acknowledges and consents that certificates now or hereafter issued for the Shares will bear a legend substantially as follows:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS (THE “STATE ACTS”), HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND QUALIFICATION UNDER THE STATE ACTS OR PURSUANT TO EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS (INCLUDING, IN THE CASE OF THE SECURITIES ACT, THE EXEMPTIONS AFFORDED BY SECTION 4(1) OF THE SECURITIES ACT AND RULE 144 THEREUNDER). AS A PRECONDITION TO ANY SUCH TRANSFER, THE ISSUER OF THESE SECURITIES SHALL BE FURNISHED WITH AN OPINION OF COUNSEL OPINING AS TO THE AVAILABILITY OF EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION AND/OR SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY THERETO THAT ANY SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES LAWS.
Buyer understands that the Shares are being sold to him or her pursuant to the exemption from registration contained in Section 4(1) of the Securities Act and that Seller is relying upon the representations made herein as one of the bases for claiming the Section 4(1) exemption.
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4.4 Liabilities . Following the Closing, Seller will have no liability for any debts, liabilities or obligations of Split-Off Subsidiary or its business or activities, or the business or activities of Seller prior to the Closing that are unrelated to the business of PrivateCo, and there are no outstanding guaranties, performance or payment bonds, letters of credit or other contingent contractual obligations that have been undertaken by Seller directly or indirectly in relation to Split-Off Subsidiary or its business, or the business of Seller prior to the Closing that are unrelated to the business of PrivateCo, and that may survive the Closing.
4.5 Title to Purchase Price Securities . Buyer is the sole record and beneficial owner of the Purchase Price Securities. At Closing, Buyer will have good and marketable title to the Purchase Price Securities, which Purchase Price Securities are, and at the Closing will be, free and clear of all options, warrants, pledges, claims, liens and encumbrances, and any restrictions or limitations prohibiting or restricting transfer to Seller, except for restrictions on transfer as contemplated by applicable securities laws.
V. SELLER’S AND SPLIT-OFF SUBSIDIARY’S REPRESENTATIONS AND WARRANTIES . Seller and Split-Off Subsidiary, as applicable, represent and warrant to Buyer that:
5.1 Organization and Good Standing . Each of Seller and Split-Off Subsidiary is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Nevada.
5.2 Authority and Enforceability . The execution and delivery of this Agreement and the documents to be executed and delivered at the Closing pursuant to the transactions contemplated hereby, and performance in accordance with the terms hereof and thereof, have been duly authorized by Seller and Split-Off Subsidiary and all such documents constitute valid and binding agreements of Seller and Split-Off Subsidiary enforceable in accordance with their terms.
5.3 Title to Shares . Seller is the sole record and beneficial owner of the Shares. At Closing, Seller will have good and marketable title to the Shares, which Shares are, and at the Closing will be, free and clear of all options, warrants, pledges, claims, liens and encumbrances, and any restrictions or limitations prohibiting or restricting transfer to Buyer, except for restrictions on transfer as contemplated by Section 4.3 above. The Shares constitute all of the issued and outstanding shares of capital stock of Split-Off Subsidiary.
5.4 WARN Act . Split-Off Subsidiary does not have a sufficient number of employees to make it subject to the Worker Adjustment and Retraining Notification Act.
5.5 Representations in Merger Agreement . Split-Off Subsidiary represents and warrants that all of the representations and warranties by Seller, insofar as they relate to Split-Off Subsidiary, contained in the Merger Agreement are true and correct.
VI. | OBLIGATIONS OF BUYER PENDING CLOSING . Buyer covenants and agrees that between the date hereof and the Closing: |
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6.1 Not Impair Performance . Buyer shall not take any intentional action that would cause the conditions upon the obligations of the parties hereto to effect the transactions contemplated hereby not to be fulfilled, including, without limitation, taking or causing to be taken any action that would cause the representations and warranties made by any party herein not to be true, correct and accurate as of the Closing, or in any way impairing the ability of Seller to satisfy its obligations as provided in Article VII.
6.2 Assist Performance . Buyer shall exercise its reasonable best efforts to cause to be fulfilled those conditions precedent to Seller’s obligations to consummate the transactions contemplated hereby which are dependent upon actions of Buyer and to make and/or obtain any necessary filings and consents in order to consummate the transactions contemplated by this Agreement.
VII. OBLIGATIONS OF SELLER AND SPLIT-OFF SUBSIDIARY PENDING CLOSING . Seller and Split-Off Subsidiary covenant and agree that between the date hereof and the Closing:
7.1 Business as Usual . Split-Off Subsidiary shall operate and Seller shall cause Split-Off Subsidiary to operate in accordance with past practices and shall use best efforts to preserve its goodwill and the goodwill of its employees, customers and others having business dealings with Split-Off Subsidiary. Without limiting the generality of the foregoing, from the date of this Agreement until the Closing Date, Split-Off Subsidiary shall (a) make all normal and customary repairs to its equipment, assets and facilities, (b) keep in force all insurance, (c) preserve in full force and effect all material franchises, licenses, contracts and real property interests and comply in all material respects with all laws and regulations, (d) collect all accounts receivable and pay all trade creditors in the ordinary course of business at intervals historically experienced, and (e) preserve and maintain Split-Off Subsidiary’s assets in their current operating condition and repair, ordinary wear and tear excepted. From the date of this Agreement until the Closing Date, Split-Off Subsidiary shall not (i) amend, terminate or surrender any material franchise, license, contract or real property interest, or (ii) sell or dispose of any of its assets except in the ordinary course of business. Neither Split-Off Subsidiary nor Seller shall take or omit to take any action that results in Buyer incurring any liability or obligation prior to or in connection with the Closing.
7.2 Not Impair Performance . Seller shall not take any intentional action that would cause the conditions upon the obligations of the parties hereto to effect the transactions contemplated hereby not to be fulfilled, including, without limitation, taking or causing to be taken any action which would cause the representations and warranties made by any party herein not to be materially true, correct and accurate as of the Closing, or in any way impairing the ability of Buyer to satisfy his obligations as provided in Article VI.
7.3 Assist Performance . Seller shall exercise its reasonable best efforts to cause to be fulfilled those conditions precedent to Buyer’s obligations to consummate the transactions contemplated hereby which are dependent upon the actions of Seller and to work with Buyer to make and/or obtain any necessary filings and consents. Seller shall cause Split-Off Subsidiary to comply with its obligations under this Agreement.
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VIII. SELLER’S AND SPLIT-OFF SUBSIDIARY’S CONDITIONS PRECEDENT TO CLOSING . The obligations of Seller and Split-Off Subsidiary to close the transactions contemplated by this Agreement are subject to the satisfaction at or prior to the Closing of each of the following conditions precedent (any or all of which may be waived by Seller and PrivateCo in writing):
8.1 Representations and Warranties; Performance . All representations and warranties of Buyer contained in this Agreement shall have been true and correct, in all material respects, when made and shall be true and correct, in all material respects, at and as of the Closing, with the same effect as though such representations and warranties were made at and as of the Closing. Buyer shall have performed and complied with all covenants and agreements and satisfied all conditions, in all material respects, required by this Agreement to be performed or complied with or satisfied by Buyer at or prior to the Closing.
8.2 Additional Documents . Buyer shall deliver or cause to be delivered such additional documents as may be necessary in connection with the consummation of the transactions contemplated by this Agreement and the performance of their obligations hereunder.
8.3 Release by Split-Off Subsidiary . At the Closing, Split-Off Subsidiary shall execute and deliver to Seller a general release which in substance and effect releases Seller and PrivateCo from any and all liabilities and obligations that Seller and PrivateCo may owe to Split-Off Subsidiary in any capacity, and from any and all claims that Split-Off Subsidiary may have against Seller, PrivateCo or their respective managers, members, officers, directors, stockholders, employees and agents (other than those arising pursuant to this Agreement or any document delivered in connection with this Agreement).
8.4 Completion of Merger . The closing of the Merger pursuant to the Merger Agreement, and all of the transactions contemplated thereby, shall occur simultaneously.
IX. BUYERS’ CONDITIONS PRECEDENT TO CLOSING . The obligation of Buyer to close the transactions contemplated by this Agreement is subject to the satisfaction at or prior to the Closing of each of the following conditions precedent (any and all of which may be waived by Buyer in writing):
9.1 Representations and Warranties; Performance . All representations and warranties of Seller and Split-Off Subsidiary contained in this Agreement shall have been true and correct, in all material respects, when made and shall be true and correct, in all material respects, at and as of the Closing with the same effect as though such representations and warranties were made at and as of the Closing. Seller and Split-Off Subsidiary shall have performed and complied with all covenants and agreements and satisfied all conditions, in all material respects, required by this Agreement to be performed or complied with or satisfied by them at or prior to the Closing.
X. | OTHER AGREEMENTS . |
10.1 Expenses . Each party hereto shall bear its expenses separately incurred in connection with this Agreement and with the performance of its obligations hereunder.
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10.2 Confidentiality . Buyer shall not make any public announcements concerning this transaction without the prior written agreement of PrivateCo, other than as may be required by applicable law or judicial process. If for any reason the transactions contemplated hereby are not consummated, then Buyer shall return any information received by Buyer from Seller or Split-Off Subsidiary, and Buyer shall cause all confidential information obtained by Buyer concerning Split-Off Subsidiary and its business to be treated as such.
10.3 Brokers’ Fees . In connection with the transaction specifically contemplated by this Agreement, no party to this Agreement has employed the services of a broker and each agrees to indemnify the other against all claims of any third parties for fees and commissions of any brokers claiming a fee or commission related to the transactions contemplated hereby.
10.4 Access to Information Post-Closing; Cooperation .
(a) Following the Closing, Buyer and Split-Off Subsidiary shall afford to Seller and its authorized accountants, counsel and other designated representatives, reasonable access (and including using reasonable efforts to give access to persons or firms possessing information) and duplicating rights during normal business hours to allow records, books, contracts, instruments, computer data and other data and information (collectively, “ Information ”) within the possession or control of Buyer or Split-Off Subsidiary insofar as such access is reasonably required by Seller. Information may be requested under this Section 10.4(a) for, without limitation, audit, accounting, claims, litigation and tax purposes, as well as for purposes of fulfilling disclosure and reporting obligations and performing this Agreement and the transactions contemplated hereby. No files, books or records of Split-Off Subsidiary existing at the Closing Date shall be destroyed by Buyer or Split-Off Subsidiary after Closing but prior to the expiration of any period during which such files, books or records are required to be maintained and preserved by applicable law without giving Seller at least 30 days’ prior written notice, during which time Seller shall have the right to examine and to remove any such files, books and records prior to their destruction.
(b) Following the Closing, Seller shall afford to Split-Off Subsidiary and its authorized accountants, counsel and other designated representatives reasonable access (including using reasonable efforts to give access to persons or firms possessing information) and duplicating rights during normal business hours to Information within Seller’s possession or control relating to the business of Split-Off Subsidiary insofar as such access is reasonably required by Buyer. Information may be requested under this Section 10.4(b) for, without limitation, audit, accounting, claims, litigation and tax purposes as well as for purposes of fulfilling disclosure and reporting obligations and for performing this Agreement and the transactions contemplated hereby. No files, books or records of Split-Off Subsidiary existing at the Closing Date shall be destroyed by Seller after Closing but prior to the expiration of any period during which such files, books or records are required to be maintained and preserved by applicable law without giving Buyer at least 30 days’ prior written notice, during which time Buyer shall have the right to examine and to remove any such files, books and records prior to their destruction.
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(c) At all times following the Closing, Seller, Buyer and Split-Off Subsidiary shall use their reasonable efforts to make available to the other on written request, the current and former officers, directors, employees and agents of Seller or Split-Off Subsidiary for any of the purposes set forth in Section 10.4(a) or (b) above or as witnesses to the extent that such persons may reasonably be required in connection with any legal, administrative or other proceedings in which Seller or Split-Off Subsidiary may from time to be involved.
(d) The party to whom any Information or witnesses are provided under this Section 10.4 shall reimburse the provider thereof for all out-of-pocket expenses actually and reasonably incurred in providing such Information or witnesses.
(e) Seller, Buyer, Split-Off Subsidiary and their respective employees and agents shall each hold in strict confidence all Information concerning the other party in their possession or furnished by the other or the other’s representative pursuant to this Agreement with the same degree of care as such party utilizes as to such party’s own confidential information (except to the extent that such Information is (i) in the public domain through no fault of such party or (ii) later lawfully acquired from any other source by such party), and each party shall not release or disclose such Information to any other person, except such party’s auditors, attorneys, financial advisors, bankers, other consultants and advisors or persons to whom such party has a valid obligation to disclose such Information, unless compelled to disclose such Information by judicial or administrative process or, as advised by its counsel, by other requirements of law.
(f) Seller, Buyer and Split-Off Subsidiary shall each use their best efforts to forward promptly to the other party all notices, claims, correspondence and other materials which are received and determined to pertain to the other party.
10.5 Guarantees, Surety Bonds and Letter of Credit Obligations . In the event that Seller is obligated for any debts, obligations or liabilities of Split-Off Subsidiary by virtue of any outstanding guarantee, performance or surety bond or letter of credit provided or arranged by Seller on or prior to the Closing Date, Buyer and Split-Off Subsidiary shall use their best efforts to cause to be issued replacements of such bonds, letters of credit and guarantees and to obtain any amendments, novations, releases and approvals necessary to release and discharge fully Seller from any liability thereunder following the Closing. Buyer and Split-Off Subsidiary, jointly and severally, shall be responsible for, and shall indemnify, hold harmless and defend Seller from and against, any costs or losses incurred by Seller arising from such bonds, letters of credit and guarantees and any liabilities arising therefrom and shall reimburse Seller for any payments that Seller may be required to pay pursuant to enforcement of its obligations relating to such bonds, letters of credit and guarantees.
10.6 Filings and Consents . Buyer, at its risk, shall determine what, if any, filings and consents must be made and/or obtained prior to Closing to consummate the purchase and sale of the Shares. Buyer shall indemnify the Seller Indemnified Parties (as defined in Section 12.1 below) against any Losses (as defined in Section 12.1 below) incurred by such Seller Indemnified Parties by virtue of the failure to make and/or obtain any such filings or consents. Recognizing that the failure to make and/or obtain any filings or consents may cause Seller to incur Losses or otherwise adversely affect Seller, Buyer and Split-Off Subsidiary confirm that the provisions of this Section 10.6 will not limit Seller’s right to treat such failure as the failure of a condition precedent to Seller’s obligation to close pursuant to Article VIII above.
10.7 Insurance . Buyer acknowledges that on the Closing Date, effective as of the Closing, any insurance coverage and bonds provided by Seller for Buyer or for Split-Off Subsidiary, and all certificates of insurance evidencing that Buyers or Split-Off Subsidiary maintain any required insurance by virtue of insurance provided by Seller, will terminate with respect to any insured damages resulting from matters occurring subsequent to Closing.
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10.8 Agreements Regarding Taxes .
(a) Tax Sharing Agreements . Any tax sharing agreement between Seller and Split-Off Subsidiary is terminated as of the Closing Date and will have no further effect for any taxable year (whether the current year, a future year or a past year).
(b) Returns for Periods Through the Closing Date . Seller will include the income and loss of Split-Off Subsidiary (including any deferred income triggered into income by Reg. §1.1502-13 and any excess loss accounts taken into income under Reg. §1.1502-19) on Seller’s consolidated federal income tax returns for all periods through the Closing Date and pay any federal income taxes attributable to such income. Seller and Split-Off Subsidiary agree to allocate income, gain, loss, deductions and credits between the period up to Closing (the “ Pre-Closing Period ”) and the period after Closing (the “ Post-Closing Period ”) based on a closing of the books of Split-Off Subsidiary, and both Seller and Split-Off Subsidiary agree not to make an election under Reg. §1.1502-76(b)(2)(ii) to ratably allocate the year’s items of income, gain, loss, deduction and credit. Seller, Split-Off Subsidiary and Buyer agree to report all transactions not in the ordinary course of business occurring on the Closing Date after Buyers’ purchase of the Shares on Split-Off Subsidiary’s tax returns to the extent permitted by Reg. §1.1502-76(b)(1)(ii)(B). Buyer agrees to indemnify Seller for any additional tax owed by Seller (including tax owed by Seller due to this indemnification payment) resulting from any transaction engaged in by Split-Off Subsidiary or Seller (not related to the Merger) during the Pre-Closing Period or on the Closing Date before Buyer’s purchase of the Shares. Split-Off Subsidiary will furnish tax information to Seller for inclusion in Seller’s consolidated federal income tax return for the period which includes the Closing Date in accordance with Split-Off Subsidiary’s past custom and practice.
(c) Audits . Seller will allow Split-Off Subsidiary and its counsel to participate at Split-Off Subsidiary’s expense in any audit of Seller’s consolidated federal income tax returns to the extent that such audit raises issues that relate to and increase the tax liability of Split-Off Subsidiary. Seller shall have the absolute right, in its sole discretion, to engage professionals and direct the representation of Seller in connection with any such audit and the resolution thereof, without receiving the consent of Buyer or Split-Off Subsidiary or any other party acting on behalf of Buyer or Split-Off Subsidiary, provided that Seller will not settle any such audit in a manner which would materially adversely affect Split-Off Subsidiary after the Closing Date unless such settlement would be reasonable in the case of a person that owned Split-Off Subsidiary both before and after the Closing Date. In the event that after Closing any tax authority informs Buyer or Split-Off Subsidiary of any notice of proposed audit, claim, assessment or other dispute concerning an amount of taxes which pertain to Seller, or to Split-Off Subsidiary during the period prior to Closing, Buyer or Split-Off Subsidiary must promptly notify Seller of the same within 15 calendar days of the date of the notice from the tax authority. In the event Buyers or Split-Off Subsidiary do not notify Seller within such 15 day period, Buyer and Split-Off Subsidiary, jointly and severally, will indemnify Seller for any incremental interest, penalty or other assessments resulting from the delay in giving notice. To the extent of any conflict or inconsistency, the provisions of this Section 10.8 shall control over the provisions of Section 12.2 below.
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(d) Cooperation on Tax Matters . Buyer, Seller and Split-Off Subsidiary shall cooperate fully, as and to the extent reasonably requested by any party, in connection with the filing of tax returns pursuant to this Section and any audit, litigation or other proceeding with respect to taxes. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Split-Off Subsidiary shall (i) retain all books and records with respect to tax matters pertinent to Split-Off Subsidiary and Seller relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Seller, any extensions thereof) of the respective taxable periods, and abide by all record retention agreements entered into with any taxing authority, and (ii) give Seller reasonable written notice prior to transferring, destroying or discarding any such books and records and, if Seller so requests, Buyer agrees to cause Split-Off Subsidiary to allow Seller to take possession of such books and records.
10.9 ERISA . Effective as of the Closing Date, Split-Off Subsidiary shall terminate its participation in, and withdraw from, any employee benefit plans sponsored by Seller, and Seller and Buyer shall cooperate fully in such termination and withdrawal. Without limitation, Split-Off Subsidiary shall be solely responsible for (i) all liabilities under those employee benefit plans notwithstanding any status as an employee benefit plan sponsored by Seller, and (ii) all liabilities for the payment of vacation pay, severance benefits, and similar obligations, including, without limitation, amounts which are accrued but unpaid as of the Closing Date with respect thereto. Buyer and Split-Off Subsidiary acknowledge and agree that Split-Off Subsidiary is solely responsible for providing continuation health coverage, as required under the Consolidated Omnibus Reconciliation Act of 1985, as amended (“ COBRA ”), to each person, if any, participating in an employee benefit plan subject to COBRA with respect to such employee benefit plan as of the Closing Date, including, without limitation, any person whose employment with Split-Off Subsidiary is terminated after the Closing Date.
XI. | TERMINATION . This Agreement may be terminated at, or at any time prior to, the Closing by mutual written consent of Seller, Buyers and PrivateCo. |
If this Agreement is terminated as provided herein, it shall become wholly void and of no further force and effect and there shall be no further liability or obligation on the part of any party except to pay such expenses as are required of such party.
XII. | INDEMNIFICATION . |
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12.1 Indemnification by Buyer and Split-Off Subsidiary . Buyer and Split-Off Subsidiary, jointly and severally, covenant and agree to indemnify, defend, protect and hold harmless Seller and PrivateCo, and their respective officers, directors, employees, stockholders, agents, representatives and Affiliates (collectively, the “ Seller Indemnified Parties ”) at all times from and after the date of this Agreement from and against all losses, liabilities, damages, claims, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys’ fees and expenses of investigation), whether or not involving a third party claim and regardless of any negligence of any Seller Indemnified Party (collectively, “ Losses ”), incurred by any Seller Indemnified Party as a result of or arising from (i) any breach of the representations and warranties of such Buyer set forth herein or in certificates delivered in connection herewith, (ii) any breach or nonfulfillment of any covenant or agreement (including any other agreement of Buyers to indemnify set forth in this Agreement) on the part of Buyer under this Agreement, (iii) any Assigned Asset or Assigned Liability or any other debt, liability or obligation of Split-Off Subsidiary, (iv) the conduct and operations, (A) prior to Closing, of the business of Seller unrelated to the assets that are the subject of the Merger, (B) whether before or after Closing, of (X) the business of Seller pertaining to the Assigned Assets and Assigned Liabilities or (Y) the business of Split-Off Subsidiary, (v) claims asserted (including claims for payment of taxes), whether before or after Closing, (A) against Split-Off Subsidiary or (B) pertaining to the Assigned Assets and Assigned Liabilities or to the business of Seller prior to the Closing, or (vi) any federal or state income tax payable by Seller or PrivateCo and attributable to the transactions contemplated by this Agreement or to the business of Seller prior to the Closing. For the purposes of this Agreement, an “Affiliate” is a person or entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, another specified person or entity.
12.2 Third Party Claims .
(a) Defense . If any claim or liability (a “ Third-Party Claim ”) should be asserted against any of the Seller Indemnified Parties (the “ Indemnitees ”) by a third party after the Closing for which Buyer has an indemnification obligation under the terms of Section 12.1, then the Indemnitee shall notify Buyer (collectively, the “ Indemnitor ”) within 20 days after the Third-Party Claim is asserted by a third party (said notification being referred to as a “ Claim Notice ”) and give the Indemnitor a reasonable opportunity to take part in any examination of the books and records of the Indemnitee relating to such Third-Party Claim and to assume the defense of such Third-Party Claim and, in connection therewith, to conduct any proceedings or negotiations relating thereto and necessary or appropriate to defend the Indemnitee and/or settle the Third-Party Claim. The expenses (including reasonable attorneys’ fees) of all negotiations, proceedings, contests, lawsuits or settlements with respect to any Third-Party Claim shall be borne by the Indemnitor. If the Indemnitor agrees to assume the defense of any Third-Party Claim in writing within 20 days after the Claim Notice of such Third-Party Claim has been delivered, through counsel reasonably satisfactory to Indemnitee, then the Indemnitor shall be entitled to control the conduct of such defense, and any decision to settle such Third-Party Claim, and shall be responsible for any expenses of the Indemnitee in connection with the defense of such Third-Party Claim so long as the Indemnitor continues such defense until the final resolution of such Third-Party Claim. The Indemnitor shall be responsible for paying all settlements made or judgments entered with respect to any Third-Party Claim the defense of which has been assumed by the Indemnitor. Except as provided in subsection (b) below, both the Indemnitor and the Indemnitee must approve any settlement of a Third-Party Claim. A failure by the Indemnitee to timely give the Claim Notice shall not excuse Indemnitor from any indemnification liability except only to the extent that the Indemnitor is materially and adversely prejudiced by such failure.
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(b) Failure to Defend . If the Indemnitor shall not agree to assume the defense of any Third-Party Claim in writing within 20 days after the Claim Notice of such Third-Party Claim has been delivered, or shall fail to continue such defense until the final resolution of such Third-Party Claim, then the Indemnitee may defend against such Third-Party Claim in such manner as it may deem appropriate and the Indemnitee may settle such Third-Party Claim, in its sole discretion, on such terms as it may deem appropriate; provided however, that the Indemnitor shall (i) promptly reimburse the Indemnitee for the amount of all settlement payments and expenses, legal and otherwise, incurred by the Indemnitee in connection with the defense or settlement of such Third-Party Claim, or (ii) shall pay, in advance of any settlement or proceedings and in installments as reasonably agreed to by the parties, such sums and expenses reasonably expected to be incurred in connection with the defense of the Third-Party Claim and any settlement thereof. If no settlement of such Third-Party Claim is made, then the Indemnitor shall satisfy any judgment rendered with respect to such Third-Party Claim before the Indemnitee is required to do so, and pay all expenses, legal or otherwise, incurred by the Indemnitee in the defense against such Third-Party Claim.
12.3 Non-Third-Party Claims . Upon discovery of any claim for which Buyer has an indemnification obligation under the terms of Section 12.1 which does not involve a claim by a third party against the Indemnitee, the Indemnitee shall give prompt notice to Buyer of such claim and, in any case, shall give Buyer such notice within 30 days of such discovery. A failure by Indemnitee to timely give the foregoing notice to Buyer shall not excuse Buyer from any indemnification liability except to the extent that Buyer is materially and adversely prejudiced by such failure.
12.4 Survival . Except as otherwise provided in this Section 12.4, all representations and warranties made by Buyer, Split-Off Subsidiary and Seller in connection with this Agreement shall survive the Closing. Anything in this Agreement to the contrary notwithstanding, the liability of all Indemnitors under this Article XII shall terminate on the third (3rd) anniversary of the Closing Date, except with respect to (a) liability for any item as to which, prior to the third (3rd) anniversary of the Closing Date, any Indemnitee shall have asserted a Claim in writing, which Claim shall identify its basis with reasonable specificity, in which case the liability for such Claim shall continue until it shall have been finally settled, decided or adjudicated, (b) liability of any party for Losses for which such party has an indemnification obligation, incurred as a result of such party’s breach of any covenant or agreement to be performed by such party after the Closing, (c) liability of Buyer for Losses incurred by a Seller Indemnified Party due to breaches of its representations and warranties in Article IV of this Agreement, and (d) liability of Buyer for Losses arising out of Third-Party Claims for which Buyer has an indemnification obligation, which liability shall survive until the statute of limitation applicable to any third party’s right to assert a Third-Party Claim bars assertion of such claim.
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XIII. | MISCELLANEOUS . |
13.1 Definitions . Capitalized terms used herein without definition have the meanings ascribed to them in the Merger Agreement.
13.2 Notices . All notices and communications required or permitted hereunder shall be in writing and deemed given when received by means of the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, or personal delivery, or overnight courier, as follows:
(a) If to Seller, addressed to:
Neurotrope, Inc.
Gottbetter & Partners, LLP
488 Madison Avenue, 12th Floor
New York, NY 10022
Attn: Ronald A. Warren
Telephone: (212) 400-6900
Facsimile:
With a copy to (which shall not constitute notice hereunder):
Gottbetter & Partners, LLP
488 Madison Avenue, 12th Floor
New York, NY 10022
Attention: Adam S. Gottbetter, Esq.
Telephone: 212-400-6900
Facsimile: 212-400-6901
(b) If to Buyer or Split-Off Subsidiary, addressed to:
Marissa Watson
1801 26th Street
Sacramento, CA 95816
Telephone:
Facsimile:
or to such other address as any party hereto shall specify pursuant to this Section 13.2 from time to time.
13.3 Exercise of Rights and Remedies . Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver.
13.4 Time . Time is of the essence with respect to this Agreement.
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13.5 Reformation and Severability . In case any provision of this Agreement shall be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby.
13.6 Further Acts and Assurances . From and after the Closing, Seller, Buyer and Split-Off Subsidiary agree that each will act in a manner supporting compliance, including compliance by its Affiliates, with all of its obligations under this Agreement and, from time to time, shall, at the request of another party hereto, and without further consideration, cause the execution and delivery of such other instruments of conveyance, transfer, assignment or assumption and take such other action or execute such other documents as such party may reasonably request in order more effectively to convey, transfer to and vest in Buyer, and to put Split-Off Subsidiary in possession of, all Assigned Assets and Assigned Liabilities, and to convey, transfer to and vest in Seller and Buyer, and to them in possession of, the Purchase Price Securities and the Shares (respectively), and, in the case of any contracts and rights that cannot be effectively transferred without the consent or approval of another person that is unobtainable, to use its best reasonable efforts to ensure that Split-Off Subsidiary receives the benefits thereof to the maximum extent permissible in accordance with applicable law or other applicable restrictions, and shall perform such other acts which may be reasonably necessary to effectuate the purposes of this Agreement.
13.7 Entire Agreement; Amendments . This Agreement contains the entire understanding of the parties relating to the subject matter contained herein. This Agreement cannot be amended or changed except through a written instrument signed by all of the parties hereto and by PrivateCo. No provisions of this Agreement or any rights hereunder may be waived by any party without the prior written consent of PrivateCo.
13.8 Assignment . No party may assign his, her or its rights or obligations hereunder, in whole or in part, without the prior written consent of the other parties.
13.9 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles of conflicts or choice of laws thereof.
13.10 Counterparts . This Agreement may be executed in one or more counterparts, with the same effect as if all parties had signed the same document. Each such counterpart shall be an original, but all such counterparts taken together shall constitute a single agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page was an original thereof.
13.11 Section Headings and Gender . The section headings used herein are inserted for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. All personal pronouns used in this Agreement shall include the other genders, whether used in the masculine, feminine or neuter and the singular shall include the plural, and vice versa, whenever and as often as may be appropriate.
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13.12 Third-Party Beneficiary . Each of Seller, Buyer and Split-Off Subsidiary acknowledges and agrees that this Agreement is entered into for the express benefit of PrivateCo, and that PrivateCo is relying hereon and on the consummation of the transactions contemplated by this Agreement in entering into and performing its obligations under the Merger Agreement, and that PrivateCo shall be in all respects entitled to the benefit hereof and to enforce this Agreement as a result of any breach hereof.
13.13 Specific Performance; Remedies . Each of the parties to this Agreement acknowledges and agrees that, if any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached, irreparable damages would be incurred by the other parties to this Agreement and by PrivateCo. Accordingly, the parties to this Agreement agree that any party or PrivateCo will be entitled to seek an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and its terms and provisions in any action instituted in any court of the United States or any state thereof having jurisdiction over the parties and the matter, subject to Section 13.9, in addition to any other remedy to which they may be entitled, at law or in equity. Except as expressly provided herein, the rights, obligations and remedies created by this Agreement are cumulative and are in addition to any other rights, obligations or remedies otherwise available at law or in equity, and nothing herein will be considered an election of remedies.
13.14 Submission to Jurisdiction; Process Agent; No Jury Trial .
(a) Each party to the Agreement hereby submits to the jurisdiction of any state or federal court sitting in the Borough of Manhattan, City and State of New York, in any action arising out of or relating to this Agreement, and agrees that all claims in respect of the action may be heard and determined in any such court. Each party to the Agreement also agrees not to bring any action arising out of or relating to this Agreement in any other court. Each party to the Agreement agrees that a final judgment in any action so brought will be conclusive and may be enforced by action on the judgment or in any other manner provided at law or in equity. Each party to the Agreement waives any defense of inconvenient forum to the maintenance of any action so brought and waives any bond, surety or other security that might be required of any other party with respect thereto.
(b) EACH PARTY TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RIGHTS TO JURY TRIAL OF ANY DISPUTE BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER AGREEMENTS RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR ANY DEALINGS AMONG THEM RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY. The scope of this waiver is intended to be all encompassing of any and all actions that may be filed in any court and that relate to the subject matter of the transactions, including contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each party to the Agreement hereby acknowledges that this waiver is a material inducement to enter into a business relationship and that they will continue to rely on the waiver in their related future dealings. Each party to the Agreement further represents and warrants that it has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED ORALLY OR IN WRITING, AND THE WAIVER WILL APPLY TO ANY AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING HERETO. In the event of commencement of any action, this Agreement may be filed as a written consent to trial by a court.
17 |
13.15 Construction . The parties hereto have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties hereto and no presumption or burden of proof will arise favoring or disfavoring any party because of the authorship of any provision of this Agreement. Any reference to any federal, state, local or foreign law will be deemed also to refer to law as amended and all rules and regulations promulgated thereunder, unless the context requires otherwise. The words “ include ,” “ includes ,” and “ including ” will be deemed to be followed by “ without limitation .” The words “ this Agreement ,” “ herein ,” “ hereof ,” “ hereby ,” “ hereunder ,” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The parties hereto intend that each representation, warranty and covenant contained herein will have independent significance. If any party hereto has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which that party has not breached will not detract from or mitigate the fact that such party is in breach of the first representation, warranty or covenant.
[Signature page follows this page.]
18 |
IN WITNESS WHEREOF, the parties hereto have duly executed this Split-Off Agreement as of the day and year first above written.
NEUROTROPE, INC.
By: /s/ Ronald A. Warren
Name: Ronald A. Warren
Title: President
BLUEFLASH COMMUNICATIONS CORP.
By: /s/ Marissa Watson
Name: Marissa Watson
Title: President
/s/ Marissa Watson
Marissa Watson
19 |
EXHIBIT A
Buyer | Purchase Price Security | Number* | Certificate No(s). |
Marissa Watson | Common Stock |
9,000,000 shares 11,178,000 shares |
1002 1003 |
* | Subject to adjustment for any stock splits or combinations effected after the date of this Agreement. |
20 |
Exhibit 10.2
General RELEASE agreement
This General Release Agreement (this “ Agreement ”), dated as of August 23, 2013, is entered into by and among Neurotrope, Inc. (successor by merger to BlueFlash Communications, Inc.), a Nevada corporation (“ Seller ”), BlueFlash Communications Corp., a Nevada corporation (“ Split-Off Subsidiary ”), and Marissa Watson (the “ Buyer ”). In consideration of the mutual benefits to be derived from this Agreement, the covenants and agreements set forth herein, and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the execution and delivery hereof, the parties hereto hereby agree as follows:
1. Split-Off Agreement . This Agreement is executed and delivered by Split-Off Subsidiary pursuant to the requirements of Section 8.3 of that certain Split-Off Agreement (the “ Split-Off Agreement ”) by and among Seller, Split-Off Subsidiary and Buyer, as a condition to the closing of the purchase and sale transaction contemplated thereby.
2. Release and Waiver by Split-Off Subsidiary . For and in consideration of the covenants and promises contained herein and in the Split-Off Agreement, the receipt and sufficiency of which are hereby acknowledged, Split-Off Subsidiary, on behalf of itself and its assigns, representatives and agents, if any, hereby covenants not to sue and fully, finally and forever completely releases Seller and Neurotrope BioScience, Inc., a Delaware corporation (“ PrivateCo ”), along with their respective present, future and former officers, directors, stockholders, members, employees, agents, attorneys and representatives (collectively, the “ Seller Released Parties ”), of and from any and all claims, actions, obligations, liabilities, demands and/or causes of action, of whatever kind or character, whether now known or unknown, which Split-Off Subsidiary has or might claim to have against the Seller Released Parties, or any of them, for any and all injuries, harm, damages (actual and punitive), costs, losses, expenses, attorneys’ fees and/or liability or other detriment, if any, whenever incurred or suffered by Split-Off Subsidiary arising from, relating to, or in any way connected with, any fact, event, transaction, action or omission that occurred or failed to occur at or prior to the closing of the Merger (as defined in the Split-Off Agreement).
3. Release and Waiver by Buyer . For and in consideration of the covenants and promises contained herein and in the Split-Off Agreement, the receipt and sufficiency of which are hereby acknowledged, Buyer on behalf of herself and her assigns, representatives and agents, if any, hereby covenants not to sue and fully, finally and forever completely releases the Seller Released Parties of and from any and all claims, actions, obligations, liabilities, demands and/or causes of action, of whatever kind or character, whether now known or unknown, which such Buyer has or might claim to have against the Seller Released Parties, or any of them, for any and all injuries, harm, damages (actual and punitive), costs, losses, expenses, attorneys’ fees and/or liability or other detriment, if any, whenever incurred or suffered by such Buyer arising from, relating to, or in any way connected with, any fact, event, transaction, action or omission that occurred or failed to occur at or prior to the closing of the Merger.
4. Additional Covenants and Agreements .
(a) Each of Split-Off Subsidiary and Buyer, on the one hand, and Seller, on the other hand, waives and releases the other from any claims that this Agreement was procured by fraud or signed under duress or coercion so as to make this Agreement not binding.
(b) Each of the parties hereto acknowledges and agrees that the releases set forth herein do not include any claims any other party hereto may have against such other party for such other party’s failure to comply with or breach of any provision in this Agreement or the Split-Off Agreement.
(c) Notwithstanding anything contained herein to the contrary, this Agreement shall not release or waive, or in any manner affect or void, any party’s rights and obligations under the Split-Off Agreement.
5. Modification . This Agreement cannot be modified orally and can only be modified through a written document signed by all parties and PrivateCo.
6. Severability . If any provision contained in this Agreement is determined to be void, illegal or unenforceable, in whole or in part, then the other provisions contained herein shall remain in full force and effect as if the provision that was determined to be void, illegal or unenforceable had not been contained herein.
7. Expenses . The parties hereto agree that each party shall pay its respective costs, including attorneys’ fees, if any, associated with this Agreement.
8. Further Acts and Assurances . Split-Off Subsidiary and Buyer each agrees that it will act in a manner supporting compliance, including compliance by its Affiliates, with all of its obligations under this Agreement and, from time to time, shall, at the request of Seller or PrivateCo, and without further consideration, cause the execution and delivery of such other instruments of release or waiver and take such other action or execute such other documents as such party may reasonably request in order to confirm or effect the releases, waivers and covenants contained herein, and, in the case of any claims, actions, obligations, liabilities, demands and/or causes of action that cannot be effectively released or waived without the consent or approval of other Persons that is unobtainable, to use its best reasonable efforts to ensure that the Seller Released Parties receive the benefits thereof to the maximum extent permissible in accordance with applicable law or other applicable restrictions, and shall perform such other acts which may be reasonably necessary to effectuate the purposes of this Agreement.
9. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles of conflicts or choice of laws thereof.
10. Third-Party Beneficiary . Each of Seller, Buyer and Split-Off Subsidiary acknowledges and agrees that this Agreement is entered into for the express benefit of PrivateCo, and that PrivateCo is relying hereon and on the consummation of the transactions contemplated by this Agreement in entering into and performing its obligations under the Merger Agreement (as defined in the Split-off Agreement), and that PrivateCo shall be in all respects entitled to the benefit hereof as an express third-party beneficiary and to enforce this Agreement as a result of any breach hereof.
11. Specific Performance; Remedies . Each of Seller, Buyer and Split-Off Subsidiary acknowledges and agrees that PrivateCo would be damaged irreparably if any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached. Accordingly, each of Seller, Buyer and Split-Off Subsidiary agrees that PrivateCo will be entitled to seek an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and its terms and provisions in any action instituted in any court of the United States or any state thereof having jurisdiction over the parties and the matter, subject to Section 9 , in addition to any other remedy to which they may be entitled, at law or in equity. Except as expressly provided herein, the rights, obligations and remedies created by this Agreement are cumulative and are in addition to any other rights, obligations or remedies otherwise available at law or in equity, and nothing herein will be considered an election of remedies.
12. Entire Agreement . This Agreement constitutes the entire understanding and agreement of Seller, Split-Off Subsidiary and Buyer and supersedes prior understandings and agreements, if any, among or between Seller, Split-Off Subsidiary and Buyer with respect to the subject matter of this Agreement, other than as specifically referenced herein. This Agreement does not, however, operate to supersede or extinguish any confidentiality, non-solicitation, non-disclosure or non-competition obligations owed by Split-Off Subsidiary to Seller under any prior agreement.
13. Definitions . Capitalized terms used herein without definition have the meanings ascribed to them in the Split-off Agreement.
[Signature page follows this page.]
IN WITNESS WHEREOF , the undersigned have executed this General Release Agreement as of the day and year first above written.
NEUROTROPE, INC. | ||
By: | /s/ Ronald A. Warren | |
Name: Ronald A. Warren | ||
Title: President | ||
BLUEFLASH COMMUNICATIONS CORP. | ||
By: | /s/ Marissa Watson | |
Name: Marissa Watson | ||
Title: President |
BUYER | |
/s/ Marissa Watson | |
Marissa Watson |
Exhibit 10.3
LOCK-UP AGREEMENT
This LOCK-UP AGREEMENT (this “Agreement”) is made as of August 23, 2013 by and between the undersigned person or entity (the “Restricted Holder”) and Neurotrope, Inc., a Nevada corporation formerly known as BlueFlash Communications, Inc. (the “Parent”). Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in the Merger Agreement (as defined herein).
WHEREAS, pursuant to the transactions contemplated under that certain Agreement and Plan of Merger and Reorganization, dated as of August 23, 2013 (the “Merger Agreement”), by and between the Parent, Neurotrope Acquisition Corp., a Delaware corporation (the “Acquisition Subsidiary”), and Neurotrope BioScience, Inc., a Delaware corporation (the “Company”), Acquisition Subsidiary will merge with and into the Company, with the result of such merger being that the Company will be the surviving entity and become a wholly-owned subsidiary of the Parent, with all the Company Common Stockholders exchanging their shares of Company Common Stock for shares of Parent Common Stock, and all of the Company Preferred Stockholders exchanging their shares of Company Series A Preferred Stock for shares of Parent Series A Preferred Stock, pursuant to the terms of the Merger Agreement (the “Merger”);
WHEREAS, the Restricted Holder will be an officer, director and/or key employee of the Parent immediately after the closing of the Merger and/or the Restricted Holder will be a beneficial owner of ten percent (10%) or more of the outstanding shares of Parent Common Stock, assuming conversion in full of all shares of the Parent Series A Preferred Stock, immediately after the closing of the Merger;
WHEREAS, the Merger Agreement provides that, among other things, all the shares of Parent Common Stock owned by the Restricted Holder immediately after the closing of the Merger (the “Restricted Securities”) shall be subject to certain restrictions on Disposition (as defined herein) during the period of twenty-four (24) months immediately following the closing date of the Merger (the “Restricted Period”), all as more fully set forth herein (for avoidance of doubt, Restricted Securities does not include any shares of Parent Series A Preferred Stock or shares of Parent Common Stock issuable upon conversion thereof).
NOW, THEREFORE, as an inducement to and in consideration of the Parent’s agreement to enter into the Merger Agreement and proceed with the Merger, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:
1. | Lock Up Period . |
(a) During the Restricted Period, the Restricted Holder will not, directly or indirectly: (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, make any short sale, lend or otherwise dispose of or transfer any Restricted Securities or any securities convertible into or exercisable or exchangeable for Restricted Securities, or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of any Restricted Securities (with the actions described in clause (i) or (ii) above being hereinafter referred to as a “Disposition”); provided , however , that if the Parent engages in an underwritten public offering of its equity or convertible securities prior to the end of the Restricted Period, the managing underwriter may waive the balance of the Restricted Period. The foregoing restrictions are expressly agreed to preclude the Restricted Holder from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of any of the Restricted Securities of the Restricted Holder during the Restricted Period, even if such securities would be disposed of by someone other than the Restricted Holder.
{Exhibit 10.3 - Form of Lock-up and No Short Selling Agreement.1 /} |
(b) In addition, during the period of twenty-four (24) months immediately following the closing date of the Merger, the Restricted Holder will not, directly or indirectly, effect or agree to effect any short sale (as defined in Rule 200 under Regulation SHO of the Securities Exchange Act of 1934 (the “Exchange Act”)), whether or not against the box, establish any “put equivalent position” (as defined in Rule 16a-1(h) under the Exchange Act) with respect to any shares of the Parent Common Stock, borrow or pre-borrow any shares of the Parent Common Stock, or grant any other right (including, without limitation, any put or call option) with respect to shares of the Parent Common Stock or with respect to any security that includes, is convertible into or exercisable for or derives any significant part of its value from shares of the Parent Common Stock, including the Parent Series A Preferred Stock, or otherwise seek to hedge the Restricted Holder’s position in the Parent Common Stock.
(c) Notwithstanding anything contained herein to the contrary, the Restricted Holder shall be permitted to engage in any Disposition (i) where the other party to such Disposition is another Restricted Holder, (ii) where such Disposition is in connection with estate planning purposes, including, without limitation to an inter-vivos trust, (iii) upon the written approval of the lead underwriter in any underwritten public offering of Parent’s securities, or (iv) where such Disposition is to an affiliate of such Restricted Holder (including entities wholly owned by such Restricted Holder or one or more trusts where such Restricted Holder is the grantor of such trust(s)) as long as such affiliate executes a copy of this Agreement.
(d) Notwithstanding anything contained herein to the contrary, the restrictions contained in this Agreement shall not apply to any shares of Parent Common Stock acquired by Restricted Holder in the open market.
2. | Legends; Stop Transfer Instructions . |
(a) In addition to any legends to reflect applicable transfer restrictions under federal or state securities laws, each stock certificate representing Restricted Securities shall be stamped or otherwise imprinted with the following legend:
“THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF A LOCK-UP AGREEMENT, DATED AS OF AUGUST 23, 2013, BETWEEN THE HOLDER HEREOF AND THE ISSUER AND MAY ONLY BE SOLD OR TRANSFERRED IN ACCORDANCE WITH THE TERMS THEREOF.”
{Exhibit 10.3 - Form of Lock-up and No Short Selling Agreement.1 /} | 2 |
(b) The Restricted Holder hereby agrees and consents to the entry of stop transfer instructions with the Parent’s transfer agent and registrar against the transfer of the Restricted Securities or securities convertible into or exchangeable for Restricted Securities held by the Restricted Holder except in compliance with this Agreement.
3. | Miscellaneous . |
(a) Specific Performance . The Restricted Holder agrees that in the event of any breach or threatened breach by the Restricted Holder of any covenant, obligation or other provision contained in this Agreement, then the Parent shall be entitled (in addition to any other remedy that may be available to the Parent) to: (i) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision; and (ii) an injunction restraining such breach or threatened breach. The Restricted Holder further agrees that neither the Parent nor any other person or entity shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 3, and the Restricted Holder irrevocably waives any right that he, she, or it may have to require the obtaining, furnishing or posting of any such bond or similar instrument.
(b) Other Agreements . Nothing in this Agreement shall limit any of the rights or remedies of the Parent under the Merger Agreement, or any of the rights or remedies of the Parent or any of the obligations of the Restricted Holder under any other agreement between the Restricted Holder and the Parent or any certificate or instrument executed by the Restricted Holder in favor of the Parent; and nothing in the Merger Agreement or in any other agreement, certificate or instrument shall limit any of the rights or remedies of the Parent or any of the obligations of the Restricted Holder under this Agreement.
(c) Notices . All notices, requests, demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly delivered four business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next business day delivery via a reputable nationwide overnight courier service, in each case to the intended recipient as set forth below:
If to the Parent:
Neurotrope, Inc. 10732 Hawk’s Vista Street Plantation, FL 33324
Attn: Dr. Jim New, CEO Facsimile: (__) ___________ |
Copy to (which copy shall not constitute notice hereunder):
Gottbetter & Partners, LLP 488 Madison Avenue, 12 th Floor New York, NY 10022 Attention: Adam S. Gottbetter, Esq. Telephone: (212) 400-6900 Facsimile: (212) 400-6901
|
{Exhibit 10.3 - Form of Lock-up and No Short Selling Agreement.1 /} | 3 |
If to the Restricted Holder:
To the address set forth on the signature page hereto.
|
Copy to (which copy shall not constitute notice hereunder):
____________________________ ____________________________ ____________________________ ____________________________ Attn: ________________________ Facsimile: ____________________ |
Any Party may give any notice, request, demand, claim or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the Party for whom it is intended. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.
(d) Severability . Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties hereto agree that the court making such determination shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the parties hereto agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term.
(e) Applicable Law; Jurisdiction . THIS AGREEMENT IS MADE UNDER, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. In any action between or among any of the parties arising out of this Agreement, (i) each of the parties irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the state and federal courts having jurisdiction over New York County, New York; (ii) if any such action is commenced in a state court, then, subject to applicable law, no party shall object to the removal of such action to any federal court having jurisdiction over New York County, New York; (iii) each of the parties irrevocably waives the right to trial by jury; and (iv) each of the parties irrevocably consents to service of process by first class certified mail, return receipt requested, postage prepared, to the address at which such party is to receive notice in accordance with this Agreement.
{Exhibit 10.3 - Form of Lock-up and No Short Selling Agreement.1 /} | 4 |
(f) Waiver; Termination . No failure on the part of the Parent to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of the Parent in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. The Parent shall not be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of the Parent; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given. If the Merger Agreement is terminated, this Agreement shall thereupon terminate.
(g) Captions . The captions contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.
(h) Further Assurances . The Restricted Holder hereby represents and warrants that the Restricted Holder has full power and authority to enter into this Agreement and that this Agreement constitutes the legal, valid and binding obligation of the Restricted Holder, enforceable in accordance with its terms. The Restricted Holder shall execute and/or cause to be delivered to the Parent such instruments and other documents and shall take such other actions as the Parent may reasonably request to effectuate the intent and purposes of this Agreement.
(i) Entire Agreement . This Agreement and the Merger Agreement collectively set forth the entire understanding of the Parent and the Restricted Holder relating to the subject matter hereof and supersedes all other prior agreements and understandings between the Parent and the Restricted Holder relating to the subject matter hereof.
(j) Non-Exclusivity . The rights and remedies of the Parent hereunder are not exclusive of or limited by any other rights or remedies which the Parent may have, whether at law, in equity, by contract or otherwise, all of which shall be cumulative (and not alternative).
(k) Amendments . This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered on behalf of the Parent and the Restricted Holder.
(l) Assignment . This Agreement and all obligations of the Restricted Holder hereunder are personal to the Restricted Holder and may not be transferred or delegated by the Restricted Holder at any time. The Parent may freely assign any or all of its rights under this Agreement, in whole or in part, to any successor entity without obtaining the consent or approval of the Restricted Holder.
(m) Binding Nature . Subject to Section 3(l) above, this Agreement will inure to the benefit of the Parent and its successors and assigns and will be binding upon the Restricted Holder and the Restricted Holder’s representatives, executors, administrators, estate, heirs, successors and assigns.
{Exhibit 10.3 - Form of Lock-up and No Short Selling Agreement.1 /} | 5 |
(n) Survival . Each of the representations, warranties, covenants and obligations contained in this Agreement shall survive the consummation of the Merger.
(o) Counterparts . This Agreement may be executed in separate counterparts, each of which shall be deemed an original and both of which shall constitute one and the same instrument.
[signature page follows ]
{Exhibit 10.3 - Form of Lock-up and No Short Selling Agreement.1 /} | 6 |
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first set forth above.
NEUROTROPE, INC. | ||
By: | ||
Name: Ronald A. Warren | ||
Title: President | ||
RESTRICTED HOLDER: | |
Name | |
Address: | |
{Exhibit 10.3 - Form of Lock-up and No Short Selling Agreement.1 /} |
Exhibit 10.4
NEUROTROPE BIOSCIENCE, INC.
SUBSCRIPTION BOOKLET FOR
SERIES A PREFERRED STOCK
Prospective Investor:
_________________________________________________
_________________________________________________
Contact Person: ____________________________________
Telephone No: _____________________________________
Fax No:___________________________________________
State/Country of Domicile:_____________________________
Tax ID or Social Security Number: _______________________
Subscription Amount (USD): $__________________________
neurotrope BIOSCIENCE, INC.
SUBSCRIPTION AGREEMENT AND
INVESTOR QUESTIONNAIRE
THE OFFERING OF SECURITIES DESCRIBED HEREIN HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), OR UNDER ANY SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. THIS OFFERING IS MADE PURSUANT TO RULE 506 OF REGULATION D UNDER SECTION 4(a)(2) OF THE SECURITIES ACT, WHICH EXEMPTS FROM SUCH REGISTRATION TRANSACTIONS NOT INVOLVING A PUBLIC OFFERING. FOR THIS REASON, THESE SECURITIES WILL BE SOLD ONLY TO INVESTORS WHO MEET CERTAIN MINIMUM SUITABILITY QUALIFICATIONS DESCRIBED HEREIN.
A SUBSCRIBER SHOULD BE PREPARED TO BEAR THE ECONOMIC RISK OF AN INVESTMENT FOR AN INDEFINITE PERIOD OF TIME BECAUSE THE SHARES OF SERIES A PREFERRED STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE LAWS OF ANY OTHER JURISDICTION, AND, THEREFORE, CANNOT BE SOLD UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. EXCEPT AS SPECIFICALLY DESCRIBED IN THE MEMORANDUM (AS HEREINAFTER DEFINED), THERE IS NO OBLIGATION OF THE ISSUER TO REGISTER THE SHARES OF SERIES A PREFERRED STOCK (OR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE SERIES A PREFERRED STOCK) UNDER THE SECURITIES ACT OR THE LAWS OF ANY OTHER JURISDICTION.
2 |
EDI Financial, Inc.
12221 Merit Drive, Suite 1020
Dallas, Texas 75251
Attn: James Hintz
Ladies and Gentlemen:
This Subscription Agreement and Investor Questionnaire (this “ Agreement ”) is entered into by and among Neurotrope BioScience, Inc. a Delaware corporation (the “ Company ”), EDI Financial, Inc., a Texas corporation and a registered broker-dealer (the “ Placement Agent ”), and the investor identified on Schedule A hereto (the “ Investor ”) in connection with the Investor’s purchase of shares of Series A Preferred Stock, $0.01 par value per share of the Company (the “ Shares ”) at a purchase price of $1.00 per share. Capitalized terms not defined herein are used as defined in the Confidential Private Placement Memorandum dated June 25, 2013 (together with all exhibits and appendices and amendments and supplements thereto, the “ Memorandum ”), which has been delivered to the Investor.
The Company is currently negotiating the terms of a merger (the “ Merger ”) with a newly formed subsidiary of a Nevada corporation that is filing reports with the Securities and Exchange Commission (the “ SEC ”) and whose common stock is approved for quotation on the OTC Markets (“ PubCo ”). The Merger is contemplated to occur immediately following a closing of the Offering in which the Company sells an aggregate of at least $6,863,375 of Shares. If the Merger is consummated, the Company would operate as a wholly-owned subsidiary of PubCo, the Shares sold in this Offering and all other outstanding shares of Series A Preferred Stock of the Company would be cancelled and exchanged on a one-for-one basis for shares of Series A Preferred Stock of PubCo with substantially the same terms as the Company’s Series A Preferred Stock, and the outstanding shares of common stock of the Company would be cancelled and exchanged on a one-for-one basis for shares of common stock of PubCo. The Investor and each other holder of shares of Series A Preferred Stock of PubCo issued in the Merger will be required to enter into a stockholders agreement with PubCo, in substantially the form provided to the Investor, that will be effective upon the consummation of the Merger (the “ PubCo Preferred Stockholders Agreement ”). See Section 5(z) below.
References in this Agreement to the term “Shares” shall mean, as appropriate, the shares of Series A Preferred Stock of the Company subscribed for hereby, the shares of common stock of the Company issuable upon conversion of such Series A Preferred Stock of the Company, the shares of Series A Preferred Stock of PubCo issuable in the Merger in exchange for the shares of Series A Preferred Stock of the Company subscribed for hereby and/or the shares of common stock of PubCo issuable upon conversion of such Series A Preferred Stock of PubCo.
The Investor hereby subscribes for Shares, and the Company, the Placement Agent and the Investor hereby agree as follows:
1. Subscription. Subject to the terms and conditions set forth herein and in the Memorandum, the Investor hereby irrevocably subscribes for and agrees to purchase _______ Shares for an aggregate purchase price of __________________________________________________________ dollars ($____________). (All currency references herein are to United States dollars.) All payments shall be made by wire transfer in immediately available funds pursuant to wire transfer instructions to be provided by the Placement Agent prior to the due date of such payments.
3 |
2. Adoption. If the Investor is accepted as a subscriber pursuant to Section 3 below, then the Investor hereby agrees to be bound by all the terms and provisions of the PubCo Preferred Stockholders Agreement and to perform all obligations therein imposed upon the Investor .
3. Acceptance of Subscription; Delivery of Documents. The Investor understands and agrees that this subscription is made subject to the following terms and conditions:
(a) The Placement Agent reserves the right to review the suitability of any person desiring to purchase the Shares and, in connection with such review, to waive such suitability standards as to such person as the Placement Agent deems appropriate under applicable law;
(b) The Placement Agent and/or the Company shall have the right, in each of their sole and absolute discretion, to reject this subscription, in whole or in part;
(c) The Placement Agent and/or the Company shall have no obligation to accept subscriptions in the order received;
(d) The Shares issued to the Investor on account of this subscription shall be created only in the name of the Investor.
(e) The Merger is expected to occur immediately following the closing of the Investor’s purchase of the Shares (the “ Closing ”). Upon the occurrence of the Merger, the Shares shall be extinguished and exchanged on a one-for-one basis for shares of Series A Preferred Stock of PubCo, and the Investor shall no longer have any rights with respect to the Shares, other than the right to receive one share of Series A Preferred Stock of PubCo in exchange for each Share purchased by the Investor in the Offering.
4. The Company’s Conditions to Closing. The Company’s obligations hereunder are subject to acceptance by the Company of the Investor’s subscription and to the fulfillment, prior to or at the time of closing, of each of the following conditions:
(a) The Company shall have accepted subscriptions for a minimum of $6,863,375, in the aggregate, of Shares in the Offering;
(b) The representations and warranties of the Investor contained in this Agreement shall be true and correct at the time of closing; and
(b) All proceedings in connection with the transactions contemplated hereby and all documents and instruments incident to such transactions shall be satisfactory in substance and form to the Placement Agent, the Company and their respective counsel (“ Counsel ”), and the Placement Agent, the Company or Counsel shall have received all such counterpart originals or certified or other copies of such documents as the Placement Agent may request, including, without limitation, this Agreement and all supporting documentation required hereby, and the PubCo Preferred Stockholders Agreement .
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5. Investor’s Representations. In connection with the Investor’s purchase of the Shares, the Investor makes the following representations and warranties on which the Placement Agent, the Company and Counsel are entitled to rely:
(a) The Shares will be held under the following type of ownership [Please check the applicable box] :
¨ | Individual |
¨ | Community Property |
¨ | Trust [Please answer clause (b) below] |
¨ | Partnership |
¨ | Corporation |
¨ | Limited Liability Company |
¨ | Other: _________________ |
(b) [ Trust Investors Only ]
The Investor is [ Please check the appropriate response ]:
¨ | An irrevocable trust. |
¨ | A living trust or other revocable trust with ____ grantor(s). |
(c) The Investor has received and read and fully understands the Memorandum, including the risk factors described or discussed therein, the PubCo Preferred Stockholders Agreement and this Agreement, in each case (as applicable) along with all schedules and/or exhibits thereto, and has based its decision to purchase the Shares solely on the information contained therein, and is not relying on any other document, information, or oral representation. The Investor was not induced to invest by any form of general solicitation or general advertising, including, but not limited to, the following: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or the Internet or broadcast over the news or radio; and (ii) any seminar or meeting whose attendees were invited by any general solicitation or general advertising.
(d) No representations or warranties have been made to the Investor by the Company, the Placement Agent or any agent of said persons, other than as set forth in the Memorandum and this Agreement. Certain statements made to the Investor by the Company and/or the Placement Agent or their respective affiliates from time to time (the “ Investor Presentations ”) constitute forward-looking statements. When used therein, the words “project,” “anticipate,” “believe,” “estimate,” “expect,” and similar expressions are generally intended to identify forward-looking statements. Such forward-looking statements, including the intended actions and performance objectives of the relevant party referenced therein, involve known and unknown risks, uncertainties, and other important factors that could cause the actual results, performance, or achievements of such party to differ materially from any future results, performance, or achievements expressed or implied by such forward-looking statements. All forward-looking statements in the Investor Presentations speak only as of the date thereof. The Placement Agent, the Company and their respective affiliates expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained therein to reflect any change in its expectation with regard thereto or any change in events, conditions, or circumstances on which any such statement is based. Furthermore, nothing contained in the Investor Presentations are, or should be relied upon as, a promise or representation as to the future performance of any partnership sponsored by the Company and/or the Placement Agent.
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(e) The Investor is acquiring the Shares solely for the Investor’s own account and not directly or indirectly for the account of any other person whatsoever (or, if the Investor is acquiring the Shares as a trustee, solely for the account of the trust or trust account named below) for investment and not with a view to, or for sale in connection with, any distribution of the Shares. The Investor does not have any contract, undertaking or arrangement with any person to sell, transfer or grant a participation to any person with respect to the Shares.
(f) The Investor has such knowledge and experience in financial and business matters that the Investor is capable of evaluating the merits and risks of the investment evidenced by the Investor’s purchase of the Shares, and the Investor is able to bear the economic risk of such investment for an indefinite period of time. Investor can afford a complete loss of such investment and has no need for liquidity in such investment.
(g) The Investor has had access to such information concerning the Company as the Investor deems necessary to enable the Investor to make an informed decision concerning the purchase of the Shares. The Investor has had access to management of the Company and the opportunity to ask questions of, and receive answers satisfactory to the Investor from, such management concerning the offering of the Shares and the Company generally. The Investor has obtained all additional information requested by the Investor to verify the accuracy of all information furnished in connection with the offering of the Shares.
(h) The Investor understands that the Offering of the Shares has not been registered under the United States Securities Act of 1933, as amended (the “ Securities Act ”) or any securities law of any state of the United States or any other jurisdiction, in each case in reliance on an exemption for private offerings, and that the Company and the Placement Agent are relying upon the truth and accuracy of, and Investor's compliance with, Investor's representations, warranties, agreements, covenants, acknowledgments and understandings set forth in this Agreement and on Schedule A hereto in order to determine the availability of such exemptions and the eligibility of Investor to purchase the Shares. The Investor understands that neither the U.S. Securities and Exchange Commission (the " SEC ") nor any state securities regulatory authority has approved or disapproved of the Shares, passed upon or endorsed the merits of the Offering or the accuracy or adequacy of the Memorandum, or made any finding or determination as to the fairness or suitability of the Shares for investment. The Investor acknowledges that the Investor is purchasing the Shares without being furnished any offering literature or prospectus other than the Memorandum, the PubCo Preferred Stockholders Agreement and this Agreement.
(i) The Investor is aware that (i) the Investor must bear the economic risk of investment in the Shares for an indefinite period of time, possibly until final winding up of the Company, (ii) because the Shares have not been registered under the Securities Act, there is currently no public market for the Shares and a public market for the Shares may never develop, therefor, the Investor may not be able to avail itself of the provisions of Rule 144 under the Securities Act with respect to the Shares, (iii) if the Company completes the Merger, Rule 144 generally would not be available to holders of PubCo’s securities until at least one year has elapsed from the date that PubCo files with the SEC all information required to be disclosed relating to the closing of the Merger and regarding the Company and its business, management, financial statements and other information and (iv) the Shares cannot be sold unless subsequently registered for resale under the Securities Act or an exemption from such registration is available. The Investor understands that the Company is under no obligation, and does not intend, to effect any such registration at any time except as specifically described in the Memorandum. The Investor also understands that sales or transfers of the Shares are further restricted by the provisions of the PubCo Preferred Stockholders Agreement and, as applicable, securities laws of other jurisdictions and the states of the United States.
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(j) The Shares will not be transferred or disposed of except in accordance with the terms of this Agreement and the PubCo Preferred Stockholders Agreement and will not be sold or transferred without registration under the Securities Act, or pursuant to an applicable exemption therefrom.
(k) The Investor’s full legal name, true and correct address of residence (for individuals) or principal place of business (for entities), phone number, fax number, electronic mail address, United States taxpayer identification number (each, if applicable) and other contact information are provided on Schedule A hereto. If Investor is an entity, (i) it is duly formed and is validly existing and in good standing under the laws of its jurisdiction of formation and (ii) the individual executing this Agreement on behalf of Investor has full power and authority to execute and deliver this Agreement and the PubCo Preferred Stockholders Agreement in such capacity on behalf of Investor.
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(l) Accredited Investor Representation . The Investor makes one of the following representations regarding the Investor’s status as an “Accredited Investor” (within the meaning of Rule 501 under the Securities Act), and has checked the applicable subparagraph:
¨ | (i) | If an individual, the Investor has a net worth, either individually or upon a joint basis with the Investor’s spouse, of at least $1,000,000 (within the meaning of such terms as used in the definition of “Accredited Investor” contained in Rule 501 under the Securities Act), or has had an individual income in excess of $200,000 for each of the two most recent years, or a joint income with the Investor’s spouse in excess of $300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year. For purposes of the foregoing net worth calculation, the Investor has excluded (i) the estimated fair market value of his/her primary residence as an asset in calculating the Investor’s net worth, and (ii) the amount of any mortgage or other indebtedness secured by the Investor’s primary residence as a liability, except to the extent that such indebtedness exceeds the estimated fair market value of the Investor’s primary residence and except that the amount of any increase in the indebtedness secured by the Investor’s primary residence (other than as a result of his/her acquisition of the primary residence) during the 60 days before the time of the Investor’s purchase of Shares has been deducted from the value of assets in the calculation of the Investor’s net worth. | |
¨ | (ii) | The Investor is an irrevocable trust with total assets in excess of $5,000,000 whose purchase is directed by a person with such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of the prospective investment. | |
¨ | (iii) | The Investor is a bank, insurance company, investment company registered under the Investment Company Act of 1940, as amended (the “ Companies Act ”), a broker or dealer registered pursuant to Section 15 of the United States Securities Exchange Act of 1934, as amended, a business development company, a Small Business Investment Company licensed by the United States Small Business Administration, a plan with total assets in excess of $5,000,000 established and maintained by a state for the benefit of its employees, or a private business development company as defined in Section 202(a)(22) of the United States Investment Advisers Act of 1940, as amended. | |
¨ | (iv) | The Investor is an employee benefit plan and either all investment decisions are made by a bank, savings and loan association, insurance company, or registered investment advisor, or the Investor has total assets in excess of $5,000,000 or , if such plan is a self-directed plan, investment decisions are made solely by persons who are accredited investors. | |
¨ | (v) | The Investor is a corporation, partnership, limited liability company or business trust, not formed for the purpose of acquiring the Shares, or an organization described in section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “ Code ”), in each case with total assets in excess of $5,000,000. |
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(m) [Intentionally omitted.]
(n) [Intentionally omitted.]
(o) [Intentionally omitted.]
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(p) [ Entity Investors Only ].
Please check the appropriate true or false response to each of the following statements:
If a “True” box is checked for any of the above statements, the Investor or the Investor’s counsel should contact Nanette C. Heide at (212) 692-1003, immediately.
The Investor understands that the Company, the Placement Agent and Counsel are relying upon the Investor’s response within this subparagraph (p) in determining fiduciary responsibilities under ERISA and related rules and regulations. THE INVESTOR AGREES TO NOTIFY THE COMPANY IMMEDIATELY IF ITS RESPONSE ABOVE BECOMES INACCURATE AT ANY TIME, INCLUDING ANY TIME FOLLOWING THE CLOSING.
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(q) [ Entity Investors Only ]
Please check the box next to each statement that is true and, if applicable, provide the appropriate information in each such statement:
§ | Freedom of Information Act and Related Statutes |
¨ | The Investor is subject to Section 552(a) of Title 5, United States Code (commonly known as the “Freedom of Information Act” ) or state freedom of information statutes or other similar federal, state, county or municipal public disclosure statutes or regulations, whether foreign or domestic (collectively, “ FOIA ”) , in each of the following jurisdictions. ( If a similar statute is applicable, please specify the applicable statute along with the applicable jurisdiction, to the extent known) : | |
¨ | One or more of the Investor’s beneficial owners is subject (or is an agent, nominee, fiduciary, custodian or trustee of an entity which is subject) to FOIA statutes or regulations in each of the following listed jurisdictions. ( Please specify the applicable statute along with the applicable jurisdiction, to the extent known) : | |
¨ | To the best of the Investor’s knowledge, n either the Investor nor any of the Investor’s beneficial owners are subject to FOIA statutes or regulations, nor are any of them agents, nominees, fiduciaries, custodians or trustees of an entity which is itself subject to FOIA statutes or regulations. |
§ | Obligations to Make Disclosures to Trading Exchanges |
¨ | The Investor is subject, by regulation, contract or otherwise, to disclose information provided to the Investor by the Company, the Placement Agent or any affiliate of the Placement Agent, or information that relates to the Company (including information regarding the Company’s beneficial owners or investments) to a trading exchange or other market where interests in the Investor are sold or traded, whether foreign or domestic. ( State the name of the trading exchange or other market) : | |
¨ | One or more of the Investor’s beneficial owners is subject (or is an agent, nominee, fiduciary, custodian or trustee of an entity which is subject) to an obligation to make disclosures to trading exchanges or other markets as set forth in the paragraph immediately above. ( State the name of the trading exchange or other market, to the extent known) : | |
¨ | To the best of the Investor’s knowledge, n either the Investor nor any of the Investor’s beneficial owners are subject to any obligation, by regulation, contract or otherwise, to make disclosures to trading exchanges or other markets . |
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§ | Affiliations with Public or Government Agencies |
¨ | The Investor is a public agency, department, office or pension plan. (Please specify type of entity and applicable jurisdiction) : | |
¨ | One or more of the Investor’s beneficial owners is a public agency, department, office or pension plan, or is an agent, nominee, fiduciary, custodian or trustee of a public agency, department, office or pension plan. ( If known, please specify type of owner and applicable states below) : | |
¨ | To the be s t of the Investor’s knowledge, none of the Investor’s beneficial owners are, or are agents, nominees, fiduciaries, custodians or trustees of, public agencies, departments, offices or pension plans. |
§ | Involvement in Government Office by Investor’s Employees, Agents or Affiliates |
¨ | The Investor is, by virtue of the current or proposed involvement in government office by any employee, agent or affiliate of the Investor, required to, or will likely be required to, disclose information provided to the Investor by the Company, the Placement Agent or any affiliate of the Placement Agent, or information that relates to the Company (including information regarding the Company’s beneficial owners or investments) to a governmental body, agency or committee (including, without limitation, any disclosures required in accordance with the Ethics in Government Act of 1978, as amended, and any rules and regulations of any executive, legislative or judiciary organization), whether foreign or domestic. |
¨ | To the be s t of the Investor’s knowledge, the Investor is not required to, and is not likely to be required to, make disclosures to any governmental body, agency or committee as set forth above. |
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(r) [Individual Investors Only]
Please check the box next to each statement that is true and, if applicable, provide the appropriate information in each such statement:
¨ | The Investor is, by virtue of the Investor’s current or proposed involvement in government office, required to, or will likely be required to, disclose information provided to the Investor by the Company, the Placement Agent or any affiliate of the Placement Agent, or information that relates to the Company (including information regarding the Company’s beneficial owners or investments) to a governmental body, agency or committee (including, without limitation, any disclosures required in accordance with the Ethics in Government Act of 1978, as amended, and any rules and regulations of any executive, legislative or judiciary organization), whether foreign or domestic. |
¨ | To the best of the Investor’s knowledge, the Investor is not required to, and is not likely to be required to, make disclosures to any governmental body, agency or committee as set forth above. |
(s) The execution and delivery of this Agreement, the consummation of the transactions contemplated thereby and the performance of the obligations thereunder will not conflict with or result in any violation of or default under any provision of any other agreement or instrument to which the Investor is a party or any license, permit, franchise, judgment, order, writ or decree, or any statute, rule or regulation, applicable to the Investor.
(t) No suit, action, claim, investigation or other proceeding is pending or, to the best of the Investor’s knowledge, is threatened against the Investor which questions the validity of this Agreement or any action taken or to be taken pursuant to this Agreement.
(u) The Investor has full power and authority to make the representations referred to in this Agreement, to purchase the Shares pursuant to this Agreement and to deliver this Agreement. This Agreement creates valid and binding obligations of the Investor and is enforceable against the Investor in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws affecting creditors’ rights, and subject to general equity principles and to limitations on availability of equitable relief, including specific performance.
(v) The Investor acknowledges that the Investor understands the meaning and legal consequences of the representations and warranties made by the Investor herein. Such representations and warranties are complete and accurate, shall be complete and accurate at the time of Closing and may be relied upon by the Company, the Placement Agent and Counsel. Said representations and warranties shall survive delivery of this Agreement. If in any respect such information shall not be complete and accurate prior to the time of closing, the Investor shall give immediate written notice of such incomplete or inaccurate information to the Placement Agent specifying which representations or warranties are not complete and accurate and the reasons therefor.
(w) The Investor hereby agrees to indemnify and hold harmless the Company, the Placement Agent, each Counsel and each member, manager, director, officer, advisor or employee thereof from and against any and all loss, damage or liability due to or arising out of any inaccuracy or breach of any such representation or warranty of the Investor.
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(x) The Investor confirms that the Investor has been advised to consult with the Investor’s attorney regarding legal matters concerning the Company and to consult with independent tax advisers regarding the tax consequences of investing in the Company. The Investor acknowledges that he, she or it understands that any anticipated United States federal or state income tax benefits may not be available and, further, may be adversely affected through adoption of new laws or regulations or amendments to existing laws or regulations. The Investor acknowledges and agrees that the Company is providing no warranty or assurance regarding the ultimate availability of any tax benefits to the Investor by reason of the Investor’s investment in the Company.
(y) The Investor acknowledges and agrees that other stockholders may receive information relating to the Investor as permitted by the PubCo Preferred Stockholders Agreement or as required by applicable laws and may share such information with their advisors and other parties.
(z) Reverse Merger:
(i) The Investor acknowledges and agrees to the following: The Company intends to enter into the Merger and in anticipation of the Merger, PubCo may conduct a forward or reverse stock split (the “ Stock Split” ); and simultaneously with or prior to the closing of the Merger, PubCo may transfer (a) all of its pre-Merger operating assets and liabilities to a newly formed wholly owned subsidiary (the “ Split-Off Subsidiary ”), and (b) all of the outstanding shares of capital stock of the Split-Off Subsidiary to the holder of a majority of PubCo’s pre-Merger capital stock, in exchange for the surrender and cancellation of shares of the PubCo capital stock held by such person (the “ Split-Off ”); and, if the Merger is consummated, following the Merger the Company would operate as a wholly-owned subsidiary of PubCo and pursuant to the Merger the Shares sold in this Offering will automatically be cancelled and converted on a one-for-one basis into shares of Series A Preferred Stock of PubCo with substantially the same terms as the Shares .
(ii) The Company’s acceptance of subscriptions for Shares of at least $6,863,375 is a condition to the consummation of the Merger. In addition, the Company’s consummation of the proposed Merger is a condition to the closing of this Offering. If either the minimum amount of this Offering is not raised or the Company does not consummate the proposed Merger with PubCo for any reason, then each prospective Investor’s funds will be promptly returned to him, her or it without interest, penalty or deduction.
(iii) Investor understands that prior to the Merger, PubCo will be a “shell company” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and that upon the filing of a Current Report on Form 8-K reporting the consummation of the Merger and otherwise containing Form 10 information discussed below, PubCo will cease to be a shell company. Pursuant to Rule 144(i), securities issued by a current or former shell company (such as the shares of Series A Preferred Stock of PubCo that will be issued in the Merger in exchange for the Shares) that otherwise meet the holding period and other requirements of Rule 144 nevertheless cannot be sold in reliance on Rule 144 until one year after post-Merger PubCo (a) is no longer a shell company; and (b) has filed current “Form 10 information” (as defined in Rule 144(i)) with the SEC reflecting that it is no longer a shell company, and provided that at the time of a proposed sale pursuant to Rule 144, post-Merger PubCo is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act and has filed all reports and other materials required to be filed by section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports. As a result, the restrictive legends on certificates evidencing the shares of Series A Preferred Stock of PubCo that will be issued in the Merger in exchange for the Shares or any securities into which such shares may be convertible cannot be removed except in accordance with the requirements of Rule 144 (including after the one-year period described above has elapsed) or pursuant to an effective registration statement.
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6. Anti-Money Laundering Regulations.
The Investor hereby acknowledges that the Company’s intent is to comply with all applicable United States federal, state and local laws designed to combat money laundering and similar illegal activities. In furtherance of such efforts, the Investor hereby represents, covenants, and agrees that, to the best of the Investor’s knowledge based on reasonable investigation:
(a) none of the Investor’s past or future capital contributions to the Company (whether payable in cash or otherwise) have been or shall be derived from money laundering or similar activities deemed illegal under federal laws and regulations;
(b) to the extent within the Investor’s control, none of the Investor’s past or future capital contributions to the Company will cause the Company, the Placement Agent or any of their personnel to be in violation of United States federal anti-money laundering laws, including without limitation the United States Bank Secrecy Act (31 U.S.C. 5311 et seq.), the United States Money Laundering Control Act of 1986 or the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, and any regulations promulgated thereunder;
(c) when requested by the Company, the Investor will provide any and all additional information deemed necessary to ensure compliance with all applicable laws and regulations concerning money laundering and similar activities;
(d) Except as otherwise disclosed in writing to the Company, the Investor represents and warrants neither it, nor any person or entity controlled by, controlling or under common control with Investor, any of Investor’s beneficial owners, any person for whom the Investor is acting as agent or nominee in connection with this investment, nor in the case of an Investor which is an entity, any Related Person 1 is:
(1) a Prohibited Investor 2 ;
(2) a Senior Foreign Political Figure 3 , any member of a Senior Foreign Political Figure’s “immediate family,” which includes the figure’s parents, siblings, spouse, children and in-laws, or any Close Associate of a Senior Foreign Political Figure 4 , or a person or entity resident in, or organized or chartered under, the laws of a Non-Cooperative Jurisdiction 5 ;
1 With respect to any entity, any interest holder, director, senior officer, trustee, beneficiary or grantor of such entity; provided that in the case of an entity that is a publicly traded company or a tax qualified pension or retirement plan in which at least 100 employees participate that is maintained by an employer that is organized in the U.S. or is a U.S. government entity (a “ Qualified Plan ”), the term “Related Person” shall exclude any interest holder holding less than 5% of any class of securities of such publicly traded company and beneficiaries of such Qualified Plan.
2 For purposes of this paragraph (6), “ Prohibited Investor ” shall mean a person or entity whose name appears on (i) the List of Specially Designated Nationals and Blocked Persons maintained by the U.S. Office of Foreign Assets Control; (ii) other lists of prohibited persons and entities as may be mandated by applicable law or regulation; or (iii) such other lists of prohibited persons and entities as may be provided to the Company in connection therewith.
3 For purposes of this paragraph (6), “ Senior Foreign Political Figure ” shall mean a senior official in the executive, legislative, administrative, military or judicial branches of a foreign government (whether elected or not), a senior official of a major foreign political party, or a senior executive of a foreign government-owned corporation. In addition, a Senior Foreign Political Figure includes any corporation, business or other entity that has been formed by, or for the benefit of, a Senior Foreign Political Figure.
4 For purposes of this paragraph (6), “ Close Associate of a Senior Foreign Political Figure ” shall mean a person who is widely and publicly known internationally to maintain an unusually close relationship with the Senior Foreign Political Figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions on behalf of the Senior Foreign Political Figure.
5 For purposes of this paragraph (6), “ Non-Cooperative Jurisdiction ” shall mean any foreign country that has been designated as non-cooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the Financial Task Force on Money Laundering, of which the U.S. is a member and with which designation the U.S. representative to the group or organization continues to concur.
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(3) a person or entity resident in, or organized or chartered under, the laws of a jurisdiction that has been designated by the U.S. Secretary of the Treasury under Section 311 or 312 of the PATRIOT Act as warranting special measures due to money laundering concerns; or
(4) a person or entity who gives Investor reason to believe that its funds originate from, or will be or have been routed through, an account maintained at a Foreign Shell Bank 6 , an “offshore bank,” or a bank organized or chartered under the laws of a Non-Cooperative Jurisdiction.
(e) If the Investor is purchasing the Shares as agent, representative, intermediary/nominee or in any particular capacity for any other person, or is otherwise requested to do so by the Company, it shall provide a copy of its anti-money laundering policies (“ AML Policies ”) to the Company. The Investor represents that it is in compliance with its AML Policies, its AML Policies have been approved by counsel or internal compliance personnel reasonably informed of anti-money laundering policies and their implementation and it has not received a deficiency letter, negative report or any similar determination regarding its AML Policies from independent accountants, internal auditors or some other person responsible for reviewing compliance with its AML Policies.
(f) the Investor shall promptly notify the Company and the Placement Agent in the event that any of the foregoing representations cease to be true and accurate regarding the Investor;
(g) if at any time it is discovered that any of the foregoing representations are incorrect, or if otherwise required by applicable laws or regulations, the Company and/or the Placement Agent may undertake appropriate actions, and the Investor agrees to cooperate with such actions, to ensure continued compliance with applicable laws or regulations, including, but not limited to segregation and/or redemption of the Investor’s Shares in the Company or freezing the Investor’s account; and
(h) the Company and/or the Placement Agent may release confidential information about the Investor (and, if applicable, any underlying beneficial owners of the Investor), to appropriate authorities if the Placement Agent and/or the Company, each in its sole discretion, determines that it is in the Company’s best interests to do so in light of applicable laws and regulations.
6 For purposes of this paragraph (6), “ Foreign Shell Bank ” shall mean a Foreign Bank without a Physical Presence in any country, but does not include a Regulated Affiliate.
A “ Foreign Bank ” shall mean an organization that (i) is organized under the laws of a foreign country, (ii) engages in the business of banking, (iii) is recognized as a bank by the bank supervisory or monetary authority of the country of its organization or principal banking operations, (iv) receives deposits to a substantial extent in the regular course of its business, and (v) has the power to accept demand deposits, but does not include the U.S. branches or agencies of a foreign bank.
“ Physical Presence ” shall mean a place of business that is maintained by a Foreign Bank and is located at a fixed address, other than solely a post office box or an electronic address, in a country in which the Foreign Bank is authorized to conduct banking activities, at which location the Foreign Bank (i) employs one or more individuals on a full-time basis, (ii) maintains operating records related to its banking activities, and (iii) is subject to inspection by the banking authority that licensed the Foreign Bank to conduct banking activities.
“ Regulated Affiliate ” shall mean a Foreign Shell Bank that is an affiliate of a depository institution, credit union or Foreign Bank that maintains a Physical Presence in the U.S. or a foreign country regulating such affiliated depository institution, credit union or Foreign Bank.
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7. The Company’s and the Placement Agent’s Representations. The Company and the Placement Agent, where applicable, make the following representations and warranties on which the Investor and its counsel are entitled to rely:
(a) The Company is duly formed and validly existing in good standing as a limited liability company under the laws of the State of Delaware, and has all requisite power and authority to act as contemplated by the Memorandum and this Agreement and to carry out the terms of this Agreement.
(b) The execution, delivery and performance of this Agreement have been authorized by all necessary action on behalf of the Company, and this Agreement is legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws affecting creditors’ rights, and subject to general equity principles and to limitations on availability of equitable relief, including specific performance.
(c) The execution and delivery of this Agreement and and the consummation of the transactions contemplated hereby will not conflict with or result in any violation of or default under any provision of any agreement or other instrument to which the Company is a party or by which it or any of its properties are bound, or any permit, franchise, judgment, decree, statute, order, rule or regulation applicable to the Company or its business or properties.
(d) Neither the Company nor anyone acting on its behalf has taken or will take any action that would subject the issuance and sale of the Shares to the registration requirements of the Securities Act.
(e) The Company is not required to register as an “investment company” under the Companies Act. The Placement Agent is not required to register as an “investment adviser” under the United States Investment Advisers Act of 1940, as amended.
(f) There is no legal action, suit, arbitration or other legal, administrative or other governmental investigation, inquiry or proceeding (whether federal, state, local or foreign) pending or, to the knowledge of the Placement Agent, threatened against or affecting the Company or any of its properties, assets or business.
(g) The Memorandum, when read in conjunction with this Agreement and the PubCo Preferred Stockholders Agreement (including all exhibits and schedules hereto and thereto), does not as of the date hereof contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading.
(h) The Placement Agent has adopted procedures to facilitate compliance by the Company with the applicable provisions of the federal securities laws and the rules and regulations of the Securities and Exchange Commission thereunder.
(i) No suit, action, claim, investigation or other proceeding is pending or, to the best of the Company’s knowledge is threatened against the Company or the Placement Agent which questions the validity of this Agreement or any action taken or to be taken pursuant to this Agreement.
17 |
8. Additional Representations of the Company
The Company hereby represents and warrants to the Investor that the representations set forth on Exhibit A hereto are true and correct as of the date of the Closing (immediately prior to the consummation of the Merger), except as otherwise indicated.
9. Survival of Agreements, Representations and Warranties. All agreements, representations and warranties contained herein or made in writing by or on behalf of the Investor, the Company and the Placement Agent in connection with the transactions contemplated by this Agreement shall survive the execution of this Agreement, any investigation at any time made by the Investor, the Company or the Placement Agent or on behalf of any of them and the sale and purchase of the Shares and payment therefor; provided, however that those representations and warranties of the Company set forth in Section 8 shall survive only for a period of twelve (12) months after the Closing.
10. Withholding. The Company is required to withhold a certain portion of the taxable income and gain allocated or distributed to each Investor unless the Investor provides documentation confirming that such Investor is not subject to withholding, or is subject to a reduced rate of withholding. The following information is provided to assist the Investor in complying with the U.S. rules for backup withholding and withholding with respect to income earned by foreign persons. This information is only a summary, and is not a substitute for the advice of a tax advisor. Each Investor is urged to consult with a tax advisor concerning the application of the U.S. withholding rules to such Investor.
18 |
For U.S. Taxpayers – Substitute Form W-9.
By signing below, I (we) declare that the information supplied in this Subscription Agreement is true and correct and may be relied upon by the Company in connection with my investment in the Company. Under penalties of perjury, each investor signing below certifies that (a) the number shown in the Social Security or Taxpayer Identification Number field in Section 2 of this Subscription Agreement is my correct taxpayer identification number; (b) I am not subject to backup withholding because (i) I am exempt from backup withholding, or (ii) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends or (iii) the IRS has notified me that I am no longer subject to backup withholding; and (c) I am a U.S. person (including a non-resident alien). Note: You must cross out item (b) above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return.
_____________________________________________
Name:________________________________________
|
For Non-U.S. Taxpayers .
¨ | I am a non-U.S. taxpayer and am providing Form W-8BEN, Certificate of Foreign Status of Beneficial Owner, certifying such status (or, if applicable, Form W-8ECI for income connected with the conduct of trade or business in the U.S., Form W-8EXP for a foreign government or other foreign organization or Form W-8IMY for a foreign intermediary, partnership or certain U.S. branches). I understand that these forms, and their instructions, may be obtained from the Company, from my broker, or from the Internal Revenue Service at http://www.irs.gov. |
11. Legends. The Investor consents to the placement of restrictive legends substantially in the form contained on page 1 of this Agreement and any other restrictive legends required or reasonably advisable, as determined by the Company and Counsel, by applicable law.
12. Counterparts, Execution and Delivery. 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. A facsimile or other reproduction of this Agreement may be executed by the Investor and/or the Company, and an executed copy of this Agreement may be delivered by the Investor and/or the Company by facsimile or similar electronic transmission device pursuant to which the signature(s) and questionnaire responses can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any party hereto, the Investor and the Company agree to execute an original of this Agreement as well as any facsimile or other reproduction hereof.
13. Amendments. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated orally, but only with the written consent of the Investor and the Company.
14. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware as applied to agreements among the residents of such state made and to be performed entirely within such state.
signatures on the following page
19 |
In Witness Whereof, the parties hereto have executed this Subscription Agreement and Investor Questionnaire as of the date first above written.
Individual Investor: | Entity Investor: | |||
(Signature) | (Name of Entity) | |||
By: | ||||
(Print Name) | ||||
Name: | ||||
Date: | Title: | |||
Date: |
SUBSCRIPTION ACCEPTED:
¨ IN FULL or ¨ for $ _________________________________
Accepted this ________ day of ___________________, ____.
Placement Agent: | Company: | |||
EDI Financial, Inc. | Neurotrope Bioscience, Inc. | |||
By: | By: | |||
Name: | Name: | |||
Title: | Title: |
Neurotrope Bioscience, Inc.
Signature Page
Exhibit A
1. | Organization, Good Standing, Corporate Power and Qualification |
The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as presently conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition or prospects, property, or results of operations of the Company (such effect, a “ Material Adverse Effect ”).
2. | Capitalization |
The authorized capital of the Company consists, immediately prior to the Closing, of:
45,000,000 shares of common stock, $0.01 par value per share (the “ Common Stock ”), 19,000,000 shares of which are issued and outstanding immediately prior to the Closing. All of the outstanding shares of Common Stock have been duly authorized, are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws.
22,000,000 shares of Preferred Stock, $0.01 par value per share, of which 22,000,000 shares have been designated Series A Preferred Stock, 10,386,625 of which are issued and outstanding immediately prior to the Closing. The rights, privileges and preferences of the Series A Preferred Stock are as stated in the Company’s Amended and Restated Certificate of Incorporation, as amended (the “ Certificate ”), and as provided by the General Corporation Law of the State of Delaware.
Except for (A) the conversion privileges of the Company’s outstanding shares of Series A Preferred Stock (and of the Shares to be issued under this Agreement), (B) certain rights of first refusal of existing holders of Series A Preferred Stock of the Company and certain preemptive rights of existing holders of the Common Stock of the Company, and (C) warrants issued or issuable to certain placement agents of the Company as described in the Memorandum, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, to purchase or acquire from the Company any shares of Common Stock or Series A Preferred Stock of the Company, or any securities convertible into or exchangeable for shares of Common Stock or Series A Preferred Stock of the Company. The Company has no obligation (contingent or otherwise) to purchase or redeem any of its capital stock.
3. | Subsidiaries |
The Company does not currently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, limited liability company, association, or other business entity. Except as described in the Memorandum, the Company is not a participant in any joint venture, partnership or similar arrangement.
4. | Authorization |
All corporate action required to be taken by the Company’s board of directors and stockholders in order to authorize the Company to enter into this Agreement, and to issue the Shares at the Closing and the Common Stock issuable upon conversion of the Shares, has been taken or will be taken prior to the Closing. All action on the part of the officers of the Company necessary for the execution and delivery of this Agreement, the performance of all obligations of the Company under this Agreement to be performed as of the Closing, and the issuance and delivery of the Shares has been taken or will be taken prior to the Closing. This Agreement, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with its terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
5. | Valid Issuance of Shares |
The Shares, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under applicable state and federal securities laws, restrictions pursuant to the PubCo Preferred Stockholders Agreement and liens or encumbrances created by or imposed by the Investor. Assuming the accuracy of the representations of the Investor in Sections 5 and 6 of this Agreement (and the accuracy of the similar representations of each other investor in the Offering) and subject to the filings described in paragraph 6 below, the Shares will be issued in compliance with all applicable federal and state securities laws. As of the Closing, the Common Stock issuable upon conversion of the Shares will have been duly reserved for issuance, and upon issuance in accordance with the terms of the Certificate, will be validly issued, fully paid and nonassessable. Based in part upon the accuracy of the representations of the Investor in Sections 5 and 6 of this Agreement (and the accuracy of the similar representations of each other investor in the Offering), and subject to the filings described in paragraph 6 below, the Common Stock issuable upon conversion of the Shares will be issued in compliance with all applicable federal and state securities laws.
6. | Governmental Consents and Filings |
Assuming the accuracy of the representations made by the Investor in Section 5 and 6 of this Agreement (and the accuracy of the similar representations of each other investor in the Offering), no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of the Company in connection with the sale and issuance of the Shares as contemplated by this Agreement, except for (i) the filing of an amendment to the Certificate to increase the authorized number of shares of preferred stock of the Company and the number of such shares designated as Series A Preferred Stock of the Company, which will have been filed as of the Closing, and (ii) filings pursuant to Regulation D under the Securities Act, and “blue sky” filings under applicable state securities laws, which have been made or will be made in a timely manner.
7. | Litigation |
There is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or to the Company’s knowledge, currently threatened in writing (i) against the Company or any officer or director of the Company arising out of their employment or board relationship with the Company; (ii) to the Company’s knowledge, that questions the validity of this Agreement or the right of the Company to enter into it, or to consummate the sale and issuance of the Shares as contemplated hereby or (iii) to the Company’s knowledge, that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. Neither the Company nor, to the Company’s knowledge, any of its officers or directors is a party or is named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality (in the case of officers or directors, such as would affect the Company). There is no action, suit, proceeding or investigation by the Company pending or which the Company intends to initiate. The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened in writing (or any basis therefor known to the Company) involving the prior employment of any of the Company’s employees, their services provided in connection with the Company’s business, or any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers.
8. | Intellectual Property |
To the Company’s knowledge, the Company owns or has the right to use all material intellectual property used in the operation of the business of the Company as currently conducted. To the Company’s knowledge, the Company is not infringing or misappropriating any intellectual property rights of any other Person. To the Company’s knowledge, no Person is currently infringing any intellectual property owned by the Company. The Company has not received within the past twelve months any written communications from any other Person alleging a material infringement or misappropriation of any intellectual property of any other Person. The Company is not a party to any action or proceeding by any Person that is currently outstanding or pending that contests the validity, enforceability, use or ownership of any intellectual property owned by the Company. Except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, the Company has taken commercially reasonable steps appropriate under the circumstances to protect and preserve the confidentiality of its material trade secrets and proprietary information.
9. | Compliance with Other Instruments |
The Company is not in violation or default (i) of any provisions of its Certificate or Bylaws, (ii) of any instrument, judgment, order, writ or decree, (iii) under any note, indenture or mortgage, or (iv) under any material lease, agreement, contract or purchase order to which it is a party or by which it is bound or, (v) to its knowledge, of any provision of federal or state statute, rule or regulation applicable to the Company, the violation of which would have a Material Adverse Effect. The execution, delivery and performance of this Agreement and the sale and issuance of Shares pursuant hereto will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either (a) a default under any such provision, instrument, judgment, order, writ, decree, contract or agreement or (b) an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to the Company.
10. | Agreements; Actions |
Except for this Agreement, the agreement with the Placement Agent dated June 25, 2013 and the agreement with Allied Beacon Partners, Inc., dated November 6, 2012 (together, the “ Placement Agreements ”), the employment agreement between the Company and Jim New (the “ CEO Employment Agreement ”), consulting agreements with certain independent contractors providing services to the Company (the “ Consulting Agreements ”), the Technology License and Services Agreement between the Company and the Blanchette Rockefeller Neurosciences Institute and NRV II, LLC dated October 31, 2012 (the “ License Agreement ”), the term sheet between the Company and Hannah Rose Holdings, LLC with respect to the Merger and the Offering (the “ Term Sheet ”), and agreements with respect to the provisions of legal services or accounting or audit services, there are no agreements, understandings, instruments, contracts or proposed transactions to which the Company is a party or by which it is bound that involve (i) obligations (contingent or otherwise) of, or payments to, the Company in excess of $50,000, (ii) the license of any patent, copyright, trademark, trade secret or other material intellectual property right to or from the Company (other than licenses to commercially available, off-the-shelf software) or (iii) the grant of rights to manufacture, produce, assemble, license, market, or sell its products to any other person or entity that limit the Company’s exclusive right to develop, manufacture, assemble, distribute, market or sell its products.
The Company has not (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) incurred any indebtedness for money borrowed or incurred any other liabilities individually in excess of $20,000 or in excess of $50,000 in the aggregate except for legal and other professional service fees and fees payable pursuant to the Placement Agreements, the CEO Employment Agreement, the Consulting Agreements, the License Agreement or the Term Sheet, (iii) made any loans or advances to any Person, other than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than in the ordinary course of business.
The Company is not a guarantor or indemnitor of any indebtedness of any other person or entity.
11. | Certain Transactions |
Other than (i) standard employee benefits generally made available to all employees, (ii) standard director and officer indemnification agreements approved by the board of directors, (iii) the purchase of shares of the Company’s capital stock approved in the written minutes of the board of directors (made available to the Investor), (iv) the stockholders agreement between the Company and the holders of Common Stock of the Company, dated October 31, 2012 (the “ Common Stockholders Agreement ”), (vi) the License Agreement, (vii) the CEO Employment Agreement, (viii) the Consulting Agreements, (ix) the Placement Agreements and (x) the stock purchase, investor rights, voting and right of first refusal and co-sale agreements entered into by and among the Company and the prior purchasers of Series A Preferred Stock, each dated as of February 28, 2013 (the “ Existing Series A Agreements ”) there are no agreements, understandings or proposed transactions between the Company and any of its officers, directors or consultants or any affiliate thereof.
The Company is not indebted, directly or indirectly, to any of its directors, officers or employees or to their respective spouses or children or to any affiliate of any of the foregoing, other than in connection with expenses or advances of expenses incurred in the ordinary course of business or employee relocation expenses and for other customary employee benefits made generally available to all employees. None of the Company’s directors, officers or employees, or any members of their immediate families, or any affiliate of the foregoing are, directly or indirectly, indebted to the Company.
12. | Rights of Registration and Voting Rights |
Except as provided in the Existing Series A Agreements and the Placement Agreement, the Company is not under any obligation to register under the Securities Act any of its currently outstanding securities or any securities issuable upon exercise or conversion of its currently outstanding securities. To the Company’s knowledge, except as contemplated in the Existing Series A Agreements, the Common Stockholders Agreement, and a letter agreement between the Company and certain of the current holders of Series A Preferred Stock with respect to voting control of shares owned by affiliates of or trusts for the benefit of family members of such holders, no stockholder of the Company has entered into any agreements with respect to the voting of capital shares of the Company.
13. | Property |
The property and assets that the Company owns are free and clear of all mortgages, deeds of trust, liens, loans and encumbrances, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do not materially impair the Company’s ownership or use of such property or assets (including any licenses to intellectual property). With respect to the property and assets it leases, the Company is in compliance with such leases and, to its knowledge, holds a valid leasehold interest free of any liens, claims or encumbrances other than those of the lessors of such property or assets. The Company does not own any real property.
14. | Material Liabilities |
The Company has no liability or obligation, absolute or contingent (individually or in the aggregate), except (i) obligations and liabilities incurred after the date of incorporation in the ordinary course of business that are not material, individually or in the aggregate, (ii) fees for legal and other professional services accrued in connection with the incorporation of the Corporation and the sale of the Series A Preferred Stock and negotiation of the Merger and (iii) obligations and liabilities pursuant to the agreements and documents described in paragraph 10 above.
15. | Changes |
To the Company’s knowledge, since October 31, 2012 there have been no events or circumstances of any kind that have had or could reasonably be expected to result in a Material Adverse Effect.
16. | Tax Returns and Payments |
There are no federal, state, county, local or foreign taxes due and payable by the Company which have not been timely paid. There are no accrued and unpaid federal, state, country, local or foreign taxes of the Company which are due, whether or not assessed or disputed. There have been no examinations or audits of any tax returns or reports by any applicable federal, state, local or foreign governmental agency. The Company has duly and timely filed all federal, state, county, local and foreign tax returns required to have been filed by it and there are in effect no waivers of applicable statutes of limitations with respect to taxes for any year.
17. | Permits |
The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business, the lack of which could reasonably be expected to have a Material Adverse Effect. The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority.
18. | Corporate Documents |
The Certificate and Bylaws of the Company are in the form made available to the Investor. The copy of the minute books of the Company made available to the Investor contains minutes of all meetings of directors and stockholders and all actions by written consent without a meeting by the directors and stockholders since the date of incorporation and accurately reflects in all material respects all actions by the directors (and any committee of directors) and stockholders with respect to all transactions referred to in such minutes.
Neurotrope BIOSCIENCE, INC.
Schedule A
Data Form
General Information for:
Name: | Type of Investor | |||||||||||
Title: | ¨ Individual | |||||||||||
Company: | ¨ Trust | |||||||||||
Street: | ¨ Partnership | |||||||||||
Room/Suite: | ¨ Corporation | |||||||||||
City: | State, Zip: | ¨ LLC | ||||||||||
Country: | ¨ Other | |||||||||||
Home | Office | Other | ||||||||||
Phone: | Phone: | Phone: | ||||||||||
Fax: | Fax: | Fax: | ||||||||||
Email: | Email: | Email: | ||||||||||
Required field | ||||||||||||
Distribution Information
Stock Registration | Tax I.D. Number: | ||
Name: | |||
DTC Delivery: | Wire Delivery (For amounts greater than $1000): | ||
DTC Broker Name: | Bank Name: | ||
DTC Number: | Bank ABA Number: | ||
Wire Acct Name: | |||
DTC Acct Name: | As listed under Stock Registration Name | ||
DTC Acct Number: | Wire Acct Number: | ||
DTC Broker Contact: | FCC account name: | ||
DTC Phone Number: | |||
DTC Fax Number: | FCC Account | ||
Number: | |||
Special Instructions for Physical Delivery: | Special Instructions for Check Delivery: | |
Neurotrope Bioscience, Inc.
Schedule A-1
Physical Stock Delivery: | Physical Check Delivery: | |
Physical Address: | Payee Name: | |
Payee Address: | ||
Special Instructions for Physical Delivery: | Special Instructions for Check Delivery: | |
Mailings . I would like the following individuals to receive the mailings and notifications indicated below:
Neurotrope Bioscience, Inc.
Schedule A-2
To subscribe for Shares in the private offering of
Neurotrope BioScience, Inc.
1. | Date and Fill in the number of Shares being subscribed for and Complete and Sign the Signature Pages included in the Subscription Agreement. |
2. | Initial where appropriate the Accredited Investor Certification contained in this Subscription Agreement. |
3. | Complete and Return the Confidential Investor Profile and, if applicable, Wire Transfer Authorization attached to this Subscription Agreement. |
4. | Fax all forms to your investment representative at (212) 661-8786 and then send all signed original documents with a check (if applicable) to: |
Intuitive Venture Partners, LLC
122 E. 42 nd Street, Suite 1616
New York, NY 10168
Attn: Samantha McGrandy
5. |
Please make your subscription payment payable to the order of
“US Bank, Account No. 201621000” |
For wiring funds directly to the escrow account, see the following instructions:
Bank Name: | US National Bank |
Bank Address:
60 Livingston Avenue
St. Paul, MN 55170
Routing/ABA Number: 091000022
ACCT #: 180121167365
ACCT NAME: US Bank Trust
FFC: EDI FINANCIAL/NEUROTROPE BIOSCI PUBCO (204367000)
ATTN: Shane 651 466-6097
(Shane is our account representative at US Bank. The wire must be sent to his attention so he can credit the funds to the Neurotrope escrow account)
FBO: | Investor Name |
Social Security Number
Address
All wire transfer payments must be net of any wire transfer fees assessed to Investor .
Exhibit 10.5
PLACEMENT AGENT WARRANT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, WHICH OPINION SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
No. _________ | Issue Date: _________________, 2013 |
NEUROTROPE, INC.
Common Stock Purchase Warrant
_________________
THIS CERTIFIES THAT , for value received, [ ] , or [his/her/its] registered assigns (the “ Holder ”), is entitled to subscribe for and purchase from Neurotrope, Inc., a Nevada corporation (the “ Company ”), at any time prior to 5:00 p.m., Eastern time, on ________________, the Shares at the Exercise Price (each as defined in Section 1 below).
This Warrant is subject to the following terms and conditions:
1. Shares . The Holder has, subject to the terms set forth herein, the right to purchase, at any time during the Warrant Exercise Term, up to [ ] ( ) shares (the “ Shares ” or the “ Warrant Shares ”) of Common Stock, par value $0.0001, of the Company (“ Common Stock ”), at a per share exercise price of $________ (the “ Exercise Price ”). The Exercise Price is subject to adjustment as provided in Section 3 hereof.
2. Exercise of Warrant .
(a) Exercise for Cash . This Warrant may be exercised by the Holder at any time during the Warrant Exercise Term, in whole or in part, by delivering the notice of exercise attached as Exhibit A hereto (the “ Notice of Exercise ”), duly executed by the Holder to the Company at its principal office, or at such other office as the Company may designate, accompanied by payment, in cash or by wire transfer of immediately available funds or by check payable to the order of the Company, of the amount obtained by multiplying the number of Shares designated in the Notice of Exercise by the Exercise Price (the “ Purchase Price ”). For purposes hereof, “ Exercise Date ” shall mean the date on which all deliveries required to be made to the Company upon exercise of this Warrant pursuant to this Section 2(a) shall have been made.
(b) Cashless Exercise . In addition to the provisions of Section 2(a) above, at any time, the Holder may, in its sole discretion, exercise all or any part of this Warrant in a “cashless” or “net-issue” exercise (a “ Cashless Exercise ”) by delivering to the Company (1) the Notice of Exercise and (2) the original Warrant, pursuant to which the Holder shall surrender the right to receive upon exercise of this Warrant the full number of Warrant Shares set forth in Section 1 hereof and instead, without cash payment, shall receive a number of Warrant Shares calculated by using the following formula:
C- 1 |
Solely for the purposes of this paragraph, “fair value” per share of Common Stock shall mean (A) the average of the closing sales prices, as quoted on the primary national or regional stock exchange on which the Common Stock is listed, or, if not listed, on the Nasdaq Market if quoted thereon, or, if not listed or quoted, the OTC Bulletin Board (or any tier of the OTC Markets) if quoted thereon, on the twenty (20) trading days immediately preceding the date on which the Notice of Exercise is deemed to have been sent to the Company, or (B) if the Common Stock is not publicly traded as set forth above, as reasonably and in good faith determined by the Board of Directors of the Company as of the date which the Notice of Exercise is deemed to have been sent to the Company.
For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for such shares shall be deemed to have commenced, on the date this Warrant was originally issued.
(c) Issuance of Certificates . As soon as practicable after the exercise of this Warrant, in whole or in part, in accordance with Section 2(a) or (b) hereof, the Company, at its expense, shall cause to be issued in the name of and delivered to the Holder (i) a certificate or certificates for the number of fully paid and non-assessable Shares to which the Holder shall be entitled upon such exercise and, if applicable, (ii) a new warrant of like tenor to purchase all of the Shares that may be purchased pursuant to the portion, if any, of this Warrant not exercised by the Holder. The Holder shall for all purposes hereof be deemed to have become the Holder of record of such Shares on the date on which the Notice of Exercise and payment of the Purchase Price in accordance with Section 2(a) were delivered and made or the date of notice of cashless exercise in accordance with Section 2(b) hereof, respectively, irrespective of the date of delivery of such certificate or certificates, except that if the date of such delivery, notice and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of record of such Shares at the close of business on the next succeeding date on which the stock transfer books are open.
(d) Taxes . The issuance of the Shares upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such Shares, shall be made without charge to the Holder for any tax or other charge of whatever nature in respect of such issuance and the Company shall bear any such taxes in respect of such issuance.
3. Adjustment of Exercise Price and Number of Shares .
(a) Adjustment for Reclassification, Consolidation or Merger . If while this Warrant, or any portion hereof, remains outstanding and unexpired there shall be (i) a reorganization or recapitalization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another corporation or other entity in which the Company shall not be the surviving entity, or a reverse merger in which the Company shall be the surviving entity but the shares of the Company’s capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (iii) a sale or transfer of the Company’s properties and assets as, or substantially as, an entirety to any other corporation or other entity in one transaction or a series of related transactions, then, as a part of such reorganization, recapitalization, merger, consolidation, sale or transfer, unless otherwise directed by the Holder, all necessary or appropriate lawful provisions shall be made so that the Holder shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the greatest number of shares of capital stock or other securities or property that a holder of the Shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, recapitalization, merger, consolidation, sale or transfer if this Warrant had been exercised immediately prior to such reorganization, recapitalization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 3. If the per share consideration payable to the Holder for Shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company’s Board of Directors (the “Board of Directors”). The foregoing provisions of this paragraph shall similarly apply to successive reorganizations, recapitalizations, mergers, consolidations, sales and transfers and to the capital stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant. In all events, appropriate adjustment shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable or issuable after such reorganization, recapitalization, merger, consolidation, sale or transfer upon exercise of this Warrant.
(b) Adjustments for Split, Subdivision or Combination of Shares . If the Company shall at any time subdivide (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) the shares of Common Stock subject to acquisition hereunder, then, after the date of record for effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of shares of Common Stock subject to acquisition upon exercise of the Warrant will be proportionately increased. If the Company at any time combines (by reverse stock split, recapitalization, reorganization, reclassification or otherwise) the shares of Common Stock subject to acquisition hereunder, then, after the record date for effecting such combination, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of shares of Common Stock subject to acquisition upon exercise of the Warrant will be proportionately decreased.
(c) Adjustments for Dividends in Stock or Other Securities or Property . If while this Warrant, or any portion hereof, remains outstanding and unexpired, the holders of any class of securities as to which purchase rights under this Warrant exist at the time shall have received or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, other or additional stock or other securities or property (other than cash) of the Company by way of dividend, then and in each case, this Warrant shall represent the right to acquire, in addition to the number of shares of such class of security receivable upon exercise of this Warrant, and without payment of any additional consideration therefor, the amount of such other or additional stock or other securities or property (other than cash) of the Company that such holder would hold on the date of such exercise had it been the holder of record of the class of security receivable upon exercise of this Warrant on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and/or all other additional stock available to it as aforesaid during said period, giving effect to all adjustments called for during such period by the provisions of this Section 3.
(d) Notice of Adjustments . Upon any adjustment of the Exercise Price and any increase or decrease in the number of Shares purchasable upon the exercise of this Warrant, then, and in each such case, the Company, within 30 days thereafter, shall give written notice thereof to the Holder at the address of such Holder as shown on the books of the Company, which notice shall state the Exercise Price as adjusted and, if applicable, the increased or decreased number of Shares purchasable upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation of each.
4. Notices . All notices, requests, consents and other communications required or permitted under this Warrant shall be in writing and shall be deemed delivered (i) three business days after being sent by registered or certified mail, return receipt requested, postage prepaid or (ii) one business day after being sent via a reputable nationwide overnight courier service guaranteeing next business day delivery or (iii) on the business day of delivery if sent by facsimile transmission, in each case to the intended recipient as set forth below:
If to the Company to :
Neurotrope, Inc.
10732 Hawk’s Vista St.
Plantation, FL 33324
Attn: Dr. James New
Facsimile: __________
With a copy (that shall not constitute notice) to:
Bilzin Sumberg Baena Price & Axelrod LLP
1450 Brickell Ave, 23rd Floor
Miami, FL 33131
Attention: Laura Vaughn
Facsimile: 305-351-2286
If to the Holder to:
The contact information
listed on the attached
Warrant Contact Information Sheet
Either party may give any notice, request, consent or other communication under this Warrant using any other means (including personal delivery, messenger service, facsimile transmission, first class mail or electronic mail), but no such notice, request, consent or other communication shall be deemed to have been duly given unless and until it is actually received by the party for whom it is intended. Either party may change the address to which notices, requests, consents or other communications hereunder are to be delivered by giving the other party notice in the manner set forth in this Section 4.
5. Legends . Each certificate evidencing the Shares issued upon exercise of this Warrant shall be stamped or imprinted with a legend substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, WHICH OPINION SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
6. Removal of Legend . Upon request of a holder of a certificate with the legends required by Section 5 hereof, the Company shall issue to such holder a new certificate therefor free of any transfer legend, if, with such request, the Company shall have received an opinion of counsel satisfactory to the Company in form and substance to the effect that any transfer by such holder of the Shares evidenced by such certificate will not violate the Act or any applicable state securities laws.
7. Fractional Shares . No fractional Shares will be issued in connection with any exercise hereunder. Instead, the Company shall round up, as nearly as practicable to the nearest whole Share, the number of Shares to be issued.
8. Rights of Stockholders . Except as expressly provided in Section 3(c) hereof, the Holder, as such, shall not be entitled to vote or receive dividends or be deemed the holder of the Shares or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or otherwise until this Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have been issued, as provided herein.
9. Transfers and Assignments . Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a “ Transferor ”). On the surrender for exchange of this Warrant, with the Transferor's endorsement in the form of Exhibit B attached hereto (the “ Transferor Endorsement Form ”) and together with an opinion of counsel reasonably satisfactory to the Company that the transfer of this Warrant will be in compliance with applicable securities laws, the Company will issue and deliver to or on the order of the Transferor thereof a new Warrant or Warrants of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “ Transferee ”), calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor.
10. Miscellaneous .
(a) This Warrant and disputes arising hereunder shall be governed by and construed and enforced in accordance with the laws of the State of Nevada applicable to agreements made and to be performed wholly within such State, without regard to its conflict of law rules.
(b) The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.
(c) The covenants of the respective parties contained herein shall survive the execution and delivery of this Warrant.
(d) The terms of this Warrant shall be binding upon and shall inure to the benefit of any successors or permitted assigns of the Company and of the Holder and of the Shares issued or issuable upon the exercise hereof.
(e) This Warrant and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subject hereof.
(f) The Company shall not, by amendment of the Certificate of Incorporation or Bylaws, or through any other means, directly or indirectly, avoid or seek to avoid the observance or performance of any of the terms of this Warrant and shall at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder contained herein against impairment.
(g) Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company, at its expense, will execute and deliver to the Holder, in lieu thereof, a new Warrant of like date and tenor.
(h) This Warrant and any provision hereof may be amended, waived or terminated only by an instrument in writing signed by the Company and the Holder.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer.
NEUROTROPE, INC. | ||
By: | ||
Name: | ||
Title: |
WARRANT CONTACT INFORMATION SHEET
Holder Name: _______________________________________________
Address: ____________________________________________________________________________
Fax Number: __________________________
Email: _______________________________
Exhibit A
NOTICE OF EXERCISE
TO: | Neurotrope, Inc. |
Attention: President |
The undersigned hereby elects to purchase _______________ shares (the “Shares”) of Common Stock of Neurotrope, Inc. (the “Company”) pursuant to the terms of the attached Warrant, and delivers herewith:
(1) $______________ (in cash as provided for in the foregoing Warrant) and any applicable taxes payable by the undersigned pursuant to such Warrant; and
(2) _______________ shares of Common Stock underlying the attached Warrant (pursuant to a Cashless Exercise in accordance with Section 2(b) of the Warrant) (check here if the undersigned desires to deliver a Warrant for an unspecified number of shares equal to the number sufficient to effect a Cashless Exercise [___]).
Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:
(Name) | ||
(Address) |
If the shares issuable upon this exercise of the Warrant are not all of the 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:
(Name) | ||
(Address) |
The undersigned hereby represents and warrants the following:
(a) He/she/it has such knowledge and experience in financial and business affairs that he/she/it is capable of evaluating the merits and risks involved in purchasing the Shares, (ii) is able to bear the economic risks involved in purchasing the Shares, and (iii) is an “accredited investor,” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended;
(b) In making the decision to purchase the Shares, he/she/it has relied solely on independent investigations made by it and has had the opportunity to ask questions of, and receive answers from, the Company concerning the Shares, the financial condition, prospective business and operations of the Company and has otherwise had an opportunity to obtain any additional information, to the extent that the Company possess such information or could acquire it without unreasonable effort or expense;
A- 1 |
(c) The overall commitment of the undersigned to investments that are not readily marketable is not disproportionate to his/hers/its net worth and income, and the purchase/acquisition of the Shares will not cause such overall commitment to become disproportionate; it can afford to bear the loss of the purchase price of the Shares;
(d) He/she/it has no present need for liquidity in its investment in the Shares; and
(e) He/she/it acknowledges that the transaction contemplated in connection with the purchase/acquisition of the Shares has not been reviewed or approved by the Securities and Exchange Commission or by any administrative agency charged with the administration of the securities laws of any state, and that no such agency has passed on or made any recommendation or endorsement of any of the securities contemplated hereby.
(Signature and Date) | ||
Name (print): |
A- 2 |
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
FOR VALUE RECEIVED , the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of NEUROTROPE, INC. to which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of NEUROTROPE, INC. with full power of substitution in the premises.
Transferees | Percentage Transferred | Number Transferred |
If the total of the Shares are not all of the Shares evidenced by the foregoing Warrant, the undersigned Transferor requests that a new Warrant evidencing the right to acquire the Shares not so transferred assigned be issued in the name of and delivered to the undersigned Transferor.
Dated: __________________, _______ | ||
(Signature must conform to name of holder as specified on the face of the Warrant) |
||
Signed in the presence of: | ||
(Name) | (Address) | |
ACCEPTED AND AGREED: [TRANSFEREE] |
||
(Name) | ||
(Address) |
B- 1 |
Exhibit 10.6
PLACEMENT AGENT WARRANT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, WHICH OPINION SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
No. _________ | Issue Date: _________________, 2013 |
NEUROTROPE, INC.
Series A Preferred Stock Purchase Warrant
_________________
THIS CERTIFIES THAT , for value received, [ ] , or [his/her/its] registered assigns (the “ Holder ”), is entitled to subscribe for and purchase from Neurotrope, Inc., a Nevada corporation (the “ Company ”), at any time prior to 5:00 p.m., Eastern time, on ________________, the Shares at the Exercise Price (each as defined in Section 1 below).
This Warrant is subject to the following terms and conditions:
1. Shares . The Holder has, subject to the terms set forth herein, the right to purchase, at any time during the Warrant Exercise Term, up to [ ] ( ) shares (the “ Shares ” or the “ Warrant Shares ”) of Series A Convertible Preferred Stock, par value $0.0001, of the Company (“ Series A Preferred Stock ”), at a per share exercise price of $________ (the “ Exercise Price ”). The Exercise Price is subject to adjustment as provided in Section 3 hereof.
2. Exercise of Warrant .
(a) Exercise for Cash . This Warrant may be exercised by the Holder at any time during the Warrant Exercise Term, in whole or in part, by delivering the notice of exercise attached as Exhibit A hereto (the “ Notice of Exercise ”), duly executed by the Holder to the Company at its principal office, or at such other office as the Company may designate, accompanied by payment, in cash or by wire transfer of immediately available funds or by check payable to the order of the Company, of the amount obtained by multiplying the number of Shares designated in the Notice of Exercise by the Exercise Price (the “ Purchase Price ”). For purposes hereof, “ Exercise Date ” shall mean the date on which all deliveries required to be made to the Company upon exercise of this Warrant pursuant to this Section 2(a) shall have been made.
(b) Cashless Exercise . In addition to the provisions of Section 2(a) above, at any time, the Holder may, in its sole discretion, exercise all or any part of this Warrant in a “cashless” or “net-issue” exercise (a “ Cashless Exercise ”) by delivering to the Company (1) the Notice of Exercise and (2) the original Warrant, pursuant to which the Holder shall surrender the right to receive upon exercise of this Warrant the full number of Warrant Shares set forth in Section 1 hereof and instead, without cash payment, shall receive a number of Warrant Shares calculated by using the following formula:
{Exhibit 10.6 - Form of Placement Warrant Series A.1 /}
1 |
Solely for the purposes of this paragraph, “fair value” per share of Series A Preferred Stock shall mean (A) the average of the closing sales prices, as quoted on the primary national or regional stock exchange on which the Series A Preferred Stock is listed, or, if not listed, on the Nasdaq Market if quoted thereon, or, if not listed or quoted, the OTC Bulletin Board (or any tier of the OTC Markets) if quoted thereon, on the twenty (20) trading days immediately preceding the date on which the Notice of Exercise is deemed to have been sent to the Company, or (B) if the Series A Preferred Stock is not publicly traded as set forth above, as reasonably and in good faith determined by the Board of Directors of the Company as of the date which the Notice of Exercise is deemed to have been sent to the Company.
For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for such shares shall be deemed to have commenced, on the date this Warrant was originally issued.
(c) Issuance of Certificates . As soon as practicable after the exercise of this Warrant, in whole or in part, in accordance with Section 2(a) or (b) hereof, the Company, at its expense, shall cause to be issued in the name of and delivered to the Holder (i) a certificate or certificates for the number of fully paid and non-assessable Shares to which the Holder shall be entitled upon such exercise and, if applicable, (ii) a new warrant of like tenor to purchase all of the Shares that may be purchased pursuant to the portion, if any, of this Warrant not exercised by the Holder. The Holder shall for all purposes hereof be deemed to have become the Holder of record of such Shares on the date on which the Notice of Exercise and payment of the Purchase Price in accordance with Section 2(a) were delivered and made or the date of notice of cashless exercise in accordance with Section 2(b) hereof, respectively, irrespective of the date of delivery of such certificate or certificates, except that if the date of such delivery, notice and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of record of such Shares at the close of business on the next succeeding date on which the stock transfer books are open.
(d) Taxes . The issuance of the Shares upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such Shares, shall be made without charge to the Holder for any tax or other charge of whatever nature in respect of such issuance and the Company shall bear any such taxes in respect of such issuance.
{Exhibit 10.6 - Form of Placement Warrant Series A.1 /}
2 |
3. Adjustment of Exercise Price and Number of Shares .
(a) Adjustment for Reclassification, Consolidation or Merger . If while this Warrant, or any portion hereof, remains outstanding and unexpired there shall be (i) a reorganization or recapitalization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another corporation or other entity in which the Company shall not be the surviving entity, or a reverse merger in which the Company shall be the surviving entity but the shares of the Company’s capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (iii) a sale or transfer of the Company’s properties and assets as, or substantially as, an entirety to any other corporation or other entity in one transaction or a series of related transactions, then, as a part of such reorganization, recapitalization, merger, consolidation, sale or transfer, unless otherwise directed by the Holder, all necessary or appropriate lawful provisions shall be made so that the Holder shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the greatest number of shares of capital stock or other securities or property that a holder of the Shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, recapitalization, merger, consolidation, sale or transfer if this Warrant had been exercised immediately prior to such reorganization, recapitalization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 3. If the per share consideration payable to the Holder for Shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company’s Board of Directors (the “Board of Directors”). The foregoing provisions of this paragraph shall similarly apply to successive reorganizations, recapitalizations, mergers, consolidations, sales and transfers and to the capital stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant. In all events, appropriate adjustment shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable or issuable after such reorganization, recapitalization, merger, consolidation, sale or transfer upon exercise of this Warrant.
(b) Adjustments for Split, Subdivision or Combination of Shares . If the Company shall at any time subdivide (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) the shares of Series A Preferred Stock subject to acquisition hereunder, then, after the date of record for effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of shares of Series A Preferred Stock subject to acquisition upon exercise of the Warrant will be proportionately increased. If the Company at any time combines (by reverse stock split, recapitalization, reorganization, reclassification or otherwise) the shares of Series A Preferred Stock subject to acquisition hereunder, then, after the record date for effecting such combination, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of shares of Series A Preferred Stock subject to acquisition upon exercise of the Warrant will be proportionately decreased.
(c) Adjustments for Dividends in Stock or Other Securities or Property . If while this Warrant, or any portion hereof, remains outstanding and unexpired, the holders of any class of securities as to which purchase rights under this Warrant exist at the time shall have received or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, other or additional stock or other securities or property (other than cash) of the Company by way of dividend, then and in each case, this Warrant shall represent the right to acquire, in addition to the number of shares of such class of security receivable upon exercise of this Warrant, and without payment of any additional consideration therefor, the amount of such other or additional stock or other securities or property (other than cash) of the Company that such holder would hold on the date of such exercise had it been the holder of record of the class of security receivable upon exercise of this Warrant on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and/or all other additional stock available to it as aforesaid during said period, giving effect to all adjustments called for during such period by the provisions of this Section 3.
{Exhibit 10.6 - Form of Placement Warrant Series A.1 /}
3 |
(d) Notice of Adjustments . Upon any adjustment of the Exercise Price and any increase or decrease in the number of Shares purchasable upon the exercise of this Warrant, then, and in each such case, the Company, within 30 days thereafter, shall give written notice thereof to the Holder at the address of such Holder as shown on the books of the Company, which notice shall state the Exercise Price as adjusted and, if applicable, the increased or decreased number of Shares purchasable upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation of each.
4. Notices . All notices, requests, consents and other communications required or permitted under this Warrant shall be in writing and shall be deemed delivered (i) three business days after being sent by registered or certified mail, return receipt requested, postage prepaid or (ii) one business day after being sent via a reputable nationwide overnight courier service guaranteeing next business day delivery or (iii) on the business day of delivery if sent by facsimile transmission, in each case to the intended recipient as set forth below:
If to the Company to :
Neurotrope, Inc.
10732 Hawk’s Vista St.
Plantation, FL 33324
Attn: Dr. James New
Facsimile: __________
With a copy (that shall not constitute notice) to:
Bilzin Sumberg Baena Price & Axelrod LLP
1450 Brickell Ave, 23rd Floor
Miami, FL 33131
Attention: Laura Vaughn
Facsimile: 305-351-2286
If to the Holder to:
The contact information
listed on the attached
Warrant Contact Information Sheet
Either party may give any notice, request, consent or other communication under this Warrant using any other means (including personal delivery, messenger service, facsimile transmission, first class mail or electronic mail), but no such notice, request, consent or other communication shall be deemed to have been duly given unless and until it is actually received by the party for whom it is intended. Either party may change the address to which notices, requests, consents or other communications hereunder are to be delivered by giving the other party notice in the manner set forth in this Section 4.
{Exhibit 10.6 - Form of Placement Warrant Series A.1 /}
4 |
5. Legends . Each certificate evidencing the Shares issued upon exercise of this Warrant shall be stamped or imprinted with a legend substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, WHICH OPINION SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
6. Removal of Legend . Upon request of a holder of a certificate with the legends required by Section 5 hereof, the Company shall issue to such holder a new certificate therefor free of any transfer legend, if, with such request, the Company shall have received an opinion of counsel satisfactory to the Company in form and substance to the effect that any transfer by such holder of the Shares evidenced by such certificate will not violate the Act or any applicable state securities laws.
7. Fractional Shares . No fractional Shares will be issued in connection with any exercise hereunder. Instead, the Company shall round up, as nearly as practicable to the nearest whole Share, the number of Shares to be issued.
8. Rights of Stockholders . Except as expressly provided in Section 3(c) hereof, the Holder, as such, shall not be entitled to vote or receive dividends or be deemed the holder of the Shares or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or otherwise until this Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have been issued, as provided herein.
9. Transfers and Assignments . Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a “ Transferor ”). On the surrender for exchange of this Warrant, with the Transferor's endorsement in the form of Exhibit B attached hereto (the “ Transferor Endorsement Form ”) and together with an opinion of counsel reasonably satisfactory to the Company that the transfer of this Warrant will be in compliance with applicable securities laws, the Company will issue and deliver to or on the order of the Transferor thereof a new Warrant or Warrants of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “ Transferee ”), calling in the aggregate on the face or faces thereof for the number of shares of Series A Preferred Stock called for on the face or faces of the Warrant so surrendered by the Transferor.
10. Miscellaneous .
{Exhibit 10.6 - Form of Placement Warrant Series A.1 /}
5 |
(a) This Warrant and disputes arising hereunder shall be governed by and construed and enforced in accordance with the laws of the State of Nevada applicable to agreements made and to be performed wholly within such State, without regard to its conflict of law rules.
(b) The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.
(c) The covenants of the respective parties contained herein shall survive the execution and delivery of this Warrant.
(d) The terms of this Warrant shall be binding upon and shall inure to the benefit of any successors or permitted assigns of the Company and of the Holder and of the Shares issued or issuable upon the exercise hereof.
(e) This Warrant and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subject hereof.
(f) The Company shall not, by amendment of the Certificate of Incorporation or Bylaws, or through any other means, directly or indirectly, avoid or seek to avoid the observance or performance of any of the terms of this Warrant and shall at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder contained herein against impairment.
(g) Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company, at its expense, will execute and deliver to the Holder, in lieu thereof, a new Warrant of like date and tenor.
(h) This Warrant and any provision hereof may be amended, waived or terminated only by an instrument in writing signed by the Company and the Holder.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer.
NEUROTROPE, INC. | ||
By: | ||
Name: | ||
Title: |
{Exhibit 10.6 - Form of Placement Warrant Series A.1 /}
6 |
WARRANT CONTACT INFORMATION SHEET
Holder Name: _______________________________________________
Address: ____________________________________________________________________________
Fax Number: __________________________
Email: _______________________________
{Exhibit 10.6 - Form of Placement Warrant Series A.1 /}
7 |
Exhibit A
NOTICE OF EXERCISE
TO: | Neurotrope, Inc. |
Attention: President |
The undersigned hereby elects to purchase _______________ shares (the “Shares”) of Series A Preferred Stock of Neurotrope, Inc. (the “Company”) pursuant to the terms of the attached Warrant, and delivers herewith:
(1) $______________ (in cash as provided for in the foregoing Warrant) and any applicable taxes payable by the undersigned pursuant to such Warrant; and
(2) _______________ shares of Series A Preferred Stock underlying the attached Warrant (pursuant to a Cashless Exercise in accordance with Section 2(b) of the Warrant) (check here if the undersigned desires to deliver a Warrant for an unspecified number of shares equal to the number sufficient to effect a Cashless Exercise [___]).
Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:
(Name) | ||
(Address) |
If the shares issuable upon this exercise of the Warrant are not all of the 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:
(Name) | ||
(Address) |
The undersigned hereby represents and warrants the following:
(a) He/she/it has such knowledge and experience in financial and business affairs that he/she/it is capable of evaluating the merits and risks involved in purchasing the Shares, (ii) is able to bear the economic risks involved in purchasing the Shares, and (iii) is an “accredited investor,” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended;
(b) In making the decision to purchase the Shares, he/she/it has relied solely on independent investigations made by it and has had the opportunity to ask questions of, and receive answers from, the Company concerning the Shares, the financial condition, prospective business and operations of the Company and has otherwise had an opportunity to obtain any additional information, to the extent that the Company possess such information or could acquire it without unreasonable effort or expense;
{Exhibit 10.6 - Form of Placement Warrant Series A.1 /}
A- 1 |
(c) The overall commitment of the undersigned to investments that are not readily marketable is not disproportionate to his/hers/its net worth and income, and the purchase/acquisition of the Shares will not cause such overall commitment to become disproportionate; it can afford to bear the loss of the purchase price of the Shares;
(d) He/she/it has no present need for liquidity in its investment in the Shares; and
(e) He/she/it acknowledges that the transaction contemplated in connection with the purchase/acquisition of the Shares has not been reviewed or approved by the Securities and Exchange Commission or by any administrative agency charged with the administration of the securities laws of any state, and that no such agency has passed on or made any recommendation or endorsement of any of the securities contemplated hereby.
(Signature and Date) | ||
Name (print): |
{Exhibit 10.6 - Form of Placement Warrant Series A.1 /}
A- 2 |
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
FOR VALUE RECEIVED , the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of shares of Series A Preferred Stock of NEUROTROPE, INC. to which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of NEUROTROPE, INC. with full power of substitution in the premises.
Transferees | Percentage Transferred | Number Transferred |
If the total of the Shares are not all of the Shares evidenced by the foregoing Warrant, the undersigned Transferor requests that a new Warrant evidencing the right to acquire the Shares not so transferred assigned be issued in the name of and delivered to the undersigned Transferor.
Dated: __________________, _______ | ||
(Signature must conform to name of holder as specified on the face of the Warrant) |
||
Signed in the presence of: | ||
(Name) | (Address) | |
ACCEPTED AND AGREED: [TRANSFEREE] |
||
(Name) | (Address) |
{Exhibit 10.6 - Form of Placement Warrant Series A.1 /}
B- 1 |
Exhibit 10.7
Member FINRA, SIPC
PLACEMENT AGREEMENT
June 25, 2013
EDI Financial, Inc.
12221 Merit Drive, Suite 1020
Dallas, TX 75251
Re: Private placement offering of $6,865,000 of Series A Convertible Preferred Stock (“Offering”), of Neurotrope Bioscience, Inc.
Dear Sirs:
Neurotrope Bioscience, Inc., a Delaware corporation (“Neurotrope” or the “Company”) proposes to offer, offer for sale and sell $6,865,000 (the "Offering Amount") of shares of Neurotrope Series A Convertible Preferred Stock, par value $.001 per share (the “Series A Preferred Stock”, and collectively with the shares of Company common stock, par value $.001 per share (the “Common Stock”) underlying the Series A Preferred Stock, the “Securities”) to accredited investors in accordance with one or more exemptions from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"). The Company and the Placement Agent (as defined below) may, upon their mutual agreement, accept additional subscriptions of up to an additional $2,750,000 (the “Over-allotment”). Further, this Over-allotment may be increased upon the mutual agreement of the Company and the Placement Agent. The Series A Preferred Stock will be offered at a price per share to be mutually determined by the Company and the Placement Agent and set forth in the Memorandum (as defined below).
The Company and the Securities are to be more fully described in a private placement memorandum completed by EDI Financial, Inc. (the “Placement Agent”) and agreed to and approved by the Company prior to commencement of the Offering (together with any exhibits, supplements or amendments thereto, collectively, the “Memorandum”). Neither the Placement Agent nor any Participating Dealers (as defined below) shall distribute the Memorandum or other materials regarding the Company unless the Company has reviewed and approved, in writing, such Memorandum or other materials in advance of such distribution.
The Company desires to employ Placement Agent as its placement agent to offer, offer for sale and sell the Series A Preferred Stock subject to all of the terms and conditions of this Placement Agreement (“Agreement”) and subject to the terms and conditions contained in the Memorandum.
1. Description of Offering and Appointment of Agent.
(a) Appointment. On the basis of the representations, warranties and covenants herein contained, but subject to the terms and conditions herein set forth, the Placement Agent is hereby appointed an exclusive agent of the Company during the Offering Period (as defined herein) for the purpose of finding subscribers for sale of the Offering Amount on an “best efforts/” basis and for sale of the Over-allotment (including any increase thereto), on a "best efforts" basis only upon mutual agreement of the Company and the Placement Agent. The Placement Agent may, in its sole discretion, appoint participating broker-dealers who are members in good standing of the Financial Industry Regulatory Authority, Inc. (“FINRA”) to offer and sell the Series A Preferred Stock (the “Participating Dealers”) pursuant to a dealer agreement between the Placement Agent and each Participating Dealer (“Dealer Agreement”). Each Dealer Agreement shall contain representations, warranties and covenants of the Participating Dealer that are substantially equivalent to the representations, warranties and covenants of the Placement Agent set forth in this Agreement. A minimum purchase of $250,000 per investor is required, provided the Company may, in its sole discretion, accept subscriptions for less than this amount. As further set forth in Section 7(b)(1), the Placement Agent acknowledges that the Company may limit its acceptance of subscriptions and may reject any subscription in its sole and absolute discretion, and the Placement Agent agrees that any such rejection of a subscription obtained by the Placement Agent or by the Participating Dealers shall be deemed not to be a sale made by the Placement Agent or by the Participating Dealers.
(b) Offering Period. The “Offering Period” shall mean that period during which the shares of Series A Preferred Stock are offered for sale, commencing on the date of the Memorandum and continuing until the earliest to occur of (i) the date upon which subscriptions for the Offering Amount and the Over-allotment, if so agreed by the Company and the Placement Agent, have been accepted; (ii) July 31, 2013, which period may be extended by mutual agreement of the Company and the Placement Agent for up to an additional 30 days; or (iii) the date upon which the Placement Agent and the Company elect to terminate the Offering.
(c) Acceptance. The Placement Agent hereby accepts such agency and agrees on the terms and conditions herein set forth to use the Placement Agent's best efforts during the Offering Period to find subscribers for the Series A Preferred Stock.
(d) Private Placement Offering. The Offering will not be registered under federal securities laws or the securities laws of any state. The Company will rely upon exemptions from registration under federal securities laws and state securities acts (the “State Acts”). With respect to federal securities laws, the Company will rely on one or more exemptions from registration for sales to accredited investors (as defined in Section 2(15) of the Securities Act and Rule 501 promulgated thereunder), including, without limitation, exemptions from registration provided by Section 4(2) of the Securities Act, Rule 506 of Regulation D and/or Regulation S, promulgated as part of the rules and regulations under the Securities Act (the “Rules and Regulations”). The Company shall use its best efforts to exempt the Securities from qualification or registration under the State Acts as reasonably requested by the Placement Agent and shall make such filings under the State Acts as may be necessary if exemptions from qualification or registration are unavailable. The Company or its counsel shall provide Placement Agent with all applications, forms and documents filed in each jurisdiction where the Securities are to be offered. The Offering shall be at the offering price and upon the terms and conditions set forth in the Memorandum and the subscription documents to be delivered with the Memorandum, and on the basis of the representations and warranties therein contained, and subject to the terms and conditions herein set forth.
(e) Subscription Procedures and Closing. The Company and the Placement Agent each agree that all subscribers will be instructed to deliver their subscription funds to a segregated escrow account (the “Escrow Account”) maintained by the Placement Agent at U.S. Bank National Association, a national bank (“Escrow Agent”). Subscribers’ wires shall be delivered directly to the Escrow Account, and subscribers’ checks shall be made payable to the Escrow Account and delivered to the Placement Agent for deposit to the Escrow Account. All subscribers' checks will be transmitted directly to the Escrow Agent or, if applicable, returned to subscriber, by noon of the next business day after receipt by the Placement Agent. The Placement Agent shall be responsible for collecting all executed subscription documents. Upon the Company’s acceptance of subscriptions in an aggregate amount of at least the Offering Amount, a closing will take place at the offices of the Company's legal counsel or another location as determined by the Company (including closing by remote electronic means), and the Escrow Agent shall disburse funds from the Escrow Account to the Company upon the written direction signed by the Placement Agent and the Company (“the Closing”). Promptly following the Closing, certificates evidencing the Securities sold in the Offering will be duly executed and issued by the Company, if applicable, in accordance with the terms of the Memorandum and delivered to the investors. Any funds deposited to the Escrow Account in payment of a rejected subscription, or portion thereof, or any funds received after the termination of the Offering Period, shall be promptly returned to the subscriber from which such funds were received, without interest or deduction.
(f) Other Covenants . In connection with the Offering, the Company and Placement Agent each agree as follows: (i) the Series A Preferred Stock will be offered and sold only to accredited investors pursuant to the registration exemption provided by Section 4(2) of the Securities Act , Rule 506 of Regulation D and/or Regulation S, as and to the extent applicable to the Offering, and will otherwise comply with the applicable laws and regulations of any jurisdictions in which the Series A Preferred Stock are offered or sold, (ii) neither the offer, sale nor delivery of the Series A Preferred Stock in conformity with the terms hereof will violate Section 5 of the Securities Act, as currently in effect, and (iii) neither the Company nor Placement Agent has taken, nor will either party take any action which conflicts with the conditions and requirements of, or which would make unavailable with respect to the sale of the Series A Preferred Stock, the exemptions from registration available pursuant to Rule 506 of Regulation D, Regulation S and/or Section 4(2) of the Securities Act and neither the Company nor Placement Agent knows of any reason why any such exemption would be otherwise unavailable to it.
(g) Information to be Supplied. The Company will furnish or cause to be furnished to Placement Agent such information as Placement Agent reasonably believes appropriate to its assignment or necessary in connection with its preparation of, review of, or inclusion in, the Memorandum. It is also understood that the Company may make available to Placement Agent and the offerees of the Series A Preferred Stock additional material, data or other information relating to the Company to the extent such information can be obtained without unreasonable effort or expense and is not otherwise confidential or a trade secret of the Company (collectively, as limited the “Company Data”). The Company recognizes and confirms that (a) in performing the services contemplated by this Agreement, Placement Agent will use and rely primarily on the Company Data made available to Placement Agent and on other information available from generally recognized public sources without having independently verified the same; (b) the contents of the Company Data are the sole responsibility of the Company, and Placement Agent does not assume any responsibility for the accuracy or completeness of the Company Data, and will not undertake to verify independently any of their accuracy or completeness; and (c) Placement Agent will furnish a copy of the Memorandum, and each supplement or amendment thereto, to each purchaser of Series A Preferred Stock, and Placement Agent will not employ any written material other than the Memorandum, each supplement and amendment thereto and the Company Data.
2. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, the Placement Agent and the Participating Dealers (if any) as follows:
(a) The Company is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction in which it was formed, with all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder.
(b) The Company has complied or will comply with Section 4(2) of the Securities Act, with all of the provisions of the Rules and Regulations promulgated under the Securities Act, specifically including the provisions of Regulation D and Rule 506 thereunder and/or Regulation S, applicable to it in connection with the offering and sale of the Series A Preferred Stock, and with all States Acts and regulations applicable to it in connection with the offering and the sale of the Series A Preferred Stock.
(c) The execution of this Agreement, and the employment of the Placement Agent, have been duly authorized by the Company and, at the time of its execution and performance, this Agreement shall not constitute or result in any breach or violation (other than any breach or violation which shall have been waived or consented to in writing) of any of the terms, provisions or conditions of, or constitute a default under, any material indenture, mortgage, deed of trust, note, contract, commitment, instrument or document to which it or any of its properties is subject, the Articles of Incorporation or Bylaws or corresponding documents of the Company, or any order, arbitration award, or judgment, of any court or governmental agency or body having jurisdiction over the Company or any of its activities or properties; and no consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated hereby.
(d) The Securities shall be duly authorized and shall be validly issued, and shall conform to the description thereof contained in the Memorandum.
(e) The Company has not been subject to any order, judgment or decree of any court of competent jurisdiction temporarily, preliminarily or permanently enjoining such person for failing to comply with Section 503 of Regulation D.
(f) The Company represents and warrants that at all times from the respective dates that the final form of the Memorandum, which has been approved by the Company for distribution to prospective investors, is furnished or made available by the Company to Placement Agent or, either directly or through Placement Agent or Participating Dealers, to offerees or any of their representatives, such Memorandum will not, as each such document may be supplemented or amended, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
(g) The Company will furnish Placement Agent, from time to time, with such number of copies of the Memorandum, any exhibits thereto and agreements and documents referred to therein, as Placement Agent may reasonably request.
(h) The Company will advise Placement Agent promptly of (A) the occurrence of any event or the existence of any condition known to the Company referred to in Section 2(f) hereof; (B) the receipt by the Company of any communication, stop order or any order from the SEC, any state securities commissioner or any other domestic or foreign securities or financial regulatory authority or self-regulatory organization concerning the Offering; and (C) the commencement of any lawsuit or proceeding to which the Company is a party relating to the Series A Preferred Stock or the Offering. The Company shall make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof as promptly as possible.
(i) The Company will provide each offeree the reasonable opportunity to ask questions of, and receive answers from, the officers and employees of the Company concerning the terms and conditions of the Offering and to obtain any other additional information about the Company and the Series A Preferred Stock to the extent the officers and employees of the Company possess the same or can acquire it without unreasonable effort or expense and it is not otherwise confidential or trade secret information. The Company may require appropriate confidentiality and non-disclosure agreements as it is advised by counsel prior to the disclosure of any information not otherwise contained in the Memorandum.
(j) The Company is not in default in the performance or observance of any material obligation (A) under its charter or its by-laws, or, to its knowledge, any indenture, mortgage, contract, purchase order or other agreement or instrument to which the Company is a party or by which it or any of its property is bound or affected; or (B) with respect to any order, writ injunction or decree of any court of any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, and, to the Company's knowledge, there exists no condition, event or act which constitutes, nor which after notice, the lapse of time or both, could constitute a default under any of the foregoing, which in either case would have a material adverse effect on the current business of the Company.
(k) The Company has full right, power and authority to execute and deliver this Agreement and to perform all of its obligations hereunder.
(l) The authorization, issuance, sale and delivery of the Securities will not (1) violate any provision of law or statute or any order of any court or other governmental agency applicable to the Company; or (2) conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute (with due notice or lapse of time or both) a default under, or result in the creation of any material lien, security interest, charge or encumbrance upon any of the properties or assets of the Company under its charter or by-laws, or any indenture, mortgage, lease agreement or other material agreement or instrument to which the Company is a party or by which it or any of its property is bound or affected except for violations, conflicts, breaches and defaults that would not, individually or in the aggregate, materially and adversely affect the Company, Placement Agent or any investor in the Offering.
(m) The Company will have prior to the consummation of the Offering all requisite corporate power and authority to issue, sell and deliver the Securities and such issuances, sales and deliveries will be duly authorized by all requisite corporate action of the Company and when so issued, sold and delivered the Series A Preferred Stock will be duly and validly issued and outstanding, valid and binding obligations of the Company, fully paid and nonassessable, with no personal liability attaching to the ownership thereof and will be free and clear of all liens, charges, claims, encumbrances, restrictions or preemptive or any other similar rights imposed by or through the Company, except as waived prior to the Closing or as disclosed herein or in the Memorandum, and the Company shall have paid all taxes, if any, in respect of the issuance thereof. Assuming that the investors meet such suitability standards as are specified by the Company and the Placement Agent, and the representations and warranties of Placement Agent are accurate as to the method of offering, the offer and sale of the Series A Preferred Stock will be exempt from the registration requirements of the Securities Act and the rules and regulations promulgated thereunder and the state “blue sky” laws and the Series A Preferred Stock will be issued in compliance with all applicable Federal and state securities laws.
(n) No permit, consent, approval, authorization, order of, or filing with, any court or governmental authority is required in connection with the execution and delivery by the Company of this Agreement or to consummate the Offering other than any that will be made or obtained prior to the consummation of the Offering, except that the offer and sale of the Securities in certain jurisdictions may be subject to the provisions of the securities or “blue sky” laws of such jurisdictions and the federal securities laws and certain filings may be made following the consummation of the Offering.
(o) There is no action, suit or proceeding before or by any United States court or governmental agency or body, now pending or threatened in writing, against the Company, or any of its properties, which would reasonably be anticipated to result in any material adverse change in the condition (financial or otherwise) or in the earnings, current business, current business plan as described in the Memorandum, properties or assets of the Company and its subsidiaries (a “Material Adverse Effect”).
(p) The Company has (A) duly and timely filed all tax returns required to be filed by the Company under applicable law that include or relate to the Company, its income, assets, payroll, operations or business, which tax returns are true, correct and complete in all material respects; (B) duly and timely paid, in full, all taxes which are currently due and payable and for which the Company is liable; or (C) adequately reserved for taxes that have not been paid or are in dispute except as to any events described in this subparagraph that would not reasonably be expected to have a Material Adverse Effect.
(q) The Company, to its knowledge, is not in default under any agreement, lease, license contract or commitment, whether oral or written including, without limitation, agreements with employees and consultants (“Company Agreements”) to which the Company is a party or by which any of its assets are bound, and there is no event known to the Company that, with notice, or lapse of time, or both, would constitute a default by any party to any Company Agreement or give any party the right to terminate or modify any of the same and the Company has not received notice that any party to any Company Agreement intends to cancel or terminate any Company Agreement or to exercise or not to exercise any renewal or extension options under any Company Agreement, except as to any events described in this subparagraph that would not have a Material Adverse Effect.
(r) The Company, to its knowledge, holds, and is in compliance with, all permits, licenses, registrations and authorizations required by it in connection with the conduct of the business of the Company as currently conducted under all Federal, state and local laws, rules and regulations (the “Permits”), except where the failure to be in compliance has not had, and is not reasonably expected to have, a Material Adverse Effect.
(s) The Company’s financial statements, which may be unaudited, will be furnished upon request to offerees, the Placement Agent, and Participating Dealers.
(t) The Company does not have any liabilities or obligations (whether actual or accrued, accruing or contingent, or otherwise) which, individually or in aggregate, would be deemed material, other than those set forth in the balance sheet included within the financial statements included in the Company Data, if any, and those incurred, in the ordinary course of its business.
(u) The consummation of the Offering and the release of the investor funds from the Escrow Account shall be further subject to any other conditions set forth in the Memorandum or the subscription agreement entered into by each purchaser of Series A Preferred Stock.
(v) The Company will be responsible for and comply with all applicable notification and fee requirements to qualify the offering and sale for exemption under the state securities or “blue sky” laws of such jurisdiction in which any sales pursuant to the offering may be transacted and as may otherwise be required or as requested by the Placement Agent provided that, in connection therewith, the Company shall not be required to qualify as a foreign corporation.
3. Representations and Warranties of the Placement Agent . The Placement Agent represents and warrants to, and agrees with, the Company as follows:
(a) The Placement Agent is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was formed, with all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder. This Agreement (i) has been duly authorized, executed and delivered by the Placement Agent, (ii) constitutes a legal, valid and binding obligation of the Placement Agent, and (iii) subject to applicable bankruptcy, insolvency and other laws affecting the enforceability of creditors' rights generally, is enforceable as to the Placement Agent in accordance with its terms, specific performance hereof being limited by general principles of equity and the enforceability of the indemnification provisions hereof.
(b) The execution, delivery and performance of this Agreement by the Placement Agent and the consummation by the Placement Agent of the transactions contemplated hereby and by the Memorandum will not conflict with or result in the Placement Agent’s breach or violation of any of the terms or provisions of, or constitute a default in any material respect under, (i) any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which the Placement Agent is a party or to which the Placement Agent or its property is subject, (ii) the Placement Agent’s charter or its operating agreement or (iii) any statute, judgment, decree, order, rule or regulation applicable to the Placement Agent of any court or governmental agency or body having jurisdiction over the Placement Agent.
(c) The Placement Agent is, and at all times through the date of the final sale of the Series A Preferred Stock shall remain, duly registered pursuant to the provisions of the Securities Exchange Act of 1934, as amended (“Exchange Act”) as a broker-dealer and duly registered as a broker-dealer in those states in which the Placement Agent is required to be so registered in order to carry out the Offering as contemplated by the Memorandum; the Placement Agent is, and at all times through the date of the final sale of a Unit shall remain, a member in good standing of FINRA; the Placement Agent will not re-allow discounts or pay commissions or other compensation for participation in the distribution of the Offering in the United States to any broker-dealer which is not a member of the FINRA; the Placement Agent shall act as an independent contractor, and nothing herein shall constitute the Placement Agent an employee of the Company.
(d) In connection with the offer, offer for sale and sale of the Series A Preferred Stock, the Placement Agent (and its representatives and Participating Dealers) shall conform to and comply with (i) the provisions of the Rules of Fair Practice of FINRA, (ii) applicable provisions of federal law, including without limitation the Securities Act, the Exchange Act and the Rules and Regulations, (iii) anti-money laundering regulations applicable under the USA PATRIOT Act or foreign jurisdictions, and (iv) the State Acts and the rules and regulations thereunder, and counsel for the Company shall make all such filings as are required pursuant to state securities and “blue sky” laws, and shall send to the Placement Agent from time to time copies thereof, during the period during which the Series A Preferred Stock may be offered, offered for sale and sold in various states.
(e) The Placement Agent will use its best efforts to procure subscribers for the Series A Preferred Stock and will conduct the Offering in compliance with the suitability standards set forth in the Memorandum and with the requirements of Section 4(2) of the Securities Act, Rule 506 of Regulation D and/or Regulation S, as and to the extent applicable to the Offering; accordingly, at all times through the date of the final sale of the Series A Preferred Stock, the Placement Agent will have:
(i) not made any untrue statement of a material fact and not omitted to state a material fact required to be stated or necessary to make any statement made not misleading, to the extent any representations are made by the Placement Agent concerning the Offering or matters set forth in the Memorandum and Company Data other than those set forth in the Memorandum and Company Data;
(ii) not offered, offered for sale, or sold the Series A Preferred Stock by means of any form of general solicitation or general advertising, including, but not limited to: (A) any advertisement, article, notice, or other communication mentioning the Series A Preferred Stock published in any newspaper, magazine or similar medium or broadcast over television or radio; (B) any seminar or meeting, the attendees of which have been invited by any general solicitation or general advertising; or (C) any letter, circular, notice, or other written communication, unless the communication is accompanied or preceded by the Memorandum;
(iii) prior to the sale of any of the Series A Preferred Stock, reasonably believed that each subscriber met the suitability and other investor standards set forth in the Memorandum and the state securities or “blue sky” laws of the applicable jurisdictions, and the Placement Agent will have prepared and maintained, for its benefit and the benefit of the Company, file memoranda and other appropriate records substantiating the foregoing;
(iv) only used sales materials which have been approved for use in the Offering by the Company, and refrained from providing any such materials to any offeree unless such materials were accompanied or preceded by the Memorandum;
(v) provided each offeree, either directly or through a Participating Dealer, with a copy of the Memorandum;
(vi) promptly distributed any amendment or supplement to the Memorandum provided to the Placement Agent by the Company under this Agreement to persons who had previously received a copy of the Memorandum from the Placement Agent and who the Placement Agent believed continued to be interested in the Series A Preferred Stock and have included such amendment or supplement in all deliveries of the Memorandum made after receipt of any such amendment or supplement; and
(vii) not made any representations on behalf of the Company other than those contained in the Company's approved subscription agreement, nor shall the Placement Agent have acted as an agent of the Company or for the Company in any other capacity, except as expressly set forth herein.
4. Compensation and Expenses. In consideration of Placement Agent’s services, the Company shall pay Placement Agent a fee (the “Fee”) to be paid contemporaneously (and as a condition to Closing) at the Closing consisting of cash and warrants as follows:
(a) The Placement Agent will be paid a total cash commission of 10% of funds raised from investors introduced by them and will receive (a) on the first $1,613,375 of total gross proceeds, (i) warrants exercisable for a period of ten (10) years from the date of issuance, to purchase a number of shares of Common Stock equal to 7.5% of the number of shares of Series A Preferred Stock sold to investors introduced by them, with a per share exercise price of $0.01, and (ii) warrants exercisable for a period of ten (10) years from the date of issuance, to purchase a number of shares of Series A Preferred Stock equal to 2.5% of the number of shares of Series A Preferred Stock sold to investors introduced by them, with a per share exercise price of $1.00, and (b) on total gross proceeds in excess of $1,613,375, warrants exercisable for a period of ten (10) years from the date of issuance, to purchase a number of shares of Series A Preferred Stock equal to 10% of the number of shares of Series A Preferred Stock sold to investors introduced by them, with an exercise price of $1.00 per share. The Company shall have no obligation to compensate any Participating Dealer for its services in connection with the Offering and all such compensation obligations shall be between the Placement Agent and the Participating Dealer(s), unless otherwise agreed to by the Company. In the event that the Company consummates the Merger (as such term is defined in the Term Sheet, dated May 7, 2013, by and between the Company and Hannah Rose Holdings, LLC), in lieu of the warrants for Series A Preferred Stock and Common Stock described above, the Placement Agent shall receive warrants exercisable for a number of shares of capital stock equal to the number of shares of capital stock that had such warrants been exercised, the warrantholder would have received in exchange for the shares of Series A Preferred Stock and Common Stock underlying the warrants, pursuant to the terms of the definitive Merger documentation.
(b) The Company shall also pay the Placement Agent the fees set forth in Section 4(a) if during the Post-Offering Period (as defined below) any person or entity contacted by the Placement Agent during the Offering Period and whose name is set forth on a schedule listing such persons and entities, which schedule shall be provided by the Placement Agent to the Company at the Closing, invests in the Company (each, a “Post-Closing Investor”), regardless of whether or not such Post-Closing Investor also invested in the Offering. For purposes hereof, the “Post-Offering Period” shall mean the later of the date that is (i) twenty-four (24) months after the termination of the Offering Period and (ii) the final Closing of the Offering.
(c) In addition, the Company has previously reimbursed Intuitive Venture Partners, LLC $25,000 for expenses in connection with the Offering.
5 . Covenants of the Company. The Company covenants and agrees that it will:
(a) Comply with all requirements imposed upon it by the Securities Act, as now and hereafter amended, by the Rules and Regulations from time to time in force, and by all State Acts, to permit the continuance of offers and sales of the Securities in accordance with the provisions of Section 4(2) of the Securities Act, Rule 506 of Regulation D and/or Regulation S, as and to the extent applicable to the Offering, and the Memorandum.
(b) Until the termination of the Offering Period, furnish to the Placement Agent information reasonably necessary to keep the Memorandum fair, accurate and complete in all material respects.
(c) If at any time any event occurs as a result of which the Memorandum would include an untrue statement of a material fact or, in view of the circumstances under which they were made , omit to state any material fact necessary to make the statements therein not misleading, the Company will notify the Placement Agent thereof (unless the information shall have been received from the Placement Agent).
(d) Provided their subscriptions are accepted by the Company, issue the Series A Preferred Stock to the holders in accordance with the description of the procedures as set forth in the Memorandum and the subscription documents to be delivered with the Memorandum.
(e) Prepare, execute and file a Form D (and any and all amendments or supplements thereto) with the SEC in a timely manner and deliver copies thereof to the Placement Agent, together with copies of all forms (including without limitation, Form Ds) and other documents and/or materials filed either before or after the Closing, and comply with Regulation D and the State Acts and make any filings required by the SEC and state securities authorities in a timely manner.
(f) The Company will make available for inspection by the Placement Agent or its authorized representatives, at the Company’s principal office during normal business hours, any information and documents relating to the business and operations of the Company as the Placement Agent may reasonably request and as are available to the Company or obtainable by it without unreasonable effort or expense.
(g) The Company will apply the net proceeds from the sale of the Series A Preferred Stock as set forth in the Memorandum.
6. Covenants of Placement Agent. The Placement Agent covenants and agrees that it will:
(a) Comply with all requirements imposed upon it by the Securities Act, as now and hereafter amended, by the Rules and Regulations from time to time in force, and by all State Acts, to permit the continuance of offers and sales of the Series A Preferred Stock in accordance with Section 4(2) of the Securities Act, Rule 506 of Regulation D and/or Regulation S, as and to the extent applicable to the Offering, and to the Memorandum.
(b) Comply with all applicable rules of the FINRA and any other laws, rules and regulations applicable to broker-dealers.
(c) Not offer, offer for sale or sell any of the Series A Preferred Stock, except and to the extent any such offer, offer for sale or sale shall not render unavailable the exemptions from registration and qualification requirements of the Securities Act and the State Acts relied upon with respect to the offering and sale of the Series A Preferred Stock contemplated by this Agreement.
7. Conditions of Closing. The purchase of, and payment for, the Series A Preferred Stock at the Closing shall be subject to the continuing accuracy of the representations and warranties of the Company and the Placement Agent as of the date hereof and as of the Closing, to the performance by the Company and Placement Agent of their respective obligations hereunder, and to the following conditions:
(a) The Placement Agent's obligations as provided herein shall be subject to the accuracy of the representations, warranties and covenants of the Company herein contained as of the date hereof and as of the date of the Closing, and to the performance by the Company of its obligations hereunder to be performed.
(b) At the Closing, if any, the Company shall:
(1) Accept subscriptions of qualifying potential purchasers that the Company reasonably believes to be qualified investors under Regulation D and/or Regulation S and the State Acts and on the Agreed List, in accordance with the Memorandum. Notwithstanding the foregoing, the Company may reject the subscription of any qualifying purchaser if (A) a potential purchaser is a competitor, or an affiliate of a competitor, of the Company, or (B) the Company deems it prudent and in the best interests of the Company to reject such subscription; provided further, that the acceptance of any subscription by the Company may not be unreasonably withheld. The Company agrees that if the Company rejects the subscription of a qualifying purchaser for the reasons set forth in clause (B) above (each, a “ Rejected Purchaser ”), at the Closing, or any closing held by the Company, the Company shall pay the Placement Agent a cash payment in the amount of one (1%) percent of the aggregate gross proceeds that the Company would have received if it would have accepted the subscription of the Rejected Purchaser at such closing.
(2) Instruct the Escrow Agent, jointly with the Placement Agent, to release the proceeds of the Offering to the Company, net of compensation payable to the Placement Agent and any rejected subscription amounts to be returned to subscribers.
(3) Provide for the issuance of certificates representing the Securities, which certificates will be delivered to subscribers within ten (10) business days of the Closing, or as otherwise described in the Memorandum.
(c) At the Closing, if any, the Placement Agent shall:
(1) Deliver to the Company all subscription agreements that the Company agrees are acceptable.
(2) Instruct the Escrow Agent to release the proceeds of the Offering to the Company, net of compensation payable to the Placement Agent and any rejected subscription amounts to be returned to subscribers.
(3) Receive from the Company, or give assignment instructions for, all compensation payable to the Placement Agent.
8. Indemnification.
(a) The Placement Agent and each of the Participating Dealers, severally and not jointly (each, an “Agent Party”), agree to indemnify and hold the Company and the directors, officers, employees, agents, attorneys, shareholders and control persons (as defined under federal and state securities laws) of the Company, and the respective heirs, personal representatives and assigns of each of the foregoing (collectively, the “Company Indemnified Persons”) harmless from and against any loss, liability, claim, damage, cost and expense (collectively, “Damages”, including, but not limited to, reasonable attorneys’ fees, experts’ fees and other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever based upon) to which the Company Indemnified Persons may become subject, under the Securities Act or otherwise, insofar as such Damages arise solely out of: (i) any material breach of any representation, warranty, agreement or covenant under this Agreement or the Dealer Agreement by such Agent Party, (ii) any untrue statement or alleged untrue statement of any material fact contained in the Memorandum, arising out of or based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Memorandum in reliance upon and in conformity with information furnished to the Company by such Agent Party, (iii) any statement made in a writing by such Agent Party containing an untrue statement or alleged untrue statement of any material fact or the omission or alleged omission to state a material fact required to be stated or necessary to make the statements not misleading, unless such statements or omissions are made in reliance upon or in conformity with statements made or information provided by the Company (including the Company Data) which have been approved by the Company for dissemination to prospective investors, and/or (iv) any amount paid in settlement of any litigation, commenced or threatened, or of any claim based upon any of the matters under (i) through (iii) (including, but not limited to, expenses reasonably incurred in investigating, preparing or defending against any such litigation or claim); provided, however that the Agent Parties shall not be liable to any Company Indemnified Person to the extent that any Damages, or any actions in respect thereof, arise out of or are based upon an untrue statement of material fact or omission of material fact made in the final Memorandum, which has been approved by the Company for dissemination to prospective investors, in reliance upon and in conformity with information furnished to the Placement Agent by or on behalf of the Company Indemnified Person. Notwithstanding the foregoing, no Agent Party shall be required to indemnify the Company for any amounts in excess of the aggregate commissions actually received by such Agent Party from the sale of Series A Preferred Stock.
If for any reason, the foregoing indemnification is unavailable to any Company Indemnified Persons, then each Agent Party shall contribute to the amount paid or payable by any such Company Indemnified Person as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of such Agent Party to other Agent Parties and any Company Indemnified Person; provided , however , that in no event shall the amount contributed by any Agent Party exceed the aggregate commissions actually received by such Agent Party from the sale of Series A Preferred Stock.
Promptly after a Company Indemnified Person receives notice of the commencement of any action, claim, proceeding or investigation (“Action”), such Company Indemnified Person, if a claim in respect thereof is to be made against an Agent Party under this Section 8(a), will notify such Agent Party of the commencement thereof. The omission to so notify such Agent Party will relieve such Agent Party from any liability which it may have to any Company Indemnified Person under this Section 8(a) if the Agent Party has been prejudiced in asserting, or shall have lost the right to assert, a legal defense by reason of such omission. Such Agent Party will be entitled to participate in, and, to the extent that it may wish, to assume the defense thereof subject to the provisions herein stated, with counsel reasonably satisfactory to the Company Indemnified Person. The Company Indemnified Person will have the right to employ separate counsel in any such Action and to participate in the defense thereof but the fees and expenses of such counsel will be at the expense of the Company Indemnified Person if the Agent Party has assumed the defense of the Action with counsel reasonably satisfactory to the Company Indemnified Person. No settlement of any Action against a Company Indemnified Person for which indemnification from an Agent Party is sought will be made without the consent of such Agent Party (which consent shall not be unreasonably withheld, conditioned or delayed).
(b) The Company agrees to indemnify and hold the Placement Agent and Participating Dealers, the directors, officers, employees, agents, attorneys, shareholders and control persons (as defined under federal and state securities laws) of the Placement Agent and the Participating Dealers, and the respective heirs, personal representatives and assigns of each of the foregoing (collectively, the “Agent Indemnified Persons”) harmless from and against any Damages to which the Agent Indemnified Persons may become subject, under the Securities Act or otherwise, insofar as such Damages arise out of or relate to: (i) any material breach of any representation, warranty, agreement or covenant under this Agreement by the Company, (ii) any untrue statement or alleged untrue statement of any material fact contained in the final Memorandum or the final Company Data which has been approved by the Company for distribution to prospective investors, or arising out of or based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in each case , (iii) any statement made in a writing by the Company that is delivered by the Company to a prospective investor (or any such statement made in writing by the Company that has been approved by the Company for distribution to prospective investors) containing an untrue statement or alleged untrue statement of any material fact or the omission or alleged omission to state a material fact required to be stated or necessary to make the statements not misleading, and/or (iv) any amount paid in settlement of any litigation, commenced or threatened, or of any claim based upon any of the matters under (i) through (iii) (including, but not limited to, expenses reasonably incurred in investigating, preparing or defending against any such litigation or claim); provided, however, that the Company shall not be liable to any Agent Indemnified Person to the extent that any Damages, or any actions in respect thereof, arise out of or are based upon an untrue statement of material fact or omission of material fact made in the Memorandum in reliance upon and in conformity with information furnished to the Company by or on behalf of the Agent Indemnified Person. The liability for indemnification shall have a limit not to exceed the gross offering proceeds for shares of Preferred Stock sold by the Company to investors introduced to the Company by Placement Agent in this offering.
If for any reason, the foregoing indemnification is unavailable to any Agent Indemnified Persons, then the Company shall contribute to the amount paid or payable by any such Agent Indemnified Persons as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the Company and any Agent Indemnified Person; provided , however , that in no event shall the amount contributed by any Agent Indemnified Person exceed the aggregate commissions actually received by such Agent Indemnified Person from the sale of Series A Preferred Stock. The liability for indemnification shall have a limit not to exceed the gross offering proceeds for shares of Preferred Stock sold and received by the Company in this offering.
Promptly after an Agent Indemnified Person receives notice of the commencement of any Action, such Agent Indemnified Person, if a claim in respect thereof is to be made against the Company under this Section 8(b), will notify the Company of the commencement thereof. The omission to so notify the Company will relieve the Company from any liability which it may have to any Agent Indemnified Person under this Section 8(b) if the Company has been prejudiced in asserting, or shall have lost the right to assert, a legal defense by reason of such omission. The Company will be entitled to participate in, and, to the extent that they may wish, to assume the defense thereof subject to the provisions herein stated, with counsel reasonably satisfactory to such Agent Indemnified Person. The Agent Indemnified Person will have the right to employ separate counsel in any such Action and to participate in the defense thereof but the fees and expenses of such counsel will be at the expense of the Agent Indemnified Person if the Company has assumed the defense of the Action with counsel reasonably satisfactory to the Agent Indemnified Person. No settlement of any Action against an Agent Indemnified Person for which indemnification from the Company is sought will be made without the consent of the Company (which consent shall not be unreasonably withheld, conditioned or delayed).
9. Representations, Indemnities and Agreements to Survive Sale and Payment . The respective representations, indemnities, warranties, covenants and other agreements of the Company and the Placement Agent set forth in or made pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation made by or on behalf of the Placement Agent, the Company, or any Agent Indemnified Person or Company Indemnified Person, and shall survive closing, delivery of, and payment for the Series A Preferred Stock.
10. Termination of Agreement . Notwithstanding any of the terms and provisions hereof, this Agreement may be terminated by the Placement Agent based on a material breach of this Agreement by the Company. The Placement Agent shall give fifteen (15) days' prior written notice to the Company of such material breach, and the Company shall have fifteen (15) days to cure such material breach before the Placement Agent may terminate the Agreement. In the event the Placement Agent reasonably determines that it is unsatisfied with the results of its due diligence investigation or that the Series A Preferred Stock is not marketable, notwithstanding its best efforts to sell the Series A Preferred Stock, the Placement Agent may terminate this Agreement upon written notice to the Company.
This Agreement shall terminate automatically (an "Automatic Termination") if at any time the Placement Agent or any Participating Dealer ceases to be duly registered pursuant to the provisions of the Exchange Act as a broker-dealer and duly registered as a broker-dealer in those states in which the Placement Agent is required to be so registered in order to carry out the Offering as contemplated by the Memorandum or the Placement Agent ceases to be a member in good standing of the FINRA.
In the event of an Automatic Termination or any termination of this Agreement by the Placement Agent, the Placement Agent shall be entitled to any fees and compensation to which it was entitled under Section 4 only as of the date of such termination.
The Company may terminate this agreement in its sole discretion by providing ten (10) days written notice to the Placement Agent. Upon such a termination by the Company, the Placement Agent shall be entitled to any fees and compensation that it was entitled to receive under Section 4 hereof as of the date of termination and for the three month period following termination for investments made in the Company by those investors sourced by the Placement Agent.
Additionally, Sections 8, 9, 10, 11 and 12 shall survive any termination or expiration of this Agreement and shall survive closing, delivery of, and payment for the Series A Preferred Stock.
11. Notices. All notices, requests, demands or other communications with respect to this Agreement shall be in writing and shall be personally delivered or mailed, postage prepaid, by certified mail, or delivered by facsimile or electronic mail (“e-mail”) or a nationally recognized express courier service, charges prepaid, to the Company or Placement Agent at the addresses set forth in this Agreement (or such other addresses as the parties may specify from time to time in accordance with this section). Any such notice shall, when sent in accordance with the preceding sentence, be deemed to have been given and received, on the earliest of: (i) on the day personally delivered including by facsimile or e-mail (with confirmation of receipt), (ii) on the third day following the date mailed, or (iii) twenty-four hours after shipment by such courier service.
12. Miscellaneous Provisions.
(a) Governing Law. This Agreement shall be governed by, subject to, and construed in accordance with the laws of the state of Delaware without regard to such state’s conflicts of law principles.
(b) Severability . If any portion of this Agreement shall be held invalid or inoperative, then, so far as is reasonable and possible (i) the remainder of this Agreement shall be considered valid and operative, and (ii) effect shall be given to the intent manifested by the portion held invalid or inoperative.
(c) Modification or Amendment . This Agreement may not be modified or amended except by written agreement executed by the parties hereto.
(d) Number and Gender of Words. Whenever the context so requires, the masculine shall include the feminine and neuter, and the singular shall include the plural, and conversely.
(e) Other Instruments; Counterparts . The parties hereto covenant and agree that they will execute such other and further instruments and documents as are or may become necessary or convenient to effect and carry out the terms of this Agreement. This Agreement may be executed by facsimile signatures or signatures delivered via e-mail, and in multiple counterparts, each of which shall be deemed an original. It shall not be necessary that each party executes each counterpart, or that any one counterpart be executed by more than one party so long as each party executes at least one counterpart.
(f) No Partnership . The Placement Agent is not a principal of or a partner with, or does not control in any way, the Company or its employees, except in such relationships disclosed in the Memorandum, subscription documents, or other offering materials.
(g) Limitation on Services . The Placement Agent shall not be obligated to provide advice or perform services to the Company that are not specifically addressed in this Agreement. The Company hereby acknowledges that the Placement Agent is not a fiduciary of the Company and that the Placement Agent makes no representations or warranties regarding the Company’s ability to secure financing, whether now or in the future. The obligations of the Placement Agent described in this Agreement consist solely of commercially reasonable best efforts services to the Company, and in no event shall the Placement Agent be required to act as the agent of the Company or to provide legal or accounting services. All final decisions with respect to acts of the Company or its affiliates, whether or not made pursuant to or in reliance upon information or advice furnished by the Placement Agent hereunder, shall be those of the Company or such affiliates, and the Placement Agent shall under no circumstances be liable for any expense incurred or loss suffered by the Company as a consequence of such decisions.
(h) Announcements. Before the Company releases any information referring to the Placement Agent’s role under this Offering or uses Placement Agent’s name in a manner which may result in public dissemination thereof, the Company shall furnish drafts of all documents or prepared oral statements to Placement Agent for comments, and shall not release any information relating thereto without the prior written consent of the Placement Agent. Notwithstanding the foregoing, nothing herein shall prevent the Company from releasing any information to the extent that such release is required by law, rule or regulation. The Company agrees that, following the completion of the Offering, the Placement Agent shall have the right to place “tombstone” style advertisements describing its services to the Company hereunder (i) in financial and other newspapers and journals or (ii) on the Placement Agent’s website or in other marketing materials of the Placement Agent, at the Placement Agent’s cost provided that Placement Agent will submit a copy of any such advertisements to the Company for its prior approval, which approval shall not be unreasonably withheld.
(i) Assignment . This Agreement shall not be assignable by any party to this Agreement without the express prior written consent of the other party to the Agreement, and in the event of an attempted assignment by one party to this Agreement without such consent, such attempted assignment shall be void and without effect.
(j) Parties . This Agreement shall be binding upon and inure solely to the benefit of the parties hereto, their respective successors and any permitted assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provision herein contained, except that the Participating Dealers shall be a third party beneficiary of the provisions of Section 8(b) hereof. No purchaser of any of the Series A Preferred Stock shall be construed a successor, representative or assignee by reason of such purchase.
(k) Entire Agreement . This Agreement contains the entire understanding between the parties and supersedes any prior or contemporaneous understandings or written or oral agreements between them respecting the subject matter hereof.
(l) Dispute Resolution; Attorneys’ Fees . If a dispute or claim shall arise with respect to any of the terms or provisions of this Agreement, or with respect to the performance by any of the parties under this Agreement, then the parties agree to submit the dispute to binding and non-appealable arbitration in a venue located in New York, New York in accordance with the rules of the American Arbitration Association (“AAA”). In connection with any such arbitration, each side will be limited to a maximum of three (3) days of argument (including rebuttal), and the parties agree in good faith to minimize discovery burdens (e.g., confine the scope to actual areas in dispute and limit the topics and number of pages on which information is requested to matters directly relevant). The prevailing party shall be reimbursed by the nonprevailing party for all reasonable attorney's fees and costs (including all arbitration costs) incurred by the prevailing party in resolving such dispute. Any award rendered in arbitration may be enforced in any court of competent jurisdiction. Notwithstanding the foregoing, any action by either party to obtain specific performance of any provision of this Agreement by the other party may be brought in any appropriate judicial forum.
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If the foregoing is in accordance with your understanding, please sign and return to us a counterpart hereof, whereupon this Agreement shall constitute a binding agreement between the Placement Agent and the Company.
NEUROTROPE BIOSCIENCE, INC. | |||
By: | /s/ Jim New | ||
Name: Jim New, Ph.D. | |||
Title: Chief Executive Officer |
ACCEPTED AND AGREED TO: | |
EDI Financial, Inc. | |
By: /s/ James Hintz | |
Name: James Hintz | |
Title: Principal | |
Date: June 25, 2013 |
August 12, 2013
EDI Financial, Inc.
12221 Merit Drive, Suite 1020
Dallas, TX 75251
Ladies and Gentlemen:
We refer to the Placement Agreement dated June 25, 2013 (the “Placement Agreement”), between EDI Financial, Inc. (“EDI”) and Neurotrope BioScience, Inc. (“Neurotrope”) in connection with a private placement offering and related transactions described therein. The parties desire to amend the Placement Agreement as set forth herein.
The Placement Agreement is hereby amended as follows. Capitalized terms used herein without definition have the meanings ascribed to them in the Placement Agreement.
Item | Description |
4. Compensation and Expenses |
The first sentence of Section 4(a) shall be replaced in its entirety with the following:
The Placement Agent will be paid a total cash commission of 10% of funds raised from investors introduced by them and will receive (a) on the first $5,595,733 of total gross proceeds, (i) warrants exercisable for a period of ten (10) years from the date of issuance, to purchase a number of shares of Common Stock equal to 7.5% of the number of shares of Series A Preferred Stock sold to investors introduced by them, with a per share exercise price of $0.01, and (ii) warrants exercisable for a period of ten (10) years from the date of issuance, to purchase a number of shares of Series A Preferred Stock equal to 2.5% of the number of shares of Series A Preferred Stock sold to investors introduced by them, with a per share exercise price of $1.00, and (b) on total gross proceeds in excess of $5,595,733, warrants exercisable for a period of ten (10) years from the date of issuance, to purchase a number of shares of Series A Preferred Stock equal to 10% of the number of shares of Series A Preferred Stock sold to investors introduced by them, with an exercise price of $1.00 per share. |
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Neurotrope | Hannah Rose |
Except as set forth herein, the Placement Agreement is otherwise hereby ratified and confirmed and remains in full force and effect in accordance with its terms. If the foregoing correctly sets forth your understanding, please evidence your agreement by executing a copy of this letter in the space set forth below.
NEUROTROPE BIOSCIENCE, INC.
By: | /s/ Jim New | ||
Name: | Jim New | ||
Title: | CEO |
AGREED TO AND ACCEPTED:
As of the 12th day of August, 2013
EDI FINANCIAL, INC.
By: | /s/ James Hintz | ||
Name: | James Hintz | ||
Title: | Principal |
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (“Agreement”), dated as of February 25, 2013 (the “Effective Date”), is made by and between Neurotrope BioScience, Inc., a Delaware corporation (the “Company”), and James S. New, a resident of the State of Florida (the “Executive”).
WITNESSETH :
WHEREAS , the Company desires to employ the Executive, and the Executive wishes to be employed by the Company, on the terms and conditions set forth herein; and
WHEREAS, the Company and the Executive desire to enter into this Agreement to set forth the terms and conditions of the employment relationship between the Company and the Executive.
NOW, THEREFORE , in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows.
1. Nature of Employment .
(a) Employment . The Company hereby engages the Executive, effective as of the Effective Date (as defined in that certain Technology License and Services Agreement, dated as of October 31, 2012, by and between the Company, on the one hand, and Blanchette Rockefeller Neurosciences Institute (“BRNI”) and NRV II, LLC, on the other hand (the “License Agreement”)), as a full-time employee to hold the office of President and Chief Executive Officer for the Employment Period (as defined below), and the Executive accepts such employment, on the terms and conditions set forth in this Agreement. Throughout the Employment Period the Executive shall report to, and shall be subject to the direction of, the Company’s Board of Directors (the “Board”) and shall perform and discharge well and faithfully the duties that the Board may assign to him from time to time (consistent with the position of President and Chief Executive Officer) in connection with the conduct of the Company’s business. If the Executive is elected or appointed a director of the Company or any subsidiary thereof during the Employment Period, the Executive will serve in such capacity without additional compensation, unless otherwise specified.
(b) Obligations . Throughout the Employment Period, the Executive shall devote the Executive’s full employment energies, interests, abilities and time to the performance of the Executive’s duties and shall not render to others any service of any kind for compensation, unless the Executive receives written consent of the Board. Notwithstanding the foregoing, Executive may (i) serve on civic or charitable boards or committees, (ii) deliver lectures, (iii) fulfill speaking engagements, (iv) teach at educational institutions, and (v) manage personal investments; provided that such activities do not individually or in the aggregate interfere with the performance of Executive’s duties under this Agreement. Subject to the prior written consent of the Board, Executive may also serve as a director of any company or business that does not compete with the Company provided that such activities do not individually or in the aggregate interfere with the performance of Executive’s duties under this Agreement.
2. Term and Termination of Employment .
(a) Term . Subject to prior termination in accordance with this Article 2 , the term of this Agreement shall commence on the Effective Date and such term shall continue for four (4) years following the Effective Date (as defined in the License Agreement) (such four (4) year period, the “Employment Period”).
(b) Termination by Company with Cause .
(1) During the Employment Period, the Company may terminate Executive’s employment (and this Agreement) at any time for Cause (as defined below).
(2) As used herein, the term “Cause” shall mean: (i) any material breach of this Agreement by the Executive; (ii) any willful or gross neglect by the Executive of his duties and responsibilities hereunder; (iii) any fraud, criminal misconduct, breach of fiduciary duty, dishonesty, gross negligence or willful misconduct by the Executive in connection with the performance of his duties and responsibilities hereunder; (iv) the intoxication of Executive or Executive being under the influence of illegal or illegally obtained drugs during business hours or while on call, or Executive’s habitual drunkenness or addiction to drugs (provided that this shall not restrict the Executive from taking physician-prescribed medication in accordance with the applicable prescription); (v) the commission by the Executive of any (A) felony or (B) crime or act of moral turpitude; (vi) any action by the Executive that may materially impair or damage the reputation of the Company; (vii) insubordinate disregard of any lawful direction given to the Executive by the Board; or (viii) failure or refusal to comply with the Company's policies and procedures.
(3) Upon termination by Company for Cause during the Employment Period, Executive shall be entitled only to accrued and unpaid Salary (as defined below) through the date of termination and payment for any unused vacation or leave accrued through the date of termination of employment (“For Cause Compensation”).
(c) Termination by Company without Cause or by Executive for Good Reason .
(1) During the Employment Period, the Company may terminate Executive’s employment (and this Agreement) at any time without Cause and the Executive may resign for Good Reason (as defined below).
(2) In the event that during the Employment Period, the Company terminates Executive’s employment without Cause or the Executive resigns his employment for Good Reason (as defined below), then Executive shall be entitled to the following (“Good Reason Compensation”): (i) severance in a lump sum equal to one (1) year’s Salary to be paid to Executive twenty-one (21) days after the date of such termination or resignation, as applicable (or such later date as may be necessary to avoid any adverse tax consequences under Section 409(A) of the Internal Revenue Code) and payment for any unused vacation or leave accrued but unused through the date of termination or resignation, as applicable; and (ii) in the event the Executive elects to continue coverage for himself and his family under the Company’s health insurance plan pursuant to COBRA (or, if the Company has not yet adopted such a plan, then under his individual family health insurance plan pursuant to Section 3(d) ), the Company shall pay for such health insurance for a period of one (1) year from the date of termination or resignation, as applicable (or until such earlier date as Executive discontinues COBRA coverage), provided that such payment shall not exceed the amounts paid or payable by the Company for Executive’s health insurance plan during the twelve (12) month period immediately preceding such termination or resignation (and Executive shall be responsible for the payment of all amounts in excess thereof with respect to such health insurance plan).
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(3) As used herein, the term “Good Reason” shall mean the happening of any of the following events:
(i) | the material diminution of Executive’s title, duties or responsibilities with the Company; |
(ii) | the Company’s material breach of any of its obligations under this Agreement; provided however, that the Executive shall have given Company written notice of any such ground(s) for Good Reason set forth in the foregoing clauses (i), (ii) or (iii), and Company shall have failed to cure such ground(s) (if curable) within twenty- one (21) days after the date of such notice. If the ground(s) for Good Reason is cured in all material respects within the twenty- one (21) day period, it shall be deemed for all purposes that such ground(s) for Good Reason has not occurred; or |
(iii) | the Company’s election to repurchase any portion of Executive’s unvested equity pursuant to Section 6B of that certain Common Stock Purchase Agreement by and among the Company, the Executive and Northlea Partners LLLP (the “Common Stock Purchase Agreement”). |
(d) Termination by Executive (Resignation) .
(1) At any time during the Employment Period, Executive may terminate his employment (and this Agreement) without Good Reason by giving not less than thirty (30) days prior written notice of such termination to Company.
(2) In the event Executive voluntarily terminates his employment without Good Reason at any time during the Employment Period, Executive shall be entitled only to the compensation and benefits set forth in Section 2(b) of this Agreement; provided, Executive’s right to any equity will be governed by the Common Stock Purchase Agreement.
(e) Termination of Employment by Reason of Death or Disability . If Executive shall die or become permanently disabled such that he cannot perform his duties or responsibilities during the Employment Period as required under this Agreement, this Agreement shall terminate automatically as of the date of death or disability, and Company shall pay and/or deliver to Executive’s legal representative the compensation and benefits under Section 2(b) , which would otherwise be payable to Executive up to the end of the month in which death or disability occurs.
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(f) Termination Prior to the Employment Period . This Agreement shall automatically and immediately terminate upon any termination of (i) that certain Independent Contractor Agreement by and between the Company and Execute, dated as of the Effective Date (the “Independent Contractor Agreement”) or (ii) prior to the commencement of the Employment Period, the License Agreement. In the event that, other than during the Employment Period, the Executive’s employment (and this Agreement) is terminated pursuant to this Article 2 or Executive resigns pursuant to this Article 2 , Executive shall not be entitled to any compensation or benefits under this Agreement.
(g) Other Benefits . Except as otherwise expressly provided herein, (i) Executive shall not be entitled to any other salary, bonuses, employee benefits or compensation from the Company after the date of termination or expiration of this Agreement or resignation of the Executive and (ii) all of Executive's rights to salary, bonuses, employee benefits and other compensation hereunder which would have accrued or become payable after the date of termination or expiration of this Agreement or resignation of Executive shall cease and be forfeited as of such date, other than those expressly required under applicable law.
3. Compensation and Benefits .
(a) Prior to the Employment Period . Prior to the commencement of the Employment Period, Executive shall not be considered an employee of the Company and Executive shall not be entitled to any salary, reimbursements, vacation days or other compensation or benefits.
(b) Salary . During the Employment Period, Executive shall receive an initial annual salary in the amount of two hundred fifty thousand dollars ($250,000) which shall be payable in periodic installments in accordance with the standard payroll practices of the Company in effect from time to time (“Salary”), and shall be prorated during the year in which the Employment Period commences. Beginning on the later of (i) the second anniversary of the commencement of the Employment Period, and (ii) the closing of the B Round Financing (as defined in the License Agreement) (such date hereinafter referred to as the “Salary Increase Date”), the Salary shall be increased to three hundred thousand dollars ($300,000).
(c) Bonus . In addition to the Salary, the Executive shall be entitled to receive an annual guaranteed cash bonus (“Bonus”) equal to: (i) fifty thousand dollars ($50,000) per annum for all periods during the Employment Period but prior to the Salary Increase Date; and (ii) one hundred thousand dollars ($100,000) per annum for all periods after the Salary Increase Date. The Bonus shall be paid not later than each anniversary of the date of the commencement of the Employment Period and shall be prorated between the foregoing amounts during the year in which the Salary Increase Date occurs.
(d) Fringe Benefits . The Company shall also make available to the Executive, throughout the Employment Period, such benefits and perquisites as are generally provided by the Company to its executives; provided, however, that nothing herein contained shall be deemed to require the Company to adopt or maintain any particular plan or policy. In addition, during the Employment Period and prior to such time as the Company implements a group health insurance plan for its employees, the Company shall reimburse Executive for the cost of family and Blue Shield of Florida, up to a maximum of one thousand two hundred fifty four dollars ($1,254) per month, and the Company shall pay Executive a gross-up with respect to taxes actually paid by Executive with respect to such reimbursement that are evidenced by written documentation provided to the Company.
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(e) Expenses . During the Employment Period, the Company shall reimburse the Executive, upon presentment by the Executive to the Company of appropriate receipts and vouchers therefor, for any reasonable out-of-pocket business expenses incurred by the Executive in connection with the performance of his duties and responsibilities hereunder. Without limiting the generality of the foregoing, it is expressly agreed that the Company shall reimburse Executive for business-class air travel on all international flights he takes in the performance of his duties hereunder during the Employment Period.
(f) Reimbursement of Legal Fees . Promptly following the commencement of the Employment Period, the Company shall reimburse the Executive for legal fees he has incurred in connection with the negotiation and drafting of this Agreement and the Common Stock Purchase Agreement, provided that the maximum amount of such reimbursement shall be ten thousand dollars ($10,000).
(g) D&O Insurance . As soon as possible following the commencement of the Employment Period (but in no event more than ninety (90) days thereafter), the Company shall, subject to applicable law, acquire and maintain D&O insurance in favor of each officer of the Company (including Executive) and each member of the Board, with coverage of at least twelve million dollars ($12,000,000).
4. Vacation, Personal Days and Sick Days .
During the Employment Period, the Executive will be entitled to holidays, personal days and sick days in accordance with the Company’s standard policies and procedures in effect from time to time. The Executive will also be entitled to four (4) weeks of paid vacation during each rolling twelve (12) month period following the date of the commencement of the Employment Period.
5. Nondisclosure of Confidential and Proprietary Information .
(a) Obligation to Maintain Confidentiality . The Executive acknowledges that during the term of the Employment Period, Executive will have access to and possession of trade secrets, confidential information, and proprietary information (collectively, as defined more extensively below, “Confidential Information”) of the Company, its parents, subsidiaries, and affiliates and its and their respective customers, suppliers, manufacturers, collaborators, partners, clients, licensors, licensees, and other business relations. The Executive recognizes and acknowledges that this Confidential Information is valuable, special, and unique to the Company’s business, and that access thereto and knowledge thereof are essential to the performance of the Executive’s duties and responsibilities to the Company. During the Employment Period and thereafter, Executive will keep secret and will not use or disclose to any person or entity other than the Company, in any fashion or for any purpose whatsoever, any Confidential Information relating to the Company, its parents, subsidiaries, affiliates, or its or their respective customers, suppliers, manufacturers, collaborators, partners, clients, licensors, licensees, and other business relations, except at the request of the Company. Executive will use no less than a reasonable standard of care to prevent disclosing to third parties any Confidential Information.
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(b) Definition . The term “Confidential Information” shall mean trade secrets, confidential data and confidential information relating to the business of the Company, its parents, subsidiaries, or affiliates or its or their respective customers, suppliers, manufacturers, collaborators, partners, clients, licensors, licensees, and other business relations, that is or has been disclosed to Executive or of which Executive became aware as a consequence of or through Executive’s employment with the Company and that has value to the Company and is not generally known to the competitors of the Company and includes but is not limited to information (including in written form, in digital form, in graphic form, in electronically stored form, or in oral transmission or memorization) concerning the Company’s business or operations plans, strategies, portfolio, prospects or objectives, structure, products, product development, technology, distribution, sales, services, support and marketing plans, practices, and operations, research and development, financial records and information, and Inventions (as defined below).
(c) Third Party Information . The Executive further recognizes that the Company has received and in the future will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the Employment Period and thereafter, Executive will hold Third Party Information in the strictest confidence and will not disclose Third Party Information to anyone (other than Company personnel who need to know such information in connection with their work for the Company) or use Third Party Information, except in connection with Executive’s duties and responsibilities required under this Agreement for the Company, unless expressly authorized by the Company in writing.
(d) Treatment and Ownership of Confidential Information . The Executive shall store and maintain all Confidential Information in a secure place. On the termination or expiration of the Employment Period, Executive shall, at the Company’s option, promptly deliver to the Company or destroy all records, data, information, and other documents, in any form or medium, produced or acquired by Executive during the Employment Period, and all copies thereof. Such material at all times will remain the exclusive property of the Company, unless otherwise agreed to in writing by the Company. Upon termination or expiration of the Employment Period, Executive shall make no further use of any Confidential Information on his or his own behalf or on behalf of any other person or entity other than the Company.
(e) Use of Information of Prior Employers . At no time will Executive improperly use or disclose any confidential information or trade secrets, if any, of any former employer or any other person to whom Executive has an obligation of confidentiality, or bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any other person to whom Executive has an obligation of confidentiality unless consented to in writing by that former employer or person.
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6. Assignment of Inventions and Intellectual Property .
(a) Developments . The term “Developments” shall mean information, materials, systems, processes, formulae, formulations, compositions, biomarkers, functional specifications, technology, computer software (including source code, executable code, pseudocode, algorithms, firmware, interfaces, data, databases, and documentation), programs and displays, know-how (including all biological, chemical, pharmacological, toxicological, clinical, manufacturing assay and related data), ideas, works of authorship, creations, manuscripts, innovations, apparati, methods, protocols, reports, improvements, discoveries, inventions, developments, designs, techniques, marketing plans, strategies, forecasts, new and proposed products and technologies, unpublished financial statements and financial information, business plans, budgets, projections, licenses, prices, costs, training methods and materials, sales prospects, and customer, supplier, manufacturer, collaborator, partner, client, licensor, licensee or other business relation lists and any other work product, together with (i) all causes of action for past, present or future infringement, misappropriation or violation of any of the foregoing and (ii) all goodwill in connection with any of the foregoing.
(b) Ownership of Developments . In consideration of Executive’s employment, Executive expressly acknowledges and agrees that the Company shall have exclusive, unlimited ownership rights to all Developments created, prepared, derived or developed in connection with, or arising from, Executive’s employment relationship with the Company (whether solely or jointly with others, whether original or considered enhancements, improvements or modifications, whether or not completed, (whether on or after the Effective Date), and whether or not protectable as trade secrets or confidential information, service marks or trademarks, or patent, copyright, mask work or any other intellectual industrial or other form of property protection or proprietary rights) (“Inventions”). Executive further expressly acknowledges and agrees that all such Inventions shall be deemed made in the course and scope of Executive’s employment with the Company and shall belong exclusively to the Company, with the Company having the sole right to obtain, hold and renew, in its own name and for its own benefit, all registrations and other protections that may be available by contract, license, law, equity and/or regulation. Any copyrightable Invention shall be deemed a "work made for hire" under the copyright laws of the United States (17 U.S.C. 101 et seq.), and the Company shall own all rights therein. To the extent that exclusive title or ownership rights in any Inventions do not originally vest in the Company as contemplated, Executive hereby irrevocably assigns, transfers and conveys (and shall assign, transfer and convey in the future) to the Company all right, title and interest in and to such Inventions (including all intellectual property and other rights therein and thereto); provided, however, that the foregoing assignment shall not apply to any Invention that Executive developed entirely on his own time without using the equipment, supplies, facilities or Confidential Information of the Company, unless such Invention (i) relates at the time of conception or reduction to practice to the Company’s business or actual or demonstrably anticipated research or development, or (ii) results from any work performed by Executive for the Company. Executive shall give the Company all reasonable assistance and shall execute all documents reasonably necessary to assist and enable the Company to perfect, preserve, enforce, register and record its rights with respect to any Invention.
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7. Disclosure of Inventions and Developments .
(a) Disclosure . Executive shall promptly disclose Inventions to the Board and shall perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm the Company's ownership (including the execution of assignments, consents, powers of attorney, and other instruments).
(b) Pre-Existing Developments . Executive hereby represents and warrants to the Company that Exhibit A to this Agreement lists any and all Developments that (i) are owned by Executive or were created, prepared, derived or developed by Executive (whether solely or jointly with others) prior to the Effective Date, and (ii) relate to the Company’s actual or anticipated business, research or development or products or services (“Pre-Existing Developments”). Executive will not use in connection with his employment with the Company (including in any products or services of the Company), or provide to the Company, any Pre- Existing Developments, without the prior written consent of the Board. To the extent that Executive uses any Pre-Existing Developments in connection with his employment with the Company (including in any products or services of the Company), or provides to the Company any Pre-Existing Developments, Executive hereby grants to the Company a perpetual, irrevocable, transferable, worldwide, fully paid up, royalty-free license, with the right to sublicense, to make, have made, reproduce, copy, sell, offer for sale, import, export, display, perform and prepare derivative works of, such Pre-Existing Developments.
8. Return of Company Property .
Promptly following the termination or expiration of the Employment Period, the Executive will deliver to the Company (and will not keep in his possession, recreate or deliver to anyone else) any and all devices, records, recordings, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, computer materials, equipment, other documents or property, together with all copies thereof (in whatever medium recorded), belonging to the Company, its successors or assigns. The Executive expressly acknowledges and agrees that any property situated on the Company's premises and owned by the Company (including computer disks and other digital, analog or hard copy storage media, filing cabinets or other work areas) is subject to inspection by Company personnel at any time with or without notice.
9. Legal and Equitable Remedies .
Because the Executive's services are personal and unique and because the Executive may have access to, and become acquainted with, Confidential Information and Developments of the Company (including Inventions), Executive expressly acknowledges and agrees that (i) a breach or threatened breach of any of Articles 5 , 6 , 7 , 8 or 10 by the Executive would result in irreparable harm for which money damages would be an inadequate remedy, and (ii) the Company will have the right to enforce Articles 5 , 6 , 7 , 8 and 10 and any of their provisions by injunction, restraining order, specific performance or other injunction relief, without posting a bond or other security, and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement. The Company’s remedies under this Article 9 are not exclusive and shall not prejudice or prohibit any other rights or remedies under this Agreement or otherwise.
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10. Non-Disparagement, Non-Competition and Non-Solicitation .
(a) Non-Disparagement . So long as Executive is an employee of the Company and for a period of twelve (12) months thereafter, he shall not directly or indirectly through another person or entity make any negative or disparaging statements or communications regarding the Company.
(b) Non-Competition and Non-Solicitation . Executive expressly acknowledges and agrees that during the course of his employment with the Company pursuant to this Agreement, he has and will become familiar with Confidential Information and Developments of the Company (including Inventions) and that his services will be of special, unique and extraordinary value to the Company. Therefore, Executive agrees that:
(1) Non-Competition . Until twelve (12) months after Executive is no longer an employee of the Company, Executive shall not, within the United States, or any other country, state or territory in which the Company conducts or plans to conduct business at the time of the expiration or termination of the Employment Period, directly or indirectly own, manage, control, participate in, consult with, render services for, or in any manner engage in, any business relating to any of the Licensed Technology (as defined in the License Agreement) or any of the diseases, disorders or dysfunctions set forth on Exhibit B or any neurodegenerative diseases, disorders or dysfunctions related thereto (the “Restricted Business”); provided , however, that (i) Executive may own, directly or indirectly, solely as an investment, publicly traded securities of any entity if Executive (A) is not a controlling person with respect to such entity and (B) does not, directly or indirectly, own two percent (2%) or more of any class of the securities of such entity; and (ii) this Section 10(b)(1) shall not prevent Executive from rendering services for an entity that engages in businesses that are both related and unrelated to the Restricted Business, provided that Executive does not directly or indirectly render any services relating to the Restricted Business.
(2) Non-Solicitation . For so long that Executive is an employee of the Company and for a period of twenty-four (24) months thereafter, Executive shall not directly or indirectly through another entity (i) induce or attempt to induce an employee of, or consultant to, the Company (each such employee or consultant, a “Restricted Employee”) to leave the employ of, or to stop rendering services to, the Company or in any way interfere with the relationship between the Company and any Restricted Employee, (ii) hire any person who was a Restricted Employee of the Company at any time during the Employment Period, (iii) induce or attempt to induce any customer, supplier, manufacturer, collaborator, partner, client, licensor, licensee or other business relation of the Company to cease doing business with the Company or in any way interfere with the relationship between any such any customer, supplier, manufacturer, collaborator, partner, client, licensor, licensee or other business relation of the Company, or (iv) directly or indirectly acquire or attempt to acquire an interest in any business relating to the business of the Company and with which any of the Company has entertained discussions or has requested and received information relating to the acquisition of such business by the Company in the eighteen (18) month period immediately preceding the date on which Executive ceases to be an employee of the Company; provided , however, that Executive may own, directly or indirectly, solely as an investment, publicly traded securities of any entity if Executive (A) is not a controlling person with respect to such entity and (B) does not, directly or indirectly, own two percent (2%) or more of any class of the securities of such entity.
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(3) Enforcement . Executive expressly acknowledges and agrees that the services to be rendered under the provisions of this Agreement are of a unique nature and that it would be difficult or impossible to replace such services. If, at the time of enforcement of this Article 10 , a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographic area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. In addition, in the event of a breach or violation by Executive of this Article 10 , the time periods referenced in this Article 10 shall be automatically extended by the amount of time between the initial occurrence of the breach or violation and when such breach or violation has been duly cured.
(4) Additional Acknowledgments . Executive expressly acknowledges and agrees that the provisions of this Article 10 are in consideration of (i) employment with the Company and (ii) additional good and valuable consideration as set forth in this Agreement. In addition, Executive expressly acknowledges and agrees (A) that the restrictions contained in this Article 10 do not preclude Executive from earning a livelihood, (B) that the potential harm to the Company of the non-enforcement of this Article 10 outweighs any potential harm to Executive of its enforcement by injunction or otherwise, (C) that he has carefully read this Agreement and has given careful consideration to the restraints imposed upon Executive by this Agreement, and is in full accord as to their necessity for the reasonable and proper protection of Confidential Information and Developments of the Company (including Inventions) now existing or to be developed in the future, and (D) that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, time period and geographic area.
11. Notices .
Any notice of communication permitted or required by this Agreement shall be in writing and shall be effective from the date delivered personally or sent via overnight courier or certified mail, return receipt requested:
If to the Company:
Kirkland & Ellis LLP
300 N. LaSalle
Chicago, IL 60654
Attn: Neurotrope BioScience, Inc. c/o William Singer, Secretary
Fax: 312-862-2200
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Copy to (which shall not constitute notice):
Steptoe & Johnson
P.O. Box 1616
Morgantown, WV 26507-1616
Attn: Tom Vorbach
Fax: (304) 598-8116
If to the Executive:
James S. New
10732 Hawk’s Vista St.
Plantation, FL 33324
Copy to (which shall not constitute notice):
Kaiser Saurborn & Mair, P.C.
111 Broadway, 18th Floor
New York, New York 10006
Attn: David N. Mair, Esq.
12. General .
(a) Waiver . No waiver by either party to this Agreement of any breach of this Agreement will be a waiver of any preceding or subsequent breach. No waiver by either party to this Agreement of any right under this Agreement will be construed as a waiver of any other right. The parties will not be required to give notice to enforce strict adherence to all terms of this Agreement.
(b) Successors and Assigns . Neither this Agreement nor any of the Executive’s rights, powers, duties, or obligations hereunder may be assigned by the Executive. This Agreement shall be binding upon and inure to the benefit of Executive and Executive’s heirs and legal representatives and the Company and its successors. Successors of the Company shall include, without limitation, any company or companies acquiring, directly or indirectly, all or substantially all of the assets of the Company, whether by merger, consolidation, purchase, lease or otherwise, and successor shall thereafter be deemed the “Company” for the purpose hereof.
(c) No Strict Construction; Descriptive Headings; Interpretation . The captions and Article and Section headings used in this Agreement are for convenience of reference only, and will not affect the construction or interpretation of this Agreement or any of the provisions hereof.
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(d) Choice of Law; Venue . The validity and construction of this Agreement or any of its provisions will be governed by, and constructed in accordance with, the laws of the State of Delaware without regard to its conflicts of law. Executive hereby irrevocably submits to the exclusive jurisdiction of the courts of the United States of America located in the State of Delaware, for the purposes of any action or lawsuit arising out of this Agreement. Executive expressly acknowledges and agrees that service of any process, summons, notice, or document by personal delivery, by registered mail, or by a recognized international express delivery service to Executive’s address set forth in Article 11 shall be effective service of process for any action or lawsuit in the applicable court with respect to any matters to which it has submitted to jurisdiction in this Section 12(d) . Executive irrevocably and unconditionally waives any objection to the laying of venue of any action or lawsuit arising out of this Agreement in such court, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action or lawsuit brought in any such court has been brought in an inconvenient forum.
(e) Counterparts . This Agreement may be executed in counterparts, each of which will be deemed to be an original hereof, but all of which together will constitute one and the same instrument.
(f) Complete Agreement . This Agreement constitutes the sole and entire agreement and understanding between the parties hereto as to the subject matter hereof, and supersedes all prior discussions, agreements and understandings of every kind and nature between them as to such subject matter. Any modification to this Agreement must be in writing and must be signed by both parties.
(g) No Third Party Beneficiaries . This Agreement is intended for the sole and exclusive benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors and permitted assigns, and no other person or entity will have any right to rely on this Agreement or to claim or derive any benefit herefrom absent the express written consent of the party to be charged with such reliance or benefit.
(h) Severability . If any provision of this Agreement is held invalid or unenforceable, either in its entirety or by virtue of its scope or application to given circumstances, such provision will thereupon be deemed modified only to the extent necessary to render same valid, or not applicable to given circumstances, or excised from this Agreement, as the situation may require; and this Agreement will be construed and enforced as if such provision had been included herein as so modified in scope or application, or had not been included herein, as the case may be.
(i) Executive’s Acknowledgements . Executive hereby expressly acknowledges and represents that (i) he has consulted with independent legal counsel regarding his rights and obligations under this Agreement, and (ii) that the agreements herein are reasonable and necessary for the protection of the Executive and the Company and are an essential inducement to the Company to enter into this Agreement.
(j) Survival . Article 2 and Articles 5 through 12 shall survive the termination or expiration of the Executive’s employment and the assignment of this Agreement by the Company to any successor in interest or other assignee.
The Executive has read this Agreement carefully and fully understands its terms.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first set forth above.
Neurotrope BioScience, Inc. | |||
By: | /s/ William Singer | ||
Name: | William Singer | ||
Title: | Secretary | ||
/s/ James S. New | |||
James S. New | |||
[Signature Page -Employment Agreement]
Exhibit A
Pre-Existing Developments
Exhibit B
• | Pick’s disease |
• | Frontal lobe dementia |
• | Lewy Body disease |
• | Parkinson’s disease |
• | Stroke (infarctive and hemorrhagic) |
• | Head trauma |
• | Mental retardation (including Fragile X and autism spectrum disorders) |
• | Depression |
• | Huntington’s Chorea |
• | Alcoholic brain degeneration (a/k/a Wernicke-Korsakoff syndrome) |
• | Diseases, disorders and dysfunctions relating to attention and (including Post Traumatic Stress Disorder) |
• | Diseases, disorders and dysfunctions relating to memory (including those resulting from cardiopulmonary bypass or post-operative general amnesia and ischemia) |
EXHIBIT 10.10
CONSULTING AGREEMENT
This Consulting Agreement (the “Agreement” ) is made and entered into as of June 2, 2013 (the “Effective Date”), by and between Medical Cash Management Solutions , LLC , a New York limited liability company ( “MCMS” ), and Neurotrope BioScience, Inc. , a Delaware corporation ( “Neurotrope” ).
RECITALS
Whereas, Neurotrope desires to engage MCMS, and MCMS desires to accept the engagement by Neurotrope , to act as a consultant to Neurotrope under the terms and conditions set forth in this Agreement.
Now, Therefore , in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
AGREEMENT
1. Consulting Services. Subject to the terms and conditions of this Agreement, effective as of the date hereof, Neurotrope hereby engages MCMS, and MCMS hereby accepts the engagement by Neurotrope, to act as a consultant to Neurotrope for the duration of the Term (as defined below). In its capacity as a consultant to Neurotrope, MCMS agrees to perform the services identified in Appendix A and such other services relating to Neurotrope’s business and operations as are reasonably requested from time to time by Neurotrope's chief executive officer or board of directors (collectively, the “Services” ). The manner and means by which MCMS chooses to perform the Services shall be in the discretion and control of MCMS; provided , however , that MCMS shall cause all Services to be performed by Robert Weinstein, a managing member of MCMS (" Weinstein "), and provided , further , that MCMS shall perform all Services in a timely and professional manner, using a degree of skill and care at least consistent with industry standards.
2. Compensation. As consideration for MCMS’s performance of the Services, Neurotrope shall pay to MCMS $20,000 (twenty thousand dollars) per month (the " Consulting Fees "), in arrears, with $10,000 (ten thousand dollars) paid on the 15 th day of each month and $10,000 (ten thousand dollars) at the end of each month for the entire Term of this Agreement or until its earlier termination pursuant to Section 8 hereof.
3. Expenses. Neurotrope shall reimburse MCMS for any reasonable out-of-pocket expenses, including, without limitation, reasonable travel expenses, incurred in connection with MCMS’s performance of the Services; provided , however , that MCMS must submit such written documentation of all such expenses as Neurotrope may reasonably require. Neurotrope will reimburse MCMS for expenses covered by this Section 3 within fifteen (15) days of the date that MCMS submits proper documentation of such expenses to Neurotrope.
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4. Independent Contractor Relationship. MCMS’s relationship with Neurotrope shall be solely that of an independent contractor, and nothing in this Agreement shall be construed to create a partnership, joint venture, or employer-employee relationship. MCMS is not the agent of Neurotrope and is not authorized to make any representation, contract or commitment on behalf of Neurotrope. MCMS shall not be entitled to any of the benefits that Neurotrope may make available to its employees, such as group insurance, profit sharing or retirement benefits. MCMS shall be solely responsible for all tax returns and payments required to be filed with or made to any federal, state or local tax authority with respect to MCMS’s performance of the Services and receipt of the Consulting Fees pursuant to this Agreement. Neurotrope will regularly report amounts paid to MCMS by filing Form 1099-MISC with the Internal Revenue Service as required by law, but given that MCMS is an independent contractor, Neurotrope will not withhold or make payments for social security, make unemployment insurance or disability insurance contributions, or obtain worker’s compensation insurance on MCMS’s behalf. MCMS agrees to accept exclusive liability for complying with all applicable federal, state and local laws governing self-employed individuals, including, without limitation, obligations such as payment of taxes, social security, disability and other contributions based on the Consulting Fees paid to MCMS. MCMS hereby agrees to indemnify, hold harmless and defend Neurotrope from and against any and all such taxes and contributions, as well as any penalties and interest arising therefrom.
5. Information and Intellectual Property Rights.
5.1 Proprietary Information. MCMS agrees that, during the Term and thereafter, MCMS shall take all steps necessary to hold the Proprietary Information (as defined below) in trust and confidence, shall not use such Proprietary Information in any manner or for any purpose except as expressly set forth in this Agreement and shall not disclose any such Proprietary Information to any third party without first obtaining Neurotrope’s express written consent on a case-by-case basis; provided , however , that MCMS may disclose certain Proprietary Information, without violating its obligations under this Agreement, to the extent such disclosure is required by a valid order of a court or other governmental body having jurisdiction, provided that MCMS provides Neurotrope with reasonable prior written notice of such disclosure and uses commercially reasonable efforts to obtain, or to assist Neurotrope in obtaining, a protective order preventing or limiting the disclosure and/or requiring that the Proprietary Information so disclosed be used only for the purposes for which the law or regulation required, or for which the order was issued. For purposes of this Agreement, “Proprietary Information” means any and all confidential and/or proprietary information regarding Neurotrope or any of its affiliates and their current and proposed business and operations, including, without limitation, information pertaining to their current or forecasted capital structure, equity or debt financing or investment activities, strategic plans, current or proposed products or services, investors, employees, directors, consultants, and other business and contractual relationships; provided , however , that information received by MCMS shall not be considered to be Proprietary Information if MCMS can demonstrate with competent evidence that such information has been published or is otherwise readily available to the public other than by a breach of this Agreement.
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5.2 Third-Party Information. MCMS understands that Neurotrope has received and will in the future receive from third parties certain confidential or proprietary information relating to such third parties (collectively, “Third-Party Information” ), subject to duties on Neurotrope’s part to maintain the confidentiality of such Third-Party Information and to use such Third-Party Information only for certain limited purposes. MCMS agrees to hold all Third-Party Information in confidence and not to disclose to anyone (other than personnel of Neurotrope) or to use, except in connection with MCMS’s performance of the Services, any Third-Party Information unless expressly authorized in writing by an executive officer of Neurotrope.
5.3 Intellectual Property Rights. MCMS agrees that any and all intellectual property and intellectual property rights that MCMS conceived, reduced to practice or developed during the course of its performance of services as a director, officer, employee or consultant for Neurotrope, together with any and all intellectual property and intellectual property rights that MCMS conceives, reduces to practice or develops during the course of its performance of the Services pursuant to this Agreement, in each case whether alone or in conjunction with others (all of the foregoing being collectively referred to herein as the “Inventions” ), shall be the sole and exclusive property of Neurotrope. Accordingly, MCMS hereby: (i) assigns and agrees to assign to Neurotrope its entire right, title and interest in and to all Inventions; and (ii) designates Neurotrope as its agent for, and grants to the officers of Neurotrope a power of attorney (which power of attorney shall be deemed coupled with an interest) with full power of substitution solely for the purpose of, effecting the foregoing assignments from MCMS to Neurotrope. MCMS further agrees to cooperate with and provide reasonable assistance to Neurotrope to obtain and from time to time enforce any and all current or future intellectual property rights covering or relating to the Inventions in any and all jurisdictions.
6. No Conflicting Obligation. MCMS represents that its entering into this Agreement, its performance of all of the terms of this Agreement and its performance of the Services pursuant to this Agreement do not and will not breach or conflict with any agreement or other arrangement between MCMS and any third party. During the Term, MCMS agrees not to enter into any agreement that conflicts with this Agreement. Notwithstanding the foregoing, during the Term, Weinstein may consult (directly or as an agent of MCMS) with other companies as a financial advisor or CFO provided these companies are not in direct competition with Neurotrope. Weinstein also may (i) serve on civic or charitable boards or committees, (ii) deliver lectures, (iii) fulfill speaking engagements, (iv) teach at educational institutions, and (v) manage personal investments; provided that such activities do not individually or in the aggregate directly interfere with the performance of Weinstein's or MCMS’s duties under this Agreement. Subject to the prior written consent of the board of directors which request will not be unreasonably denied, Weinstein may also serve as a director of any company or business that does not directly compete with Neurotrope provided that such activities do not individually or in the aggregate interfere with the performance of Weinstein's or MCMS’s duties under this Agreement.
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7. Indemnification and Insurance Related to Employment by the Company .
Neurotrope shall indemnify MCMS and hold MCMS harmless from and against any claim, loss or cause of action arising from or out of MCMS’s performance after the Effective Date (and within the scope of his responsibilities) as a consultant of Neurotrope or any of its subsidiaries or other affiliates or predecessors or in any other capacity, including any fiduciary capacity, in which MCMS serves at Neurotrope’s request, in each case to the maximum extent permitted by law and, to the extent more favorable, to the maximum extent permitted under Neurotrope’s organizational documents. Notwithstanding the foregoing, Neurotrope shall have no obligation of indemnification (including advancement of expenses) with respect to conduct, actions or omissions attributable to the gross negligence, willful or reckless misconduct or malfeasance of MCMS or with respect to conduct, actions or omissions of MCMS occurring after the expiration of the Term of this Agreement or its earlier termination pursuant to Section 8 hereof. Neurotrope shall, consistent with applicable laws, provide for the advancement to MCMS, within ten (10) days of its presentation of invoices or other appropriate documentation, of expenses incurred or sustained in connection with any action, suit or proceeding to which MCMS or its legal representatives may be made a party by reason of its being or having been a consultant of Neurotrope or any of its subsidiaries or other affiliates or predecessors or his being or having been engaged in any other capacity at Neurotrope’s request. The rights under this Section 7 shall in all cases be on terms no less favorable to MCMS than to other consultants of Neurotrope and shall survive the termination or expiration of this Agreement until the expiration of the applicable statute of limitations.
8. Term and Termination.
8.1 Term. This Agreement shall commence on the date hereof and shall continue until November 30, 2013 (the “Initial Term” ). At the end of such Initial Term, this Agreement shall terminate unless extended for one or more additional periods (each, a “Renewal Term” ) by mutual written agreement of the parties. The Initial Term and all Renewal Terms, if any, are collectively referred to herein as the “Term” .
8.2 Automatic Termination. This Agreement shall automatically terminate at any time during the Term upon the event of (a) Weinstein ceasing to be the managing member of MCMS or (b) Weinstein's death.
8.3 Voluntary Termination. Either party may voluntarily terminate this Agreement by delivering thirty (30) days prior written notice to the other party.
8.4 Termination by Neurotrope. Neurotrope may terminate this Agreement at any time during the Term upon delivery to MCMS of notice of the good-faith determination by the majority of the members of the board of directors of Neurotrope (and the accompanying justification therefore) that such Agreement should be terminated for Cause (as defined below) or as a result of Disability (as defined below) of Weinstein. For purposes of this Agreement:
(a) The term “Cause” shall mean: (i) the willful misconduct of MCMS or any of MCMS’s employees, officers or agents; (ii) MCMS’s willful failure to perform the Services; (iii) the causing of intentional damage to the tangible or intangible property of Neurotrope by MCMS or any of MCMS’s employees, officers or agents; (iv) the conviction of Weinstein of any felony or any other crime involving moral turpitude; (v) the performance of any dishonest or fraudulent act by MCMS or any of MCMS’s employees, officers or agents which is, or would be, in each case as determined in good faith by the board of directors of Neurotrope materially detrimental to the best interests of Neurotrope or its stockholders or affiliates; or (vi) a breach of the Agreement by MCMS.
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(b) The term “Disability” shall mean Weinstein’s inability to perform the Services for any period of thirty (30) consecutive days (or any sixty (60) days during any period of twelve (12) consecutive months) by reason of any physical or mental incapacity or illness, as determined by the board of directors of Neurotrope based upon medical advice provided by a licensed physician mutually acceptable to the board of directors of Neurotrope and Weinstein.
8.5 Effect of Termination. The obligations set forth in Sections 4, 5, 6, 8.5 and 9, as well as any outstanding payment or reimbursement obligations of Neurotrope, shall survive any termination or expiration of this Agreement. Upon any termination or expiration of this Agreement and at the written request of Neurotrope, MCMS shall promptly deliver to Neurotrope all documents and other materials of any nature pertaining to the Services, together with all documents and other items containing or pertaining to any Proprietary Information, Third-Party Information or Inventions.
9. Miscellaneous.
9.1 Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day; (iii) five (5) business days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after deposit with a nationally recognized overnight courier, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at the following addresses (or at such other addresses as shall be specified by notice given in accordance with this Section 9.1):
If to MCMS: | Medical Cash Management Solutions, LLC |
c/o Robert Weinstein | |
60 Hampden Lane | |
Irvington, New York 10533 | |
If to Neurotrope: | Neurotrope BioScience, Inc. |
10732 Hawk’s Vista St. | |
Plantation, Florida 33324 | |
Attn: Dr. Jim New | |
President and CEO | |
Fax: 954-452-4656 |
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Copy to (which shall not constitute notice):
Bilzin Sumberg Baena Price & Axelrod LLP | |
1450 Brickell Ave, 23rd Floor | |
Miami, FL 33131 | |
Attn: Laura Vaughn | |
Fax: (305) 351-2272 |
9.2 Headings. The bold-face headings contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.
9.3 Governing Law; Jurisdiction and Venue. This Agreement shall be construed in accordance with, and governed in all respects by, the internal laws of the State of New York without giving effect to its principles of conflicts of laws. Any legal action or other legal proceeding relating to this Agreement or the enforcement of any provision of this Agreement shall be brought or otherwise commenced exclusively in any state or federal court located in the State of New York. Each of the parties hereto: (i) expressly and irrevocably consents and submits to the jurisdiction of each state and federal court located in the State of New York, in connection with any legal proceeding; (ii) agrees that service of any process, summons, notice or document by U.S. mail addressed to such party at the address set forth in Section 8.2 shall constitute effective service of such process, summons, notice or document for purposes of any such legal proceeding; (iii) agrees that each state and federal court located in the State of New York, shall be deemed to be a convenient forum; and (iv) agrees not to assert, by way of motion, as a defense or otherwise, in any such legal proceeding commenced in any state or federal court located in the State of New York, any claim that it is not subject personally to the jurisdiction of such court, that such legal proceeding has been brought in an inconvenient forum, that the venue of such proceeding is improper or that this Agreement or the subject matter of this Agreement may not be enforced in or by such court.
9.4 Successors and Assigns. The rights and liabilities of the parties hereto shall bind and inure to the benefit of their respective successors, heirs, executors and administrators, as the case may be; provided , however , that, as Neurotrope has specifically contracted for MCMS’s Services, which Services are unique and personal, MCMS may not assign or delegate its obligations under this Agreement either in whole or in part to any other contractor, subcontractor, business or entity without the prior written consent of Neurotrope. Neurotrope may assign its rights and obligations hereunder to any person or entity who succeeds to all or substantially all of Neurotrope’s business.
9.5 Remedies Cumulative; Specific Performance. The rights and remedies of the parties hereto shall be cumulative and not alternative. The parties agree that, in the event of any breach or threatened breach by any party to this Agreement of any covenant, obligation or other provision set forth in this Agreement for the benefit of any other party to this Agreement, such other party shall be entitled, in addition to any other remedy that may be available to it, to: (i) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision; and (ii) an injunction restraining such breach or threatened breach. The parties further agree that no person or entity shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 8.6, and the parties irrevocably waive any right they may have to require the obtaining, furnishing or posting of any such bond or similar instrument.
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9.6 Waiver. No failure on the part of any person or entity to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any person or entity in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. No person or entity shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such person or entity, and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.
9.7 Amendments. This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered on behalf of all of the parties hereto.
9.8 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement in writing for such provision, then: (i) such provision shall be excluded from this Agreement; (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded; and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.
9.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
9.10 Entire Agreement. This Agreement sets forth the entire understanding of the parties hereto relating to the subject matter hereof and thereof and supersede all prior agreements and understandings among or between any of the parties relating to the subject matter hereof and thereof.
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In Witness Whereof, the parties hereto have executed this Consulting Agreement as of the date first written above.
Medical Cash Management Solutions, LLC | Neurotrope BioScience, Inc. | |
/s/ Robert Weinstein Robert Weinstein Managing Member |
/s/ James S. New James S. New Chief Executive Officer |
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Appendix A
sERVICES
MCMS shall serve as Chief Financial Officer (“CFO”) of Neurotrope and shall perform all duties typically performed by the CFO of a similarly situated company. During the Term, Weinstein shall devote at least three days per week to the performance of such duties for Neurotrope.
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Exhibit 10.11
NEUROTROPE, INC.
2013 EQUITY INCENTIVE PLAN
1. Purposes of the Plan . The purposes of this Plan are:
· | to attract and retain the best available personnel for positions of substantial responsibility, |
· | to provide incentives to individuals who perform services for the Company, and |
· | to promote the success of the Company’s business. |
The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and other stock or cash awards as the Administrator may determine.
2. Definitions . As used herein, the following definitions will apply:
(a) “ Administrator ” means the Board or any of its Committees as will be administering the Plan, in accordance with Section 4 hereof.
(b) “ Affiliate ” means any corporation or any other entity (including, but not limited to, partnerships and joint ventures) controlling, controlled by, or under common control with the Company.
(c) “ Applicable Laws ” means the requirements relating to the administration of equity-based awards under U.S. federal and 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.
(d) “ Award ” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and other stock or cash awards as the Administrator may determine.
(e) “ Award Agreement ” means the written agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.
(f) “ Board ” means the Board of Directors of the Company.
(g) “ Change in Control ” means the occurrence of any of the following events:
(i) | A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (“ Person ”), acquires ownership of stock in the Company that, together with the stock already held by such Person, constitutes more than 50% of the total voting power of the stock of the Company; provided, however, that for purposes of this subsection (i), the acquisition of additional stock by any Person who is considered to own more than 50% of the total voting power of the stock of the Company before the acquisition will not be considered a Change in Control; or |
(ii) | The individuals who constitute the members of the Board cease, by reason of a financing, merger, combination, acquisition, takeover or other non-ordinary course transaction affecting the Company, to constitute at least fifty-one percent (51%) of the members of the Board; or |
(iii) | The consummation of any of the following events: (A) a change in the ownership of a substantial portion of the Company’s assets, which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such Person) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions, (B) a merger, consolidation or reorganization involving the Company, where either or both of the events described in clauses (i) or (ii) above would be the result, or (C) a liquidation or dissolution of or appointment of a receiver, rehabilitator, conservator or similar person for, or the filing by a third party of an involuntary bankruptcy against, the Company. For purposes of this subsection (iii), the following will not constitute a change in the ownership of a substantial portion of the Company’s assets or a Change in Control: (A) a transfer to an entity that is controlled by the Company’s stockholders immediately after the transfer, or (B) a transfer of assets by the Company to: (1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock, (2) an entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a Person that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company, or (4) an entity, at least 50% of the total equity or voting power of which is owned, directly or indirectly, by a Person described in subsection (iii)(B)(3) above. For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. |
For purposes of this Section 2(g), persons will be considered to be acting as a group if they are owners of a corporation or other entity that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.
(h) “ Code ” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.
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(i) “ Committee ” means a committee of Directors or of other individuals satisfying Applicable Laws appointed by the Board in accordance with Section 4 hereof.
(j) “ Common Stock ” means the common stock, par value $0.0001 per share, of the Company.
(k) “ Company ” means Neurotrope, Inc., a Nevada corporation, or any successor thereto.
(l) “ Consultant ” means any person, including an advisor, engaged by the Company or a Parent, Subsidiary or Affiliate to render services to such entity.
(m) “ Determination Date ” means the latest possible date that will not jeopardize the qualification of an Award granted under the Plan as “performance-based compensation” under Section 162(m) of the Code.
(n) “ Director ” means a member of the Board.
(o) “ Disability ” means permanent and total disability as defined in Section 22(e)(3) of the Code , provided that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time .
(p) “ Effective Date ” shall have the meaning set forth in Section 18 hereof.
(q) “ Employee ” means any person, including Officers and Directors, employed by the Company or any Parent, Subsidiary or Affiliate of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.
(r) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
(s) “ Exchange Program ” means a program under which (i) outstanding Awards are surrendered or cancelled in exchange for Awards of the same type (which may have lower exercise prices and different terms), Awards of a different type, and/or cash, (ii) Participants would have the opportunity to transfer any outstanding Awards to a financial institution or other person or entity selected by the Administrator, and/or (iii) the exercise price of an outstanding Award is reduced. The Administrator will determine the terms and conditions of any Exchange Program in its sole discretion.
(t) “ Fair Market Value ” means, as of any date, the value of the Common Stock as the Administrator may determine in good faith, by reference to the closing price of such stock on any established stock exchange or on a national market system on the day of determination, if the Common Stock is so listed on any established stock exchange or on a national market system. If the Common Stock is not listed on any established stock exchange or on a national market system, the value of the Common Stock will be determined as the Administrator may determine in good faith.
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(u) “ Fiscal Year ” means the fiscal year of the Company.
(v) “ Incentive Stock Option ” means an Option that by its terms qualifies and is otherwise intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(w) “ Nonstatutory Stock Option ” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.
(x) “ Officer ” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(y) “ Option ” means a stock option granted pursuant to Section 6 hereof.
(z) “ Parent ” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.
(aa) “ Participant ” means the holder of an outstanding Award.
(bb) “ Performance Goals ” will have the meaning set forth in Section 11 hereof.
(cc) “ Performance Period ” means any Fiscal Year of the Company or such other period as determined by the Administrator in its sole discretion.
(dd) “ Performance Share ” means an Award denominated in Shares which may be earned in whole or in part upon attainment of Performance Goals or other vesting criteria as the Administrator may determine pursuant to Section 10 hereof.
(ee) “ Performance Unit ” means an Award which may be earned in whole or in part upon attainment of Performance Goals or other vesting criteria as the Administrator may determine and which may be settled for cash, Shares or other securities or a combination of the foregoing pursuant to Section 10 hereof.
(ff) “ Period of Restriction ” means the period during which transfers of Shares of Restricted Stock are subject to restrictions and, therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Administrator.
(gg) “ Plan ” means this 2013 Equity Incentive Plan.
(hh) “ Restricted Stock ” means Shares issued pursuant to an Award of Restricted Stock under Section 8 hereof, or issued pursuant to the early exercise of an Option.
(ii) “ Restricted Stock Unit ” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 9 hereof. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.
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(jj) “ Rule 16b-3 ” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.
(kk) “ Section 16(b) ” means Section 16(b) of the Exchange Act.
(ll) “ Service Provider ” means an Employee, Director, or Consultant.
(mm) “ Share ” means a share of the Common Stock, as adjusted in accordance with Section 14 hereof.
(nn) “ Stock Appreciation Right ” means an Award, granted alone or in connection with an Option, that pursuant to Section 7 is designated as a Stock Appreciation Right.
(oo) “ Subsidiary ” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan .
(a) Subject to the provisions of Section 14 hereof, the maximum aggregate number of Shares that may be awarded and sold under the Plan is Seven Million (7,000,000) Shares. The Shares may be authorized, but unissued, or reacquired Common Stock.
(b) Lapsed Awards . If an Award expires or becomes unexercisable without having been exercised in full, or, with respect to Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units, is forfeited to or repurchased by the Company, the unpurchased Shares (or for Awards other than Options and Stock Appreciation Rights, the forfeited or repurchased Shares) which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). Upon exercise of a Stock Appreciation Right settled in Shares, the gross number of Shares covered by the portion of the Award so exercised will cease to be available under the Plan . Shares that have actually been issued under the Plan under any Award will not be returned to the Plan and will not become available for future distribution under the Plan; provided, however, that if unvested Shares of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units are repurchased by the Company or are forfeited to the Company, such Shares will become available for future grant under the Plan. Shares used to pay the tax and/or exercise price of an Award will become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Notwithstanding the foregoing provisions of this Section 3(b), subject to adjustment provided in Section 14 hereof, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in Section 3(a) above, plus, to the extent allowable under Section 422 of the Code, any Shares that become available for issuance under the Plan under this Section 3(b).
(c) Share Reserve . The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan.
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4. Administration of the Plan .
(a) Procedure .
(i) | Multiple Administrative Bodies . Different Committees with respect to different groups of Service Providers may administer the Plan. |
(ii) | Section 162(m) . To the extent that the Administrator determines it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, and if the Company is then a “publicly held corporation” as defined therein, the Plan will be administered by a Committee of two (2) or more “outside directors” within the meaning of Section 162(m) of the Code. |
(iii) | Rule 16b-3 . To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3. |
(iv) | Other Administration . Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy Applicable Laws. |
(b) Powers of the Administrator . Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:
(i) | to determine the Fair Market Value; |
(ii) | to select the Service Providers to whom Awards may be granted hereunder; |
(iii) | to determine the terms and condition, not inconsistent with the terms of the Plan, of any Award granted hereunder; |
(iv) | to institute an Exchange Program and to determine the terms and conditions , not inconsistent with the terms of the Plan, for (1) the surrender or cancellation of outstanding Awards in exchange for Awards of the same type, Awards of a different type, and/or cash, (2) the transfer of outstanding Awards to a financial institution or other person or entity, or (3) the reduction of the exercise price of outstanding Awards; |
(v) | to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan; |
(vi) | to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws; |
(vii) | to modify or amend each Award (subject to Section 19(c) hereof); |
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(viii) | to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator; |
(ix) | to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award pursuant to such procedures as the Administrator may determine; and |
(x) | to make all other determinations deemed necessary or advisable for administering the Plan. |
(c) Effect of Administrator’s Decision . The Administrator’s decisions, determinations, and interpretations will be final and binding on all Participants and any other holders of Awards.
5. Eligibility . Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance Shares, and such other cash or stock awards as the Administrator determines may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.
6. Stock Options .
(a) Limitations .
(i) | Each Option will be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000 (U.S.), such Options will be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. |
(ii) | The Administrator will have complete discretion to determine the number of Shares subject to an Option granted to any Participant. |
(b) Term of Option . The Administrator will determine the term of each Option in its sole discretion; provided, however, that the term will be no more than ten (10) years from the date of grant thereof . Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement.
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(c) Option Exercise Price and Consideration .
(i) | Exercise Price . The per share exercise price for the Shares to be issued pursuant to exercise of an Option will be determined by the Administrator, but will be no less than 100% of the Fair Market Value per Share on the date of grant. In addition, i n the case of an Incentive Stock Option granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant. Notwithstanding the foregoing provisions of this Section 6(c), Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code. |
(ii) | Waiting Period and Exercise Dates . At the time an Option is granted, the Administrator will fix the period within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised. |
(iii) | Form of Consideration . The Administrator will determine the acceptable form(s) of consideration for exercising an Option, including the method of payment, to the extent permitted by Applicable Laws. |
(d) Exercise of Option .
(i) | Procedure for Exercise; Rights as a Stockholder . Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share. |
An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator specifies from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with any applicable withholding taxes). No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 14 hereof.
(ii) | Termination of Relationship as a Service Provider . If a Participant ceases to be a Service Provider, other than upon the Participant’s termination as the result of the Participant’s death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for three (3) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by such Option will revert to the Plan. |
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(iii) | Disability of Participant . If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for six (6) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan. |
(iv) | Death of Participant . If a Participant dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for six (6) months following Participant’s death. Unless otherwise provided by the Administrator, if at the time of death Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will continue to vest in accordance with the Award Agreement. If the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan. |
7. Stock Appreciation Rights .
(a) Grant of Stock Appreciation Rights . Subject to the terms and conditions of the Plan, a Stock Appreciation Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion.
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(b) Number of Shares . The Administrator will have complete discretion to determine the number of Stock Appreciation Rights granted to any Participant.
(c) Exercise Price and Other Terms . The Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under the Plan; provided, however, that the exercise price will be not less than 100% of the Fair Market Value of a Share on the date of grant.
(d) Stock Appreciation Rights Agreement . Each Stock Appreciation Right grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
(e) Expiration of Stock Appreciation Rights . A Stock Appreciation Right granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement ; provided, however, that the term will be no more than ten (10) years from the date of grant thereof . Notwithstanding the foregoing, the rules of Section 6(d) above also will apply to Stock Appreciation Rights.
(f) Payment of Stock Appreciation Right Amount . Upon exercise of a Stock Appreciation Right, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:
(i) | The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times |
(ii) | The number of Shares with respect to which the Stock Appreciation Right is exercised. |
At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in Shares of equivalent value, or in some combination thereof.
8. Restricted Stock .
(a) Grant of Restricted Stock . Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine.
(b) Restricted Stock Agreement . Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
(c) Transferability . Except as provided in this Section 8, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.
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(d) Other Restrictions . The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.
(e) Removal of Restrictions . Except as otherwise provided in this Section 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed.
(f) Voting Rights . During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.
(g) Dividends and Other Distributions . During the Period of Restriction, Service Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If any such dividends or distributions are paid in Shares, the Shares will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid.
(h) Return of Restricted Stock to Company . On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan.
(i) Section 162(m) Performance Restrictions . For purposes of qualifying grants of Restricted Stock as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Restricted Stock which is intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
9. Restricted Stock Units .
(a) Grant . Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. Each Restricted Stock Unit grant will be evidenced by an Award Agreement that will specify such other terms and conditions as the Administrator, in its sole discretion, will determine, including all terms, conditions, and restrictions related to the grant, the number of Restricted Stock Units and the form of payout, which, subject to Section 9(d) hereof, may be left to the discretion of the Administrator.
(b) Vesting Criteria and Other Terms . The Administrator will set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. After the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any restrictions for such Restricted Stock Units. Each Award of Restricted Stock Units will be evidenced by an Award Agreement that will specify the vesting criteria, and such other terms and conditions as the Administrator, in its sole discretion will determine. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed.
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(c) Earning Restricted Stock Units . Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as specified in the Award Agreement.
(d) Form and Timing of Payment . Payment of earned Restricted Stock Units will be made as soon as practicable after the date(s) set forth in the Award Agreement. The Administrator, in its sole discretion, may pay earned Restricted Stock Units in cash, Shares, or a combination thereof. Shares represented by Restricted Stock Units that are fully paid in cash again will be available for grant under the Plan.
(e) Cancellation . On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be forfeited to the Company.
(f) Section 162(m) Performance Restrictions . For purposes of qualifying grants of Restricted Stock Units as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Restricted Stock Units which are intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
10. Performance Units and Performance Shares .
(a) Grant of Performance Units/Shares . Performance Units and Performance Shares may be granted to Service Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of Performance Units/Shares granted to each Participant.
(b) Value of Performance Units/Shares . Each Performance Unit will have an initial value that is established by the Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant.
(c) Performance Objectives and Other Terms . The Administrator will set performance objectives or other vesting provisions. The Administrator may set vesting criteria based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment), or any other basis determined by the Administrator in its discretion. Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
(d) Earning of Performance Units/Shares . After the applicable Performance Period has ended, the holder of Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved. After the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Performance Unit/Share.
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(e) Form and Timing of Payment of Performance Units/Shares . Payment of earned Performance Units/Shares will be made as soon as practicable after the expiration of the applicable Performance Period. The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof.
(f) Cancellation of Performance Units/Shares . On the date set forth in the Award Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan.
(g) Section 162(m) Performance Restrictions . For purposes of qualifying grants of Performance Units/Shares as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Performance Units/Shares which are intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
11. Performance-Based Compensation Under Code Section 162(m) .
(a) General . If the Administrator, in its discretion, decides to grant an Award intended to qualify as “performance-based compensation” under Code Section 162(m), the provisions of this Section 11 will control over any contrary provision in the Plan; provided, however, that the Administrator may in its discretion grant Awards that are not intended to qualify as “performance-based compensation” under Section 162(m) of the Code to such Participants that are based on Performance Goals or other specific criteria or goals but that do not satisfy the requirements of this Section 11.
(b) Performance Goals . The granting and/or vesting of Awards of Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units and other incentives under the Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Code Section 162(m) and may provide for a targeted level or levels of achievement (“ Performance Goals ”) including (i) earnings per Share, (ii) operating cash flow, (iii) operating income, (iv) profit after-tax, (v) profit before-tax, (vi) return on assets, (vii) return on equity, (viii) return on sales, (ix) revenue, and (x) total shareholder return . Any Performance Goals may be used to measure the performance of the Company as a whole or a business unit of the Company and may be measured relative to a peer group or index. The Performance Goals may differ from Participant to Participant and from Award to Award. Prior to the Determination Date, the Administrator will determine whether any significant element(s) will be included in or excluded from the calculation of any Performance Goal with respect to any Participant.
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(c) Procedures . To the extent necessary to comply with the performance-based compensation provisions of Code Section 162(m), with respect to any Award granted subject to Performance Goals, within the first twenty-five percent (25%) of the Performance Period, but in no event more than ninety (90) days following the commencement of any Performance Period (or such other time as may be required or permitted by Code Section 162(m)), the Administrator will, in writing, (i) designate one or more Participants to whom an Award will be made, (ii) select the Performance Goals applicable to the Performance Period, (iii) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period, and (iv) specify the relationship between Performance Goals and the amounts of such Awards, as applicable, to be earned by each Participant for such Performance Period. Following the completion of each Performance Period, the Administrator will certify in writing whether the applicable Performance Goals have been achieved for such Performance Period. In determining the amounts earned by a Participant, the Administrator will have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Administrator may deem relevant to the assessment of individual or corporate performance for the Performance Period. A Participant will be eligible to receive payment pursuant to an Award for a Performance Period only if the Performance Goals for such period are achieved.
(d) Additional Limitations . Notwithstanding any other provision of the Plan, any Award which is granted to a Participant and is intended to constitute qualified performance based compensation under Code Section 162(m) will be subject to any additional limitations set forth in the Code (including any amendment to Section 162(m)) or any regulations and ruling issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m) of the Code, and the Plan will be deemed amended to the extent necessary to conform to such requirements.
12. Leaves of Absence . Unless the Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Service Provider will not cease to be an Employee in the case of (i) any leave of absence approved by the Company, or (ii) transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months and one day following the commencement of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.
13. Transferability of Awards . Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable, such Award may only be transferred (i) by will, (ii) by the laws of descent and distribution, (iii) to a revocable trust, or (iii) as permitted by Rule 701 of the Securities Act of 1933, as amended.
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14. Adjustments; Dissolution or Liquidation; Merger or Change in Control .
(a) Adjustments . In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Award, and the numerical Share limits set forth in Sections 3, 6, 7, 8, 9 and 10 hereof .
(b) Dissolution or Liquidation . In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action.
(c) Change in Control . In the event of a merger or Change in Control, each outstanding Award will be treated as the Administrator determines, including, without limitation, that each Award will be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation (the “ Successor Corporation ”). The Administrator will not be required to treat all Awards similarly in the transaction.
In the event that the Successor Corporation does not assume or substitute for the Award, the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock will lapse, and, with respect to Restricted Stock Units, Performance Shares and Performance Units, all Performance Goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met. In addition, if an Option or Stock Appreciation Right is not assumed or substituted for in the event of a Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period.
For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) or, in the case of a Stock Appreciation Right upon the exercise of which the Administrator determines to pay cash or a Performance Share or Performance Unit which the Administrator can determine to pay in cash, the fair market value of the consideration received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control is not solely common stock of the Successor Corporation, the Administrator may, with the consent of the Successor Corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Performance Share or Performance Unit, for each Share subject to such Award (or in the case of Performance Units, the number of implied shares determined by dividing the value of the Performance Units by the per share consideration received by holders of Common Stock in the Change in Control), to be solely common stock of the Successor Corporation equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control.
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Notwithstanding anything in this Section 14(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more Performance Goals will not be considered assumed if the Company or its successor modifies any of such Performance Goals without the Participant’s consent; provided, however, a modification to such Performance Goals only to reflect the Successor Corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption.
15. Tax Withholding
(a) Withholding Requirements . Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof).
(b) Withholding Arrangements . The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (i) paying cash, (ii) electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum amount required to be withheld, (iii) delivering to the Company already-owned Shares having a Fair Market Value equal to the amount required to be withheld, or (iv) selling a sufficient number of Shares otherwise deliverable to the Participant through such means as the Administrator may determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to be withheld. The amount of the withholding requirement will be deemed to include any amount which the Administrator agrees may be withheld at the time the election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld.
16. No Effect on Employment or Service . Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company, nor will they interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws.
17. Date of Grant . The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant.
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18. Term of Plan . Subject to Section 22 hereof, the Plan will become effective upon its adoption by the Board (the “Effective Date”). It will continue in effect for a term of ten (10) years unless terminated earlier under Section 19 hereof; provided, however, that such expiration shall not affect Awards then outstanding, and the terms and conditions of this Plan shall continue to apply to such Awards.
19. Amendment and Termination of the Plan .
(a) Amendment and Termination . The Administrator may at any time amend, alter, suspend or terminate the Plan.
(b) Stockholder Approval . The Company will obtain stockholder approval of the Plan and any Plan amendment to the extent necessary or desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination . No amendment, alteration, suspension, or termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.
20. Conditions Upon Issuance of Shares .
(a) Legal Compliance . Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations . As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.
(c) Restrictive Legends . All Award Agreements and all securities of the Company issued pursuant thereto shall bear such legends regarding restrictions on transfer and such other legends as the appropriate officer of the Corporation shall determine to be necessary or advisable to comply with applicable securities and other laws.
21. Inability to Obtain Authority . The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority will not have been obtained.
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22. Stockholder Approval . The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws. In the event that stockholder approval is not obtained within twelve (12) months after the date the Plan is adopted by the Board, the Plan and all Awards granted hereunder shall be void ab initio and of no effect. Notwithstanding any other provisions of the Plan, no Awards shall be exercisable until the date of such stockholder approval.
23. Notification of Election Under Section 83(b) of the Code . If any Service Provider shall, in connection with the acquisition of Shares under the Plan, make the election permitted under Section 83(b) of the Code, such Service Provider shall notify the Company of such election within ten (10) days of filing notice of the election with the Internal Revenue Service and provide the Company with a copy thereof, in addition to any filing and a notification required pursuant to regulations issued under the authority of Section 83(b) of the Code. A Service Provider shall not be permitted to make a Section 83(b) election with respect to an Award of a Restricted Stock Unit.
24. Notification Upon Disqualifying Disposition Under Section 421(b) of the Code . Each Service Provider shall notify the Company of any disposition of Shares issued pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), within ten (10) days of such disposition.
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Exhibit 10.12
STOCK OPTION AGREEMENT
NEUROTROPE, INC.
THIS AGREEMENT is entered into as of the 23rd day of August, 2013 (the “Date of Grant”)
BETWEEN:
NEUROTROPE, INC. , a company incorporated pursuant to the laws of the State of Nevada,
(the “Company”)
AND: [ Name of Recipient ]
(the “Optionee”).
WHEREAS:
The Board of Directors of the Company (the “Board”) has approved and adopted the Neurotrope, Inc. 2013 Equity Incentive Plan (the “2013 Plan”), pursuant to which the Board is authorized to grant to employees and other selected persons stock options to purchase common shares of the Company (the “Common Stock”);
The 2013 Plan provides for the granting of stock options that either (i) are intended to qualify as “Incentive Stock Options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or (ii) do not qualify under Section 422 of the Code (“Non-Qualified Stock Options”); and
The Board has authorized the grant to Optionee of options to purchase a total of _______________________ (_______) shares of Common Stock (the “Options”), which Options are intended to be (select one):
[ ] Incentive Stock Options;
[ ] Non-Qualified Stock Options
NOW THEREFORE, the Company agrees to offer to the Optionee the option to purchase, upon the terms and conditions set forth herein and in the Plan, __________________ (______) shares of Common Stock. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the 2013 Plan.
1. Exercise Price. The exercise price of the options shall be US $_____ per share.
2.
Limitation on the Number of Shares.
If the Options granted hereby are Incentive Stock Options, the number of shares
which may be acquired upon exercise thereof is subject to any limitations set forth in the 2013 Plan.
3. Vesting Schedule. The Options shall vest in accordance with Exhibit A . In the event of a Change in Control, the vesting schedule shall accelerate and any options not yet vested shall become vested concurrent with the closing of that event.
4. Options not Transferable. The Options may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by will, by applicable laws of descent and distribution or, in the case of a Non-Qualified Stock Option, pursuant to a qualified domestic relations order, and shall not be subject to execution, attachment or similar process; provided, however , that if the Options represent a Non-Qualified Stock Option, such Option is transferable without payment of consideration to immediate family members of the Optionee or to trusts or partnerships established exclusively for the benefit of the Optionee and Optionee’s immediate family members. Upon any attempt to transfer, pledge, hypothecate or otherwise dispose of any Option or of any right or privilege conferred by the 2013 Plan contrary to the provisions thereof, or upon the sale, levy or attachment or similar process upon the rights and privileges conferred by the 2013 Plan, such Option shall thereupon terminate and become null and void.
5. Investment Intent. By accepting the Options, the Optionee represents and agrees that none of the shares of Common Stock purchased upon exercise of the Options will be distributed in violation of applicable federal and state laws and regulations. In addition, the Company may require, as a condition of exercising the Options, that the Optionee execute an undertaking, in such a form as the Company shall reasonably specify, that the Stock is being purchased only for investment and without any then-present intention to sell or distribute such shares.
6. Termination of Service and Options. Vested Options shall terminate, to the extent not previously exercised, upon the occurrence of the first of the following events:
(a) | Expiration. [Five (5)] years from the Date of Grant. |
(b) | Termination for Cause. The date of the first discovery by the Company of any reason for an Optionee’s Termination of Service with the Company or any Subsidiary for cause (as determined in the sole discretion of the Board, the Committee or the Committee-designated officer, the “2013 Plan Administrator”), and, if an Optionee’s employment or contractual relationship is suspended pending any investigation by the Company as to whether the Optionee’s Termination of Service should be for cause, the Optionee’s rights under this Agreement and the 2013 Plan shall likewise be suspended during the period of any such investigation. |
(c) | Termination Due to Death or Total and Permanent Disability. The expiration of one (1) year from the date of the death of the Optionee or the Termination of Service of an Optionee by reason of Total and Permanent Disability. If an Optionee’s Termination of Service is caused by death, any Option held by the Optionee shall be exercisable only by the person or persons to whom such Optionee’s rights under such Option shall pass by the Optionee’s will or by the laws of descent and distribution. |
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(d) | Termination for Any Other Reason. The expiration of twelve (12) months from the date of an Optionee’s Termination of Service with the Company or any Subsidiary for any reason whatsoever other than Termination of Service for cause, death or Total and Permanent Disability. |
Each unvested Option granted pursuant hereto shall terminate immediately upon the Optionee’s Termination of Service with the Company or Subsidiary for any reason whatsoever, including Total and Permanent Disability unless otherwise provided by the 2013 Plan Administrator.
7. Stock. In the case of any stock split, stock dividend or like change in the nature of shares of Stock covered by this Agreement, the number of shares and exercise price shall be proportionately adjusted as provided in Article 14 of the 2013 Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at any time after vesting, until termination; provided, however, that any Optionee who is subject to the reporting and liability provisions of Section 16 of the Securities Exchange Act of 1934 with respect to the Common Stock shall be precluded from selling or transferring any Common Stock or other security underlying an Option during the six (6) months immediately following the grant of that Option. If less than all of the shares included in the vested portion of any Option are purchased, the remainder may be purchased at any subsequent time prior to the expiration of the Option term. No portion of any Option for less than fifty (50) shares (as adjusted pursuant to Article 14 of the 2013 Plan) may be exercised; provided, that if the vested portion of any Option is less than fifty (50) shares, it may be exercised with respect to all shares for which it is vested. Only whole shares may be issued pursuant to an Option, and to the extent that an Option covers less than one (1) share, it is unexercisable.
Each exercise of the Option shall be by means of delivery of a notice of election to exercise (which may be in the form attached hereto as Exhibit B) to the [CEO] of the Company at its principal executive office, specifying the number of shares of Common Stock to be purchased and accompanied by payment in cash by certified check or cashier’s check in the amount of the full exercise price for the Common Stock to be purchased. In addition to payment in cash by certified check or cashier’s check, an Optionee or transferee of an Option may pay for all or any portion of the aggregate exercise price by complying with one or more of the following alternatives:
(a) | by delivering to the Company shares of Common Stock previously held by such person, duly endorsed for transfer to the Company, or by the Company withholding shares of Common Stock otherwise deliverable pursuant to exercise of the Option, which shares of Common Stock received or withheld shall have a fair market value at the date of exercise (as determined by the 2013 Plan Administrator) equal to the aggregate purchase price to be paid by the Optionee upon such exercise; |
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Solely for the purposes of this paragraph, “fair market value” per share of Common Stock shall mean (A) the average of the closing sales prices, as quoted on the primary national or regional stock exchange on which the Common Stock is listed, or, if not listed, the OTC Markets if quoted thereon, on the twenty (20) trading days immediately preceding the date on which the notice of election to exercise is deemed to have been sent to the Company, or (B) if the Common Stock is not publicly traded as set forth above, as reasonably and in good faith determined by the Board of Directors of the Company as of the date which the notice of election to exercise is deemed to have been sent to the Company.
For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the shares of Common Stock issued in a cashless exercise transaction shall be deemed to have been acquired by the Optionee, and the holding period for such shares shall be deemed to have commenced, on the date the Options were originally issued; or
(b) | by complying with any other payment mechanism approved by the 2013 Plan Administrator at the time of exercise. |
It is a condition precedent to the issuance of shares of Common Stock that the Optionee execute and/or deliver to the Company all documents and withholding taxes required in accordance with Section 15 of the 2013 Plan.
9. Holding period for Incentive Stock Options. In order to obtain the tax treatment provided for Incentive Stock Options by Section 422 of the Code, the shares of Common Stock received upon exercising any Incentive Stock Options received pursuant to this Agreement must be sold, if at all, after a date which is later of two (2) years from the date this agreement is entered into or one (1) year from the date upon which the Options are exercised. The Optionee agrees to report sales of shares prior to the above determined date to the Company within one (1) business day after such sale is concluded. The Optionee also agrees to pay to the Company, within five (5) business days after such sale is concluded, the amount necessary for the Company to satisfy its withholding requirement required by the Code in the manner specified in Section 15 of the 2013 Plan. Nothing in this Section 9 is intended as a representation that Common Stock may be sold without registration under state and federal securities laws or an exemption therefrom or that such registration or exemption will be available at any specified time.
10. Resale restrictions may apply. Any resale of the shares of Common Stock received upon exercising any Options will be subject to resale restrictions contained in the securities legislation applicable to the Optionee. The Optionee acknowledges and agrees that the Optionee is solely responsible (and the Company is not in any way responsible) for compliance with applicable resale restrictions.
11. Subject to 2013 Plan. The terms of the Options are subject to the provisions of the 2013 Plan, as the same may from time to time be amended, and any inconsistencies between this Agreement and the 2013 Plan, as the same may be from time to time amended, shall be governed by the provisions of the 2013 Plan, a copy of which has been delivered to the Optionee, and which is available for inspection at the principal offices of the Company.
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12. Professional Advice. The acceptance of the Options and the sale of Common Stock issued pursuant to the exercise of Options may have consequences under federal and state tax and securities laws which may vary depending upon the individual circumstances of the Optionee. Accordingly, the Optionee acknowledges that he or she has been advised to consult his or her personal legal and tax advisor in connection with this Agreement and his or her dealings with respect to Options. Without limiting other matters to be considered with the assistance of the Optionee’s professional advisors, the Optionee should consider: (a) the implications of alternative minimum tax pursuant to the Code; (b) the merits and risks of an investment in the underlying shares of Common Stock; and (c) any resale restrictions that might apply under applicable securities laws.
13. No Employment Commitment. The grant of the Options shall in no way constitute any form of agreement or understanding binding on the Company or any Subsidiary, express or implied, that the Company or any Subsidiary will employ or contract with the Optionee, for any length of time, nor shall it interfere in any way with the Company’s or, where applicable, a Subsidiary’s right to terminate Optionee’s employment at any time, which right is hereby reserved.
14. Entire Agreement. This Agreement is the only agreement between the Optionee and the Company with respect to the Options, and this Agreement and the 2013 Plan supersede all prior and contemporaneous oral and written statements and representations and contain the entire agreement between the parties with respect to the Options.
15. Notices. Any notice required or permitted to be made or given hereunder shall be mailed or delivered personally to the addresses set forth below, or as changed from time to time by written notice to the other:
The Company: | Neurotrope, Inc. | |
Attention: | ||
With a copy to: | Gottbetter & Partners, LLP | |
488 Madison Avenue, 12 th Floor | ||
New York, NY 10022 | ||
Attention: Adam S. Gottbetter | ||
The Optionee: |
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NEUROTROPE, INC.
Per:
James New, CEO
[Name of Recipient]
_________________ ___________________
Tax ID #
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EXHIBIT A
TERMS OF THE OPTION
Name of the Optionee: | ____________________ |
Date of Grant: | _____ __, 201__ |
Designation: | [Incentive] [Non-Qualified] Stock Options |
1. Number of Options granted: | ___________ shares |
2. Purchase Price: | $______ per share |
3. Vesting Dates: |
_____ __, 201__ – _________ shares |
4. Expiration Date: | _____ __, 201__ |
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EXHIBIT B
To: Neurotrope, Inc.
Attention: [CEO]
Notice of Election to Exercise
This Notice of Election to Exercise shall constitute proper notice under Neurotrope, Inc.’s (the “Company”) 2013 Equity Incentive Plan (the “2013 Plan”) pursuant to Section 8 of that certain Stock Option Agreement (the “Agreement”) dated as of the ___ day of _______, 201__, between the Company and the undersigned.
The undersigned hereby elects to exercise Optionee’s option to purchase _______ shares of the common stock of the Company at a price of US$____ per share, for aggregate consideration of US$____, on the terms and conditions set forth in the Agreement and the 2013 Plan. Such aggregate consideration, in the form specified in Section 8 of the Agreement, accompanies this notice.
The Optionee hereby directs the Company to issue, register and deliver the certificates representing the shares as follows:
Registration Information: | Delivery Instructions: | |
Name to appear on certificates | Name | |
Address | Address | |
Telephone Number |
DATED at ____________________________________, the day ____ of ________________________, 20___.
(Name of Optionee – Please type or print)
(Signature and, if applicable, Office)
(Address of Optionee)
(City, State, and Zip Code of Optionee)
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Exhibit 10.13
TECHNOLOGY LICENSE AND SERVICES AGREEMENT
by and between
NEUROTROPE BIOSCIENCE, INC.,
on the one hand,
and
BLANCHETTE ROCKEFELLER NEUROSCIENCES INSTITUTE
and
NRV II, LLC,
on the other hand,
dated
October 31, 2012
Technology License and Services Agreement
This Technology License and Services Agreement is made and entered into as of October 31, 2012 (the “ Execution Date ”) by and between Neurotrope BioScience, Inc., a corporation organized and existing under the laws of Delaware (“ Neurotrope ”), on the one hand, and Blanchette Rockefeller Neurosciences Institute, a not-for-profit institution organized and existing under the laws of the State of West Virginia (“ BRNI ”), and NRV II, LLC, a limited liability company organized and existing under the laws of the State of Delaware (“ NRV II ”), on the other hand. Neurotrope, BRNI and NRV II are sometimes referred to herein, individually, as a “ Party ” or, collectively, as the “ Parties. ”
WHEREAS , BRNI is a 501(c)(3) tax-exempt, not-for-profit, medical research institution dedicated to the study of memory and memory disorders;
WHEREAS , NRV II, an affiliate of NRV I (as defined below), is a limited liability company involved in the facilitation of the advancement of technology of BRNI;
WHEREAS , Neurotrope, Neuroscience Research Ventures, Inc., a corporation organized and existing under the laws of West Virginia and an affiliate of BRNI (“ NRV I ”), Dr. Dan Alkon and certain other Persons are parties to that certain Stockholders Agreement, dated October 31, 2012 (the “ Stockholders Agreement ”);
WHEREAS , Neurotrope and each of NRV I, John Abeles, Jim New, and Dr. Dan Alkon are parties to those certain Stock Purchase Agreements, each dated October 31, 2012 (the “ Founder Purchase Agreements ”);
WHEREAS , the Stockholders Agreement contemplates that Neurotrope and each of the Investor Stockholders (as defined in the Stockholders Agreement) will become parties to that certain Investor Purchase Agreement (as defined in the Stockholders Agreement) (such Founder Purchase Agreements and such Investor Purchase Agreement, collectively, the “ Purchase Agreements ”);
WHEREAS , Neurotrope desires to receive a license from BRNI and a sublicense from NRV II, and BRNI desires to grant a license to Neurotrope and NRV II desires to grant a sublicense to Neurotrope, in each case with respect to certain technology developed by BRNI; and
WHEREAS , Neurotrope desires to receive certain research and development services from BRNI, and BRNI desires to provide such services to Neurotrope.
NOW, THEREFORE , in consideration of the mutual promises and covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows.
1. | Definitions |
Terms used in this Agreement with initial capital letters shall have the respective meanings set forth in this Article 1 . Terms used in this Agreement with initial capital letters, but not defined in this Agreement, shall have their respective meanings set forth in the Stockholders Agreement.
1.1 | Action . The term “Action” shall mean any action, arbitration, audit, claim, demand, hearing, investigation, inquiry, litigation, proceeding or suit (whether civil, criminal, administrative or investigative), including any interference, reissue, re-examination, invalidity, revocation or opposition proceeding, and any solicited or unsolicited offer, demand or request to license any Intellectual Property. |
1 .2 | Affiliate . The term “Affiliate” shall mean, with respect to any particular Person, any other Person controlling, controlled by, or under common control with, such particular Person, where “control” (together with its correlative terms) means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract or otherwise, and such “control” will be conclusively presumed if any Person owns ten percent (10%) or more of the voting capital stock or other ownership interests, directly or indirectly, of any other Person. |
1.3 | Agreement . The term “Agreement” shall mean this Technology License and Services Agreement, including all SOWs hereunder. |
1.4 | A Round Financing . The term “A Round Financing” shall mean the equity financing from the sale of Series A Preferred Stock of Neurotrope, par value $0.01 per share pursuant to the closing of the transactions contemplated by the Founder Purchase Agreements and Investor Purchase Agreements and the actual receipt of the proceeds therefrom by Neurotrope (following approval of such receipt by BRNI), it being understood that for the purposes of Section 1.15 , Section 11.2.1 and Article 12 , Neurotrope’s obligations with respect to the A Round Financing shall not be considered satisfied, and the A Round Financing shall not be considered completed, until the Net Amount of such proceeds is equal to or greater than eight million dollars ($8,000,000) (or such other amount as agreed by a unanimous vote of all of the Directors (as defined in the Stockholders Agreement) of the Board (as defined in the Stockholders Agreement)). |
1.5 | B Round Financing . The term “B Round Financing” shall mean equity financing from the sale of Series B Preferred Stock of Neurotrope, par value $0.01 per share from and after the conclusion of the A Round Financing, which B Round Financing is contemplated to close on the earlier of (i) the actual receipt by Neurotrope of an amount equal to twenty-five million dollars ($25,000,000) and (ii) twenty-four (24) months following the conclusion of the A Round Financing. |
1.6 | BRNI . The term “BRNI” shall have the meaning set forth in the Preamble. |
1.7 | BRNI Data . The term “BRNI Data” shall mean all data, reports, documentation and information (and all Intellectual Property therein) related to the Licensed IP, the Services or this Agreement, including: (i) all data, reports, documentation and information related to actual and planned pre-clinical or clinical activities or trials (including pre-clinical and clinical data and reports, autopsy data and reports, case report forms, un-blinded data, statistical planning, IRBs, shipping SOPs, shipping costs, other costs, Swedish OLINC interface, communications with Governmental Authorities, and records required to be maintained under applicable Laws); (ii) all statistical models for actual and planned pre-clinical or clinical activities or trials; (iii) all autopsy criteria for diagnosis; and (iv) all marketing and product development-related research information and documentation. |
1.8 | BRNI Indemnitees . The term “BRNI Indemnitees” shall mean BRNI, its Affiliates (including NRV II, but excluding Neurotrope), and its and their respective directors, officers, employees and agents. |
1.9 | Claiming Indemnitee . The term “Claiming Indemnitee” shall mean a BRNI Indemnitee or Neurotrope Indemnitee, as applicable, who seeks indemnification under Section 10.1 . |
1.10 | Confidential Information . The term “Confidential Information” shall mean all confidential and proprietary information of a Party (whether or not specifically labeled or identified as “confidential,” whether disclosed directly or indirectly in writing, by oral communications, or by inspection or analysis of samples, biomarkers, DNA, genes, cells, tissues, or other tangible objects, and in any form or medium), including (i) the terms and conditions of this Agreement, (ii) BRNI Data and Licensed Technology, and (iii) other trade secrets, know-how, data, databases, analyses, techniques, technologies, systems, formulae, formulations, discoveries, research, development, actual or planned pre-clinical or clinical activities or trials (and the results thereof), records, reports, manuals, documentation, models, files, confidential inventions, innovations, improvements, developments, methods, processes, designs, drawings, reports, documentation, prototypes and all similar or related information, whether or not patentable. |
1.11 | CREATE Act . The term “CREATE Act” shall mean the Cooperative Research and Technology Enhancement Act (35 U.S.C. §103(c)). |
1.12 | Disclosing Party . The term “Disclosing Party” shall mean the Party that discloses Confidential Information to any other Party pursuant to this Agreement. |
1.13 | Dispute . The term “Dispute” shall mean any dispute, controversy, or claim arising out of, or relating to, this Agreement, including any dispute, controversy, or claim with respect to the interpretation of any provision of this Agreement, the performance of any Party of its obligations under this Agreement, and situations or circumstances in which the Parties shall, but cannot, agree. |
1.14 | Dispute Resolution Procedure . The term “Dispute Resolution Procedure” shall mean the procedures for resolving Disputes in accordance with Section 13.3 . |
1.15 | Effective Date . The term “Effective Date” shall mean the date on which Neurotrope completes the A Round Financing. |
1.16 | Execution Date . The term “Execution Date” shall have the meaning set forth in the Preamble. |
1.17 | FDA . The term “FDA” shall mean the United States Food and Drug Administration or any successor entity thereto, and any similar Governmental Authority outside of the United States. |
1.18 | Field of Use . The term “Field of Use” shall mean the field of use of the Licensed IP in humans or animals for therapeutic or diagnostic applications for Alzheimer’s Disease or other cognitive dysfunctions. |
1.19 | Fixed Research Fee . The term “Fixed Research Fee” shall mean: (i) with respect to the calendar year of the completion of the B Round Financing, the pro-rata amount of one million dollars ($1,000,000) for such calendar year; (ii) with respect to each of the five (5) calendar years following the calendar year of the completion of the B Round Financing, the amount of one million dollars ($1,000,000), in each case whether or not Neurotrope engages BRNI for Services in accordance with Article 3 for such calendar year; and (iii) with respect to any other calendar year, such amount as agreed by the Parties. |
1.20 | Force Majeure Event . The term “Force Majeure Event” shall mean, with respect to a delay or failure to perform by a Party, an event that is beyond the reasonable control of such Party, including (i) acts of war, terrorism, civil riots and unrest, rebellions, strikes, labor disputes, (ii) quarantines, embargos and other similar unusual governmental actions, and (iii) extraordinary elements of nature, fires, earthquakes, tsunamis, and acts of God. |
1.21 | GAAP . The term “GAAP” shall mean then-current generally accepted accounting principles in the United States as established by the Financial Accounting Standards Board or any successor entity or other entity generally recognized as having the right to establish such principles, in each case consistently applied. |
1.22 | Governmental Authority . The term “Governmental Authority” shall mean any federal, state, multinational, provincial, municipal, local, territorial, or other governmental department, governmental or regulatory authority, court or judicial or administrative body, of competent jurisdiction, whether domestic, foreign, or international, including any of the foregoing with authority over the research, development, manufacturing, commercialization or other use (including the granting of marketing approvals) of any diagnosis or therapeutics of human diseases in any jurisdiction (such as the FDA). |
1.23 | Indemnifying Party . The term “Indemnifying Party” shall mean BRNI or Neurotrope, as applicable, who is obligated to indemnify a Claiming Indemnitee under Section 10.1 . |
1.24 | Improvements . The term “Improvements” shall mean all Intellectual Property that includes, or is based in whole or in part on, any of the Licensed IP, including any improvements, modifications, enhancements and derivative works thereof and substitutes therefor. |
1.25 | Infringement . The term “Infringement” shall mean any infringement, misappropriation or conflict with any of the Licensed IP by any Person. |
1.26 | Intellectual Property . The term “Intellectual Property” shall mean any and all of the intellectual property and proprietary rights (except for trademarks and service marks) in any jurisdiction throughout the world, including: (i) inventions and ideas (whether or not patentable or reduced to practice), patents, patent applications, and patent disclosures and improvements thereto, together with all continuations, continuations in part, reissues, renewals, reexaminations, provisionals, divisionals, extensions, revisions or improvements thereof, any foreign counterparts or equivalents of any of the foregoing; (ii) copyrights and works of authorship, whether registered or unregistered, and all registrations and applications for any of the foregoing, and all associated moral rights; (iii) trade secrets, know-how, and other confidential and proprietary information; and (iv) samples, biomarkers, DNA, genes, cells, and tissues. |
1.27 | Law . The term “Law” shall mean all statutes, regulations, directives, ordinances, orders, rulings, agency or court interpretations, or other action of any Governmental Authority in any jurisdiction in the world, whether currently in force or enacted during the Term. |
1.28 | Licensed IP . The term “Licensed IP” shall mean the Licensed Patents and Licensed Technology. |
1.29 | Licensed Patents . The term “Licensed Patents” shall mean claims of any issued patent owned by BRNI or licensed to NRV II by BRNI on or subsequent to the Effective Date, to the extent that such claims cover the Licensed Technology. |
1.30 | Licensed Products . The term “Licensed Products” shall mean any products or services that (i) practice, use, embody, are based on, incorporate or utilize any Licensed IP or (ii) but for the license and sublicense granted under this Agreement, infringe, misappropriate or otherwise violate any Licensed IP. |
1.31 | Licensed Technology . The term “Licensed Technology” shall mean all trade secrets, know-how, and other confidential and proprietary information owned by BRNI or licensed to NRV II by BRNI on or subsequent to the Effective Date, to the extent covering any of the following: |
(i) | an in vitro therapeutic test system that uses cultured human fibroblasts or any other method to detect and measure PKC and/or other assays with peripheral cells to predict the presence of Alzheimer’s Disease in humans, and all succeeding test formats (including test kits); |
(ii) | the PKC activators (including bryostatin, analogs, PUFAs, and other PKC activators) and their therapeutic applications in humans or animals; |
(iii) | the LDL or ApoE-based drug delivery system that is targeted to enhance access of all manner of drugs and therapeutics to the brain by facilitation of transport of such drugs across the Blood-Brain-Barrier in humans or animals; and |
(iv) | the carbonic anhydrase activators and their therapeutic applications in humans or animals. |
1.32 | Losses . The term “Losses” shall mean claims, liabilities, costs, expenses, damages, deficiencies, losses, or obligations of any kind or nature (including reasonable attorney’s fees and other costs and expenses of litigation). |
1.33 | Net Amount . The term “Net Amount” shall mean the amount of capital raised by Neurotrope in the A Round Financing, less all costs and expenses incurred by Neurotrope in connection the A Round Financing, including attorneys’ fees and bankers’ fees. |
1.34 | Neurotrope . The term “Neurotrope” shall have the meaning set forth in the Preamble. |
1.35 | Neurotrope Indemnitees . The term “Neurotrope Indemnitees” shall mean Neurotrope and its directors, officers, employees and agents. |
1.36 | Neurotrope Technology . The term “Neurotrope Technology” shall mean Intellectual Property created by Neurotrope during the Term outside the scope of this Agreement. For the avoidance of doubt, Neurotrope Technology shall not include the Licensed IP, Improvements or Confidential Information of BRNI or NRV II. |
1.37 | NRV II . The term “NRV II” shall have the meaning set forth in the Preamble. |
1.38 | Party or Parties . The term “Party” or “Parties” shall have the meaning set forth in the Preamble. |
1.39 | Person . The term “Person” shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a Governmental Authority or any department, agency or political subdivision thereof. |
1.40 | Prime Rate . The term “Prime Rate” shall mean the prime rate as published in the Wall Street Journal or, failing such publication, such other interest rate as may replace or supersede the same or, in the absence of a replacement or superseding interest, such other interest as the Parties may agree. |
1.41 | Purchase Agreements . The term “Purchase Agreements” shall have the meaning set forth in the Preamble. |
1.42 | Quarter . The term “Quarter” shall mean, during the Term of this Agreement, each calendar quarter, with any partial calendar quarter commencing on the Effective Date being included within the first full calendar quarter after the Effective Date as the first “Quarter,” and any partial calendar quarter being included within the last full calendar quarter including the date of termination or expiration of the Term as the last “Quarter.” |
1.43 | Receiving Party . The term “Receiving Party” shall mean the Party that receives Confidential Information from another Party pursuant to this Agreement. |
1.44 | Records . The term “Records” shall mean books of account and records relating to this Agreement (including all records of transactions relating to Licensed Products, Revenues, and sublicenses). |
1.45 | Revenues . The term “Revenues” shall mean, during any given period, as determined in accordance with GAAP: (i) gross revenues of any kind accrued, due or owing to Neurotrope (directly or indirectly) or any of its sublicensees (directly or indirectly) in connection with any Licensed Products sold or otherwise provided by or for Neurotrope or its sublicensees during such period, and (ii) gross up-front fees, royalties, licensing or sublicensing fees, milestone payments, lump sum payments and other amounts of any kind accrued, due or owing to Neurotrope in connection with any Licensed IP. |
1.46 | Royalty . The term “Royalty” shall mean a royalty equal to the Royalty Rate times Revenues. |
1.47 | Royalty Rate . The term “Royalty Rate” shall mean the applicable percentage, as determined by the percentage of NRV I’s equity ownership of Neurotrope pursuant to the Stockholders Agreement, in accordance with the following table: |
1.48 | Services . The term “Services” shall mean research and development services and other related scientific assistance and support services (including pre-clinical or clinical activities or trials) set forth in an SOW to be provided by BRNI to Neurotrope under this Agreement. |
1.49 | Services Fees . The term “Services Fees” shall mean the costs and expenses incurred by BRNI or its Affiliates in connection with the Services and the fees for Services calculated in accordance with the applicable SOW. |
1.50 | Services Reimbursement . The term “Services Reimbursement” shall mean four million dollars ($4,000,000), pro-rated on a thirty (30) month basis with respect to the period of time elapsed from April 2, 2012 through the date of completion of the A Round Financing. For example, if the A Round Financing is completed on: |
(i) | October 2, 2012, the Services Reimbursement shall be equal to (6 months / 30 months) * $4,000,000 (or $800,000); and |
(ii) | July 2, 2013, the Services Reimbursement shall be equal to (15 months / 30 months) * $4,000,000 (or $2,000,000). |
1.51 | SOW . The term “SOW” shall mean a statement of work entered into between BRNI and Neurotrope in connection with this Agreement. |
1.52 | Stockholders Agreement . The term “Stockholders Agreement” shall have the meaning set forth in the Preamble. |
1.53 | Term . The term “Term” shall mean the later of the date (i) the last of the Licensed Patents expires, is abandoned, or is declared unenforceable or invalid and (ii) the last of the Licensed Technology enters the public domain. For the purposes of this Agreement, the expiration, abandonment, or declaration of unenforceability or invalidity of a Licensed Patent occurs in the event of: (a) irrevocable lapse for failure to pay maintenance fees; (b) final rejection of the applicable claims by the United States Patent and Trademark Office or applicable foreign patent office and the exhaustion or expiration of all appeals of such rejection; or (c) final adjudication by a court of competent jurisdiction that the applicable claims of the such Licensed Patent are invalid or unenforceable and the exhaustion or expiration of all appeals from such adjudication. |
1.54 | Third Party . The term “Third Party” shall mean any Person other than the Parties. |
1.55 | Third Party Claims . The term “Third Party Claims” shall mean any actual or threatened Action of any Third Party. |
2. | Licenses |
2.1 | Grant of License . Subject to the terms and conditions of this Agreement, effective as of the Effective Date, BRNI and NRV II hereby grant to Neurotrope, the exclusive (except as set forth in Section 2.3 ), non-transferable (except as permitted by Section 13.1 ), worldwide, royalty-bearing right (including a license from BRNI and a sublicense from NRV II) under their respective right, title and interest in and to the Licensed Patents and the Licensed Technology to develop, use, manufacture (for the avoidance of doubt, but not to have manufactured except as permitted by Section 2.2 ), market, offer for sale, sell, distribute, import and export the Licensed Products during the Term, in each case, solely in the Field of Use. |
2.2 | Right to Sublicense . Neurotrope shall have no right to sublicense the rights granted in Section 2.1 to a Third Party, without the prior written consent of BRNI. Any such permitted sublicense: (i) shall be subject to the terms and conditions of this Agreement; (ii) shall expressly exclude the right to sublicense; and (iii) shall be made pursuant to a written agreement between Neurotrope and such sublicensee providing that Neurotrope’s obligations under this Agreement shall be binding upon such sublicensee as if such sublicensee were a party to this Agreement. Neurotrope shall be liable and responsible for, and shall assume all liabilities and responsibilities for, the acts or omissions of its sublicensees and shall not grant any rights that are inconsistent with the rights granted to, and obligations of, Neurotrope hereunder. Any act or omission of a sublicensee that would be a breach of this Agreement if performed by Neurotrope shall be deemed to be a breach of this Agreement by Neurotrope. No sublicense agreement granted by Neurotrope shall contain any provision which would cause such sublicense agreement to extend beyond the Term of this Agreement. |
Without limiting any other provision of this Section 2.2 , each sublicense agreement must expressly provide that: (i) all Intellectual Property developed, conceived of, or created in connection with, such sublicense agreement shall be assigned to BRNI; (ii) the sublicensee shall be bound by confidentiality obligations that are no less stringent than those set forth in Article 7 with respect to all Confidential Information of BRNI, NRV II and Neurotrope; and (iii) BRNI and, if applicable, NRV II are intended Third Party beneficiaries of such sublicense agreement. Neurotrope shall promptly supply BRNI with a copy of each sublicense agreement for BRNI’s review prior to such agreement being executed.
2.3 | Exceptions to Exclusivity . Notwithstanding anything to the contrary contained in this Agreement: BRNI and its Affiliates may use the Licensed IP in the Field of Use (a) to engage in research and development and other non-commercial activities and (b) to provide Services to Neurotrope or to perform any other activities in connection with this Agreement. Notwithstanding anything to the contrary contained in this Agreement, if, subsequent to the Execution Date, BRNI or NRV II acquires any Intellectual Property that would otherwise constitute Licensed IP and such Intellectual Property is subject to a license existing as of the date of acquisition thereof, then (I) to the extent such Intellectual Property is licensed on an exclusive or sole basis pursuant to such license existing as of the date of such acquisition, such Intellectual Property shall be (a) deemed to not be Licensed Technology or Licensed Patents, as applicable, and (b) excluded from the rights granted to Neurotrope under this Agreement (including pursuant to Section 2.1 ); and (II) to the extent such Intellectual Property is not licensed on an exclusive or sole basis pursuant to such license existing as of the date of such acquisition, such Intellectual Property shall be deemed to be Licensed Technology or Licensed Patents, as applicable, provided that all rights granted to Neurotrope under this Agreement with respect to such Intellectual Property shall be deemed to be non-exclusive and subject to the terms and conditions of the agreement granting such license. |
2.4 | No Implied Licenses . No different, other or further right or license, other than what is granted in this Article 2 , is intended or granted by this Agreement, whether by express or implied means or by estoppel, and this is not an assignment by BRNI or NRV II of any right, title or interest in any of the Licensed IP. Any right or interest not expressly granted under this Article 2 is reserved to BRNI and NRV II, including all rights and interests with respect to the Licensed IP outside the Field of Use. As between Neurotrope, on the one hand, and BRNI and NRV II, on the other hand, Neurotrope shall be the exclusive owner of all Neurotrope Technology (but only to the extent created without the use of any Licensed Technology, Licensed Patents, Improvements or Confidential Information of BRNI or NRV II). |
2.5 | Restrictions . Neurotrope shall not, and shall cause its sublicensees not to, use any Licensed IP outside of the scope of the licenses granted under this Article 2 . |
3 . | Services |
3.1 | Services . Neurotrope may, from time to time, submit request for Services in writing to BRNI, setting forth in reasonable detail the nature of the Services requested. In the event that BRNI is able to provide such Services and no Third Party is clearly in a superior position to provide services identical or similar to such Services, BRNI and Neurotrope shall promptly: (i) discuss the Services requested and the related terms and conditions; and (ii) negotiate in good faith and execute an SOW regarding terms and conditions of such Services. Upon execution of an SOW, BRNI shall provide, or shall cause its Affiliates to provide, the applicable Services in accordance with such SOW. |
3.2 | Preferred Service Provider . Neurotrope shall not engage any Person other than BRNI to provide any research or development services or other related scientific assistance and support services (including pre-clinical or clinical activities or trials), including any services identical or similar to the Services, without BRNI’s prior written consent. BRNI and Neurotrope may agree to have a Third Party provide services identical or similar to the Services to Neurotrope in the case where BRNI is demonstrably unable to do so or such Third Party is demonstrably in a superior position to do so. Under such circumstances: (i) Neurotrope shall promptly enter into an agreement with such Third Party regarding the terms and conditions for such services; and (ii) unless BRNI has no expertise or experience relating to such services, BRNI and Neurotrope shall promptly negotiate and execute an SOW regarding terms and conditions of Services to be provided by BRNI under which BRNI will work closely with such Third Party and will provide support for such Third Party services. |
4. | Payments |
4.1 | Royalties and Other Fees . Neurotrope shall pay: (i) to BRNI, on BRNI’s own behalf and as an agent for NRV II, the Royalty (including advances on future Royalties), to be allocated between NRV II and BRNI pursuant to an agreement between NRV II and BRNI; and (ii) to BRNI, (a) the Fixed Research Fee, (b) the Services Reimbursement, (c) the Services Fees and (d) all other fees, costs, expenses or other amounts to be paid or reimbursed to BRNI pursuant to this Agreement, in each case in accordance with this Article 4 . Upon the date the last of the Licensed Patents expires, is abandoned, or is declared unenforceable or invalid, the Parties shall negotiate in good faith an adjustment to the Royalty Rate for the remainder of the Term. |
4.2 | Arms’ Length Transaction . Neurotrope shall engage in all transactions related to the Licensed Products or the sublicenses granted any Licensed IP in the ordinary course of business on fair and reasonable terms and conditions that are no less favorable to Neurotrope than would be obtained in a comparable arms’ length transaction between Neurotrope and a Third Party that is not an Affiliate of Neurotrope. Such terms and conditions shall be the basis for calculation of Revenues. |
4.3 | Advances on Future Royalties . Within thirty (30) days after the receipt by Neurotrope of any amount of capital raised in the A Round Financing, the B Round Financing, or any subsequent rounds of financing prior to a public offering, Neurotrope shall pay to BRNI five percent (5%) of such amount as an advance payment of future Royalty payable under Section 4.5 . Such advance payment of future Royalty will be offset (with no interest) against the amount of Royalty payable under Section 4.5 until such time that such advance payment of future Royalty equals in full the amount of the advance payment. |
4.4 | Reimbursement . Within thirty (30) days of the date of completion of the A Round Financing, Neurotrope shall pay to BRNI the Services Reimbursement. |
4.5 | Royalty Payments and Reports . Within sixty (60) days after the end of each Quarter, Neurotrope shall: (i) pay to BRNI the Royalty for such Quarter in accordance with this Article 4 ; and (ii) regardless of whether any payment is due, provide BRNI with a report providing (a) details of Revenues accrued for such Quarter, (b) details regarding the Licensed Products sold or otherwise provided by Neurotrope or its sublicensees during such Quarter (detailed country-by-country, with gross invoiced amounts and Revenues), (c) details regarding up-front fees, royalties, licensing or sublicensing fees, milestone payments, lump sum payments and other amounts accrued, due or owing to Neurotrope or its sublicensees for such Quarter, and (d) a calculation of the amount of Royalty due hereunder for such Quarter. |
4.6 | Fixed Research Fee . With respect to the calendar year of the completion of the B Round Financing, within ten (10) days after such completion, and with respect to each of the five (5) calendar years following the calendar year of the completion of the B Round Financing, within ten (10) days after the beginning of each such calendar year after the completion of the B Round Financing, Neurotrope shall pay to BRNI the Fixed Research Fee for such calendar year. No later than ninety (90) days prior to the end of the fifth (5th) calendar year following the calendar year of the completion of the B Round Financing, the Parties shall negotiate in good faith the amount of the Fixed Research Fee for each remaining calendar year during the Term. |
4.7 | Services Fees . BRNI will provide Neurotrope with monthly invoices for Services Fees in advance. Such invoice shall include Services Fees estimated to be incurred for the next month and a true-up for the difference between the estimated Services Fees and the actual Services Fees incurred for the immediately preceding month. Neurotrope may credit against the Services Fees for Services performed in a particular calendar year the Fixed Research Fee for such calendar year. |
4.8 | Payment Method and Timing . All payments made under this Agreement by Neurotrope shall be made in U.S. dollars. Neurotrope shall pay all sums due under this Agreement by check, wire transfer, or electronic funds transfer (EFT) in immediately available funds. Except as expressly set forth in Section 5.6 , Neurotrope shall pay to BRNI all invoiced amounts within thirty (30) days after the date of the applicable invoice. |
4.9 | Taxes . Among the Parties, all taxes relating to the sale or provision of the Licensed Products shall be the sole responsibility of Neurotrope. Each Party shall be solely responsible for its own income taxes based on the amounts received in connection with this Agreement. |
4.10 | Late Payment . Time is of the essence with respect to all payment to be made hereunder by Neurotrope. Any payments or portions thereof due hereunder which are not paid when due shall bear interest equal to the lesser of the rate equal to twenty-five percent (25%) per annum above the Prime Rate or the maximum rate permitted by Law, calculated on the number of days such payment is delinquent. This Section 4.10 shall in no way limit any other remedies available to either Party. |
4.11 | Incorrect Statements or Payment . The receipt or acceptance by BRNI of any amounts under this Agreement shall not prevent BRNI from challenging the validity or accuracy thereof at any time, and in the event that any inconsistencies or mistakes are discovered in connection therewith, they shall immediately be rectified and the appropriate payment made by Neurotrope to BRNI. |
4.12 | Audits . During the Term and for at least three (3) years after the expiration or termination of this Agreement, Neurotrope shall keep, maintain and preserve complete and accurate Records at its principal place of business. Upon reasonable notice to Neurotrope, BRNI (or a party designated by BRNI) shall have the right to audit the Records. Such audits may be exercised during normal business hours and BRNI (or a party designated by BRNI) shall have the right to make copies or extracts of the Records. Neurotrope shall pay BRNI for the cost of any audit that discloses (i) an intentional payment misreporting, or (ii) a payment misreporting of more than two percent (2%) between the amount due to BRNI pursuant to the audit and the amount Neurotrope actually paid or reported to BRNI. Neurotrope shall promptly make corrective payments (together with interest in accordance with Section 4.10 ) to correct any underpayments detected in any such audit. |
5. | Intellectual Property |
5.1 | Licensed IP . Neurotrope acknowledges and agrees that: (i) all right, title and interest in and to the Licensed IP shall be owned solely and exclusively by BRNI (except for rights granted to NRV II); (ii) all use of the Licensed IP by Neurotrope shall inure to the benefit of BRNI; and (iii) Neurotrope shall not at any time acquire any rights in the Licensed IP by virtue of any use it may make thereof. Neurotrope shall not represent, use or permit the use of the Licensed IP in such a way so as to give the impression that the Licensed IP is the property of Neurotrope. |
5.2 | Improvements . All Improvements to any of the Licensed IP authored, conceived, created, developed, discovered, invented or reduced to practice by any Party (whether solely or jointly with any other Person) shall be owned solely and exclusively by BRNI. Neurotrope shall promptly disclose to BRNI (but in any event no more than thirty (30) days thereafter), and hereby irrevocably assigns and transfer to BRNI, all Improvements to any of the Licensed IP authored, conceived, created, developed, discovered, invented or reduced to practice by Neurotrope (whether solely or jointly with any other Person), including all Intellectual Property therein. Improvements to any Licensed IP authored, conceived, created, developed, discovered, invented or reduced to practice by any Party (whether solely or jointly with any other Person) that are inside the Field of Use shall be: (i) deemed to be Licensed Patents or Licensed Technology, as applicable, and licensed by BRNI or sublicensed by NRV II, as applicable, to Neurotrope pursuant to Section 2.1 ; and (ii) subject to the terms and conditions of this Agreement. All other Improvements authored, conceived, created, developed, discovered, invented or reduced to practice by any Party (whether solely or jointly with any other Person) shall not be included in any of the rights granted under Article 2 . |
5.3 | BRNI Data . BRNI shall solely and exclusively own all right, title and interest in and to all BRNI Data. Neurotrope hereby irrevocably assigns and transfers to BRNI all right, title and interest in and to the BRNI Data. |
5.4 | No Adverse Actions . Neurotrope shall not, and shall not permit another Person to: (i) challenge BRNI’s ownership of, or BRNI’s or NRV II’s right to license, any Licensed IP; (ii) apply for or seek to patent or register any Licensed IP; (iii) file any document with any Governmental Authority or take any other action that would reasonably be expected to affect BRNI’s ownership of any Licensed IP; (iv) perform any action or omission in derogation of any of the rights of BRNI in or to any Licensed IP; (v) use any Licensed IP, or seek to extend the scope of usage of any Licensed IP, outside of the limitations set forth in Article 2 ; (vi) use the Licensed IP in any manner, or take or allow any action, that might diminish, dilute or adversely affect the reputation of BRNI; or (vii) use any Licensed IP in any manner inconsistent with this Agreement. |
5.5 | CREATE Act . The Parties acknowledge and agree that this Agreement shall be deemed to be a Joint Research Agreement as defined by the CREATE Act. |
5.6 | Prosecution and Maintenance . As between Neurotrope and BRNI, Neurotrope shall have no right, and BRNI shall have the sole and exclusive right (but not the obligation), to apply for, file, prosecute, or maintain patents and applications for the Licensed IP, in each case, in any jurisdiction throughout the world. Neurotrope shall reimburse BRNI for all of the attorneys’ fees, translation costs, filing fees, maintenance fees, and other costs and expenses related to any of the foregoing; provided, however, that, if Neurotrope provides written notice to BRNI of Neurotrope’s intent to not reimburse BRNI for any such fee, cost or expense within thirty (30) days of the date of the applicable invoice therefor, (i) Neurotrope shall not be obligated to so reimburse BRNI and (ii) the Licensed IP that is the subject of such fee, cost or expense shall be deemed to not be Licensed Technology or Licensed Patents, as applicable, as of the date of such notice (and thereafter not licensed or sublicensed to Neurotrope pursuant to this Agreement). Upon BRNI’s request, Neurotrope shall cooperate fully with BRNI (including executing and delivering all documents, providing all information, and taking all such action as may be necessary or appropriate) in preparing, executing, filing and prosecuting applications to patent or register any Licensed IP, and applications for other related patents and registrations and in maintaining all such patents and registrations as may issue. |
5.7 | Enforcement . |
5.7.1 | Notice . Neurotrope shall immediately notify BRNI in writing of any actual or suspected Infringement or any challenge to the validity, enforceability or scope of the Licensed IP, inside the Field of Use, of which Neurotrope may become aware. Such notice shall, to the extent Neurotrope is aware of such information: (i) identify the alleged Person involved in the Infringement; (ii) detail the specific aspects of the Licensed IP that are the subject of such Infringement (including any specific patent claims) and the particular manner of such Infringement (including any particular products); (iii) identify the geographic area in which such Infringement is occurring; (iv) provide a good faith estimate of the lost sales or other Losses to Neurotrope due to such Infringement; and (v) be updated, corrected or supplemented by Neurotrope promptly after Neurotrope becomes aware of any information that tends to either substantiate or call into question the claim of Infringement. |
5.7.2 | Enforcement and Defense of the Licensed IP . |
5.7.2.1 | By Neurotrope . As between Neurotrope, on the one hand, and BRNI and NRV II, on the other hand, subject to Section 5.7.3 and Section 5.7.4 , BRNI and NRV II shall have no right, and Neurotrope shall have the sole and exclusive right (but not the obligation) to, at Neurotrope’s sole cost and expense, inside the Field of Use, enforce the Licensed IP and defend the validity, enforceability or scope of the Licensed IP. Upon Neurotrope’s request, BRNI and NRV II shall cooperate fully with Neurotrope, as applicable (including executing and delivering all documents, providing all information, and taking all such action as may be necessary or appropriate) in, inside the Field of Use, enforcing the Licensed IP and defending the validity, enforceability or scope of the Licensed IP, including joining as a party to any suit, testifying at any proceeding, and executing any instruments or documents. |
5.7.2.2 | By BRNI and NRV II . As between Neurotrope, on the one hand, and BRNI and NRV II, on the other hand, Neurotrope shall have no right, and BRNI and NRV II shall have the sole and exclusive right (but not the obligation) to, at BRNI and NRV II’s sole cost and expense, enforce the Licensed IP and defend the validity, enforceability or scope of the Licensed IP, (i) outside the Field of Use and (ii) subject to Section 5.7.3 , inside the Field of Use. Upon BRNI’s or NRV II’s request, Neurotrope shall cooperate fully with BRNI or NRV II, as applicable (including executing and delivering all documents, providing all information, and taking all such action as may be necessary or appropriate) in enforcing the Licensed IP and defending the validity, enforceability or scope of the Licensed IP, including joining as a party to any suit, testifying at any proceeding, and executing any instruments or documents. |
5.7.3 | Enforcement by BRNI Inside the Field of Use . If, within sixty (60) days after Neurotrope’s receipt or delivery (as the case may be) of a notice described in Section 5.7.1 , Neurotrope has not, in accordance with Section 5.7.2.1 and Section 5.7.4 , as applicable, (i) brought an action to enforce the Licensed IP inside the Field of Use, (ii) defended the validity, enforceability or scope of the Licensed IP, and/or (iii) otherwise terminated the actual or suspected Infringement, inside the Field of Use, then Neurotrope shall have no right, and BRNI and NRV II shall have the sole and exclusive right (but not the obligation) to, with respect to the matters referenced in such notice, enforce the Licensed IP and defend the validity, enforceability or scope of the Licensed IP. |
5.7.4 | Conditions of Enforcement by Neurotrope . Neurotrope shall comply with the following with respect to any enforcement or defense in connection with Section 5.7.2.1 : (i) Neurotrope shall first give BRNI written notice of Neurotrope’s intent to bring or participate in any action to enforce, or defense of, the Licensed IP inside the Field of Use a reasonable period of time in advance of commencing any such action or engaging in such defense; and (ii) Neurotrope may not undertake any such action or defense without BRNI’s prior written consent (not to be unreasonably withheld). In the event BRNI grants such consent: (a) Neurotrope shall consult with BRNI, keep BRNI reasonably informed with respect to such action or defense, and consider, in good faith, any advice of BRNI with respect to such action or defense; (b) Neurotrope may not, without BRNI’s prior written consent, settle, compromise or consent to the entry of any judgment in any such action or defense, unless such settlement, compromise or consent (I) includes an unconditional release of the BRNI, its Affiliates (other than Neurotrope) and its and their respective directors, officers, employees and agents from all liability arising out of such action or defense and (II) is solely monetary in nature and does not include a statement as to, or an admission of fault, culpability or failure to act by or on behalf of, the BRNI, its Affiliates (other than Neurotrope) and its and their respective directors, officers, employees and agents; and (c) Neurotrope shall reimburse BRNI for all costs and expenses incurred by BRNI or its Affiliates (other than Neurotrope) in connection with such action or defense (including joining as a as a party to any suit and testifying at any proceeding). Neurotrope may retain all recovery and income (including damages, licensing fees, royalties, settlement payments and other payments) received as a result of any action or defense in which it engages pursuant to Section 5.7.2.1 . |
6. | Additional Neurotrope Obligations |
6.1 | Diligence . Neurotrope shall use its best efforts, throughout the world, (i) to develop, use, manufacture, market, offer for sale, sell, distribute, import and export the Licensed Products in the Field of Use, and (ii) to sublicense the Licensed IP to Third Parties in the Field of Use under reasonable terms and conditions (including reasonable amounts of up-front fees, royalties, licensing or sublicensing fees, milestone payments, lump sum payments or other payments). |
6.2 | Compliance with Law . Neurotrope shall develop, use, manufacture, market, offer for sale, sell, distribute, import and export the Licensed Products in strict compliance with all Laws. Neurotrope shall keep BRNI fully informed of, and shall move expeditiously to resolve, any Action by a Governmental Authority related to any Licensed Product. |
6.3 | Marking . Neurotrope shall mark all Licensed Products with, and include in all related sales and marketing literature, and other materials and documents: (i) any applicable United States of America and foreign patent numbers in accordance with the applicable Laws of the countries in which the Licensed Products are intended to be used, manufactured, marketed, offered for sale, sold, distributed, imported or exported, as may be directed by BRNI; (ii) any other legends as may be reasonably requested by BRNI to ensure that BRNI’s rights under and to the Licensed IP are fully protected; and (iii) any other marking as may be required in accordance with applicable Laws. |
6.4 | Regulatory Approval . Neurotrope shall be responsible for filing, obtaining and maintaining all licenses and approvals (including FDA approvals) necessary for the development, use, making, marketing, offer for sale, sale, distribution, importation and exportation of the Licensed Products, together with all related costs and expenses. All such licenses and approvals, and filings and applications therefor, shall be held in the name of Neurotrope (or its designated Affiliate). BRNI shall provide Neurotrope with support for filing, obtaining and maintaining all such licenses and approvals (including pre-clinical or clinical activities or trials) as part of the Services in accordance with the applicable SOW. Unless otherwise limited or prohibited by applicable Law, to the extent reasonably practicable under the circumstances, Neurotrope shall: (i) promptly provide BRNI with copies of any material written communication to or from, and a summary of any material oral communication with, any Governmental Authority relating to the Licensed Products; (ii) allow BRNI a reasonable opportunity to review and comment on any material submission or material correspondence to any Governmental Authority relating to the Licensed Products; (iii) consider in good faith any comments made by BRNI pursuant to clause (ii) or otherwise with respect to material interactions with any Governmental Authority concerning the Licensed Products; (iv) afford BRNI the opportunity to attend any in-person material meetings, and listen in on, or participate in, any planned material calls, with any Governmental Authority relating to the Licensed Products; and (v) otherwise provide BRNI with any reasonably requested information and documentation relating to material regulatory submissions or approvals. For purposes of the foregoing sentence, the term “material” (as used in reference to certain communications, correspondence, meetings, submissions, approvals, and interactions) shall mean and include those correspondence, meetings, submissions, approvals, and interactions between Neurotrope and a Governmental Authority that one would reasonably anticipate having a material impact on the grant or maintenance of a regulatory approval necessary to develop, use, manufacture, market, offer for sale, sell, distribute, import and export the Licensed Products. |
6.5 | Export Compliance . Neurotrope shall comply with all applicable Laws that may prohibit or limit the import, export, release or disclosure of any information, technology, materials or products to any Person inside or outside any country, including the U.S. International Traffic in Arms Regulations, the U.S. Export Administration Regulations and the Office of Foreign Assets Control Regulations. |
6.6 | Additional Reporting . Together with the report provided by Neurotrope pursuant to Section 4.5 , or otherwise upon BRNI’s request, Neurotrope shall provide to BRNI a report providing: (i) data, documentation and information regarding any adverse consequences of the Licensed IP of which Neurotrope or any of its sublicensees is aware; (ii) data, documentation and information regarding the usage of Licensed IP by Neurotrope, its sublicensees and its and their customers and end-users (including for what indications the Licensed IP is used); (iii) data, documentation and information regarding any compounds utilized in connection with the Licensed IP; and (iv) any other data, documentation or information related to clauses (i) through (iii) as reasonably requested by BRNI. |
7. | Confidentiality |
7.1 | Duty of Confidentiality . Each Party shall keep strictly confidential, and shall not publish or otherwise disclose or use for any purpose other than as expressly provided for in this Agreement, any Confidential Information of any other Party. Without limiting the foregoing, each Party shall exercise the highest degree of care to protect the Confidential Information of any other Party as it exercises with respect to its own highly sensitive confidential information, but in no case less than a reasonable degree of care. Each Party, as a Receiving Party, shall limit access to the Confidential Information of the Disclosing Party to only its Affiliates, and its and their directors, officers, employees, agents, consultants and contractors with a “need-to-know” in order to perform his or her duties under this Agreement or to provide or receive the Services, as applicable. Each Party shall ensure that all of its Affiliates, and its and their directors, officers, employees, agents, consultants and contractors who may be exposed to the Confidential Information of any other Party shall comply with such Party’s obligations as set forth in this Article 7 . Each Party may disclose the terms and conditions of this Agreement to its Affiliates, and its and their directors, officers, employees, agents, attorneys, accountants, other advisors, and actual or potential investors or sources of financing. With respect to Confidential Information of a Disclosing Party, the Receiving Party shall promptly inform the Disclosing Party in the event of any loss or unauthorized disclosure thereof of which the Receiving Party becomes aware. |
7.2 | Exclusions to Duties of Confidentiality . The foregoing duties of confidentiality set forth in Section 7.1 shall not apply to any particular Confidential Information that the Receiving Party can show by written documentation: |
(i) | was or has later become available to the public through no breach of this Agreement |
(ii) | was obtained from a Third Party lawfully in possession of such information that had the legal right to disclose the information without it being subject to a continuing obligation of confidentiality; |
(iii) | was already in the Receiving Party’s possession (without an obligation of confidentiality) prior to direct or indirect disclosure pursuant to this Agreement (or any predecessor agreement between the Parties governing the confidentiality of such information) and was not generated in connection with, this Agreement; |
(iv) | was developed independently by the Receiving Party (with no reference to any information disclosed to it by the Disclosing Party, whether before or after the Effective Date); or |
(v) | was disclosed only after receipt of prior written approval to disclose from a duly authorized representative of the Disclosing Party. |
7.3 | Permitted Disclosure . If the Receiving Party is requested or required to disclose all or any part of any Confidential Information of the Disclosing Party under a discovery request, a subpoena, or an inquiry issued by a Governmental Authority or under applicable Law, the Receiving Party shall, to the extent practicable and subject to applicable Laws, give prompt notice of such request to the Disclosing Party and shall give the Disclosing Party the opportunity to seek an appropriate confidentiality agreement, protective order or modification of any disclosure or otherwise intervene, prevent, delay or otherwise affect the response to such request, and the Receiving Party shall cooperate in such efforts. BRNI may publish the results of any research undertaken by BRNI pursuant to this Agreement (including in connection with any Services) within a reasonable period of time after completion of the research and a review of such proposed publication by Neurotrope. The Parties acknowledge and agree that it is the Parties’ express intent that such results (including in the Field of Use) be published in accordance with principles set forth in Rev. Rul. 76-296, 1976-2 CB 141, Situation 1. |
7.4 | Tax-Related Disclosure . Notwithstanding anything to the contrary contained in this Agreement, each Party may disclose to any and all Persons, without limitation of any kind, the tax treatment and the tax structure (as such terms are used in Internal Revenue Code §6011 and the Treasury Regulations promulgated thereunder) of the transactions contemplated by this Agreement; provided, however, that except to the extent otherwise provided above in this Section 7.4 , no Party shall disclose any information pursuant to this Section 7.4 that is not necessary to understanding the tax treatment and tax structure of any possible transactions (including the identity of the Parties, any information that could lead another to determine the identity of the Parties, any other information to the extent that such disclosure could result in a violation of any federal or state securities Law, or the general terms and conditions and other commercial terms of the arrangements contemplated by this Agreement). |
7.5 | Remedy . It is understood and agreed that in the event of a breach of this Article 7 damages will not be an adequate remedy and the Party not in breach hereof shall be entitled to injunctive relief to restrain any such breach, threatened or actual, notwithstanding Section 13.3 , without the need to prove irreparable harm or to post a bond or other security, in addition to any other remedies that may be available to the Party not in breach hereof under this Agreement, at law, in equity, or otherwise. |
7.6 | Return of Confidential Information . Each Receiving Party, shall, upon written request of the Disclosing Party or upon expiration or termination of this Agreement, either promptly return to the Disclosing Party, or destroy and certify in writing to the Disclosing Party the destruction of, any and all Confidential Information of the Disclosing Party (whether in hard copy, electronic format or otherwise and whether stand-alone or included in any, or that constitute, other materials or documents) in the Receiving Party’s possession. |
7.7 | No Right or License . Each Party acknowledges and agrees that the Licensed Technology and the BRNI Data shall be deemed to be the Confidential Information of BRNI and NRV II. Nothing in this Article 7 shall be construed as granting to, or conferring on, the other Party, expressly or impliedly, any rights or license to any Confidential Information. |
8. | Representations and Warranties |
8.1 | Mutual Representations, Warranties, and Covenants . Each Party hereby represents, warrants, and covenants that: |
(i) | such Party is duly organized and validly existing under the Laws of its jurisdiction of incorporation or formation and it has full corporate or other power and authority, has the rights necessary, and has taken all corporate or other action necessary, to enter into and perform this Agreement; |
(ii) | (a) this Agreement is a legal and valid obligation binding upon such Party and enforceable in accordance with its terms, (b) the execution, delivery, and performance of this Agreement by such Party do not conflict with any agreement, instrument or understanding, oral or written, by which it is bound, and, to its knowledge as of the Execution Date, does not violate any Law, and (c) the individual executing this Agreement on such Party’s behalf has been duly authorized to do so by all requisite corporate or other action; and |
(iii) | no authorization, consent, approval, license, exemption of, or filing or registration with any Governmental Authority, under any applicable Laws, is or shall be necessary for, or in connection with, the transactions contemplated by this Agreement. |
8.2 | Representations, Warranties, and Covenants by Neurotrope . Neurotrope hereby represents, warrants, and covenants that, during the Term: (i) the Licensed Products shall be developed, used, manufactured, marketed, offered for sale, sold, distributed, imported and exported by each of Neurotrope and its sublicensees in accordance with all applicable Laws; and (ii) that each of Neurotrope and its sublicensees shall obtain all licenses and approvals of Governmental Authorities necessary to develop, use, manufacture, market, sell, offer for sale, distribute and import the Licensed Products. |
8.3 | Representations, Warranties, and Covenants by BRNI . BRNI hereby represents, warrants, and covenants that to its knowledge, as of the Execution Date: (i) none of the data provided by BRNI to Dr. John Abeles or Dr. Jim New was intentionally falsified by BRNI; (ii) BRNI has provided to Dr. John Abeles or Dr. Jim New the information related to the Licensed IP in BRNI’s possession that is reasonably material to the rights and licenses granted hereunder; and (iii) the Licensed IP is free and clear of all security interests. |
8.4 | Disclaimer of Warranties . EXCEPT AS SET FORTH IN THIS ARTICLE 8 , EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES (EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE) WITH RESPECT TO THE LICENSED IP, THIS AGREEMENT, OR ANY OTHER SUBJECT MATTER RELATING TO THIS AGREEMENT, INCLUDING ANY WARRANTY OF MERCHANTABILITY, NON-INFRINGEMENT, FITNESS FOR A PARTICULAR PURPOSE, OR OWNERSHIP, SCOPE, VALIDITY OR ENFORCEABILITY OF INTELLECTUAL PROPERTY RIGHTS. |
9. | Limitations of Liability |
9.1 | Exclusion of Consequential Damages . EXCEPT FOR (I) NEUROTROPE’S BREACH OF ARTICLE 2 , (II) A PARTY’S BREACH OF ARTICLE 7 , (III) A PARTY’S OBLIGATIONS UNDER ARTICLE 10 , AND (IV) NEUROTROPE’S OBLIGATIONS TO PAY ANY AMOUNTS DUE UNDER THIS AGREEMENT, IN NO EVENT SHALL ANY PARTY (OR ANY OF ITS AFFILIATES OR ITS OR THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS) BE LIABLE TO ANY OTHER PARTY (OR ANY OF ITS AFFILIATES OR ITS OR THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS) FOR ANY INDIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, OR CONSEQUENTIAL DAMAGES OF ANY KIND ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, OR OTHERWISE), EVEN IF SUCH DAMAGES WERE FORESEEABLE OR SUCH PARTY WAS ADVISED OR OTHERWISE AWARE OF THE LIKELIHOOD OF SUCH DAMAGES. |
9.2 | Insurance . During the Term and for a period of at least three (3) years thereafter, Neurotrope shall carry and maintain at its sole expense (including any policy deductibles or self-insured retentions) customary insurance coverage that is (i) reasonable under circumstances with respect to this Agreement, consistent with Neurotrope’s business requirements and (ii) covers all reasonably foreseeable losses or damages that may arise from this Agreement (on a worldwide basis, except for coverage where separate non-U.S. policies apply), including general liability (including product liability), errors and omissions, workers compensation and other customary coverages, from an insurance company with claims offices in the U.S. (except for coverage where separate non-U.S. policies apply) that has a Best’s Rating of A- or higher and a Financial Size Category of Class VII or higher, as such ratings and categories are assigned by A.M. Best Company, Inc., and in all cases, naming BRNI as an additional insured. Neurotrope shall provide BRNI with a copy of the fully paid policies or certificates of insurance by no later than the first day such coverage takes effect. Neurotrope shall provide BRNI with written notice at least thirty (30) days prior to any expiration, renewal, modification or termination of any such coverage. |
10. | Indemnities |
10.1 | Indemnification . |
10.1.1 | By Neurotrope . Neurotrope shall defend, indemnify and hold harmless the BRNI Indemnitees from and against any Losses incurred by any BRNI Indemnitee in connection with all Third Party Claims arising from, resulting from or relating to: (i) Neurotrope’s or any of its sublicensees’ breach of any terms or conditions of this Agreement; (ii) any negligence, gross negligence, willful misconduct or other act or omission of Neurotrope or any of its sublicensees in connection with this Agreement; (iii) Neurotrope’s or any of its sublicensees’ use of, or conduct regarding, Licensed Products or Licensed IP, including any claims of product liability, defect, warranty, recall, false advertising, personal injury, death, or damage to property; or (iv) any violation of any Laws by any Licensed Product, Neurotrope or any of its sublicensees. |
10.1.2 | By BRNI . BRNI shall defend, indemnity and hold harmless the Neurotrope Indemnitees from and against any Losses incurred by any Neurotrope Indemnitee in connection with all Third Party Claims arising from, resulting from or relating to: (i) BRNI’s breach of any terms or conditions of this Agreement; or (ii) any violation of any Laws by BRNI. |
10.2 | Right to Participate in Defense . The Claiming Indemnitee shall be entitled to participate in the defense of any Third Party Claim and to employ counsel of its choice for such purpose; provided, however, that such employment shall be at the Claiming Indemnitee’s own expense unless the Indemnifying Party has failed to assume the defense (in which case the Claiming Indemnitee shall have the right (but not the obligation) to control the defense and the Indemnifying Party shall be responsible for all such expenses (in addition to any Losses for which the Indemnifying Party is responsible in accordance with Section 10.1 ). If the Claiming Indemnitee elects to participate in its own defense, the Indemnifying Party shall consider in good faith the views of the Claiming Indemnitee and its counsel and to keep the Claiming Indemnitee and its counsel reasonably informed of the progress of the defense, litigation, arbitration, or settlement discussions relating to such Third Party Claim. |
10.3 | Settlement . The Indemnifying Party shall not settle or compromise any Third Party Claims against any of the Claiming Indemnitees without with the Claiming Indemnitee’s prior written consent, unless such settlement or compromise: (i) includes an unconditional release of the Claiming Indemnitee from all liability arising out of such Third Party Claims; (ii) is solely monetary in nature; and (iii) does not include remedial or equitable measures or relief (including any injunction), a statement as to, or an admission of, fault, culpability or failure to act by or on behalf of, the Claiming Indemnitee or otherwise materially adversely affect the Claiming Indemnitee. The Indemnifying Party shall not admit any liability with respect to any Third Party Claim without the prior consent of Claiming Indemnitee. |
11. | Term and Termination |
11.1 | Term . This Agreement shall be effective as of the Execution Date and, subject to termination in accordance with Section 11.2 , shall continue during the Term. |
11.2 | Termination . |
11.2.1 | By BRNI . BRNI may terminate this Agreement pursuant to Section 12.1(i) . In addition, upon written notice of termination to Neurotrope, BRNI may elect, in its sole discretion, to terminate this Agreement, effectively immediately, in the event that (i) Neurotrope fails to complete the A Round Financing by February 28, 2013 (or such other date as agreed by a unanimous vote of all of the Directors (as defined in the Stockholders Agreement) of the Board (as defined in the Stockholders Agreement)) or (ii) Neurotrope challenges the ownership, scope, validity or enforceability of any Licensed IP. |
11.2.2 | By Either Party . Upon written notice of termination to the other Party, BRNI or Neurotrope may terminate this Agreement or the applicable SOW thirty (30) days after the date of such notice of termination, in the event that: |
(i) | the other Party materially breaches any provisions of this Agreement or a commits a series of breaches that over time that taken together constitute a material breach of this Agreement, and (a) such material breach is incapable of cure or (b) with respect to such material breaches capable of cure, the breaching Party does not cure such material breach within sixty (60) days from notice of such material breach from the non-breaching Party; |
(ii) | the other Party (a) files for bankruptcy, (b) is the subject of any proceedings related to its liquidation, insolvency, or the appointment of a receiver or similar officer for it, which proceedings are not dismissed within sixty (60) days after their commencement, (c) makes an assignment for the benefit of all or substantially all of its creditors, or (d) enters into an agreement for the composition, extension, or readjustment of substantially all of its obligations; or |
(iii) | the Stockholders Agreement is terminated. |
11.2.3 | Automatically . This Agreement shall terminate automatically if (i) BRNI elects to proceed with clause (ii) of Section 12.1 and (ii) BRNI, on the one hand, and John Abeles and Jim New, on the other hand, do not agree, within ninety (90) days of such election by BRNI, to a new target amount for Neurotrope to raise during A Round Financing and the intended use of such new amount following the completion of the new A Round Financing (and amend this Agreement to reflect such agreement). |
11.2.4 | Termination of an SOW . Expiration or termination of this Agreement shall result in the automatic termination of all SOWs then in effect. Expiration or termination of any or all SOWs shall not, by itself, result in the termination of this Agreement or any other SOW. |
11.3 | Effect of Termination or Expiration . |
11.3.1 | Survival . The following Articles and Sections shall survive the expiration or termination of the Term: Article 1 , Article 4 , Article 5 (other than Section 5.7 ), Article 7 , Section 8.4 , Article 9 , Article 10 , Section 11.3 , Section 12.2 and Article 13 . |
11.3.2 | Certain Post-Termination Obligations . Upon any expiration or termination of the Term: (i) all licenses granted hereunder shall terminate immediately; (ii) Neurotrope shall immediately cease, and shall cause its sublicensees to immediately cease, all use of the Licensed IP; (iii) upon BRNI’s request, Neurotrope shall (a) provide BRNI with copies of agreements with Third Parties related to obtaining licenses or approvals from Governmental Authorities and sublicense agreements with Third Parties and (b) provide BRNI with all assistance and cooperation in transferring any such agreement to BRNI (including obtaining consents); and (iv) Neurotrope shall, and shall cause its designated Affiliates to, as applicable, transfer to BRNI, at Neurotrope’s cost and expense, all licenses and approvals, and filings and applications therefor, held in the name of Neurotrope (or its designated Affiliate) pursuant to Section 6.4 . |
11.3.3 | Payments . No payment made under this Agreement shall be refundable upon the expiration or termination of this Agreement and no termination or expiration of this Agreement shall relieve Neurotrope of its obligations to pay any amounts due or owing to BRNI. Upon expiration or termination of this Agreement, all Royalty obligations or other amounts still due and owing by Neurotrope shall be accelerated and shall immediately become due and payable. |
12. | BRNI Third Party Licensor Option |
12.1 | BRNI Option to Terminate or Reduce License Scope Prior to the Completion of A Round Financing . If, prior to the date of the completion of the A Round Financing, BRNI or NRV II (or both of them) enter into an agreement that grants or agrees to grant to any Person (other than the Company) a license or sublicense, respectively, to any of the Licensed Technology referenced in clause (i) or clause (ii) of the definition of Licensed Technology or one (1) or more Licensed Patents covering any such Licensed Technology, then BRNI may elect, in its sole discretion: (i) to terminate this Agreement, effective immediately; or (ii) if such agreement does not grant or agree to grant a license or sublicense to all of the Licensed IP, to remove from the scope of the Licensed IP licensed or agreed to be licensed pursuant to such agreement (in which case the Licensed Patents and Licensed Technology licensed or agreed to be licensed pursuant to such agreement shall be (a) deemed to not be Licensed Patents or Licensed Technology, as applicable, and (b) excluded from the rights granted to Neurotrope under this Agreement (including pursuant to Section 2.1 )) and the Parties shall amend this Agreement to so reflect such removal. For the avoidance of doubt, any such agreement may grant or agree to grant a license or sublicense to Intellectual Property other than such Licensed Technology and Licensed Patents. BRNI shall give Neurotrope prompt written notice of such termination; provided, however, that any failure to so notify Neurotrope shall not affect such termination. Section 22 of the Stockholders Agreement shall apply in the event BRNI elects to proceed with clause (i) or clause (ii) of this Section 12.1 . |
12.2 | BRNI’s Reimbursement of Neurotrope’s Broker/Dealer Breakup Fee . If (i) BRNI elects to exercise clause (i) or clause (ii) of Section 12.1 , (ii) Neurotrope has entered into a written agreement with a licensed broker-dealer or investment bank in connection with the raising of proceeds for the A Round Financing, (iii) BRNI, in its sole discretion, has consented in writing to Neurotrope entering into such agreement prior to Neurotope’s execution of such agreement, and (iv) Neurotrope owes such broker-dealer or investment bank a breakup fee pursuant to such agreement as a result of BRNI’s election to exercise clause (i) or clause (ii) of Section 12.1 , as applicable, then BRNI shall reimburse Neurotrope for such breakup fee actually paid by Neurotrope to such licensed broker-dealer or investment bank. |
13. | Miscellaneous |
13.1 | Assignment . This Agreement shall bind and inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns. Neither this Agreement nor any rights or obligations hereunder may be assigned or transferred (whether by operation of Law or otherwise) by either Party without the other Party’s prior written consent. For the purposes of this Section 13.1 , any change of control, including sale of stock, merger, consolidation or reorganization of a Party shall be deemed to be an assignment of this Agreement. Any attempted assumption or assignment in contravention of this Section 13.1 shall be void and ineffective. |
13.2 | Press Release . No Party shall issue any press release or use any other Party’s name, trademark or logos in any external marketing or advertising, press release or publicity in connection with this Agreement without such other Party’s prior written consent. |
13.3 | Dispute Resolution . Any Dispute between the Parties shall be resolved as provided in this Section 13.3 . |
13.3.1 | Informal Dispute Resolution . The Parties shall use commercially reasonable efforts to resolve any Dispute hereunder in the first instance utilizing the Dispute Resolution Procedures set forth in this Section 13.3.1 . In the event of any Dispute between the Parties, each Party may initiate the Dispute Resolution Procedure by providing notice of the Dispute to the other Party. The Parties shall attempt to resolve any Dispute arising under this Agreement in good faith utilizing in the first instance each Party’s manager with primary responsibility for the SOW under which the Dispute arose. Prior to initiating any lawsuit, each Party shall escalate such Dispute to successively more senior-levels of executive. Each Party shall use commercially reasonable efforts to make such senior management or executives available to speak with (including by telephone) his or her counterpart upon reasonable notice and at a reasonable time. |
13.3.2 | Formal Proceedings . Formal proceedings for the resolution of a Dispute may be commenced after the earlier of: (i) the exhaustion of the Dispute Resolution Procedure as set forth in Section 13.3.1 ; and (ii) ninety (90) days after the initial request to negotiate the Dispute. Notwithstanding the foregoing, each Party may institute formal proceedings at any time in order to avoid the expiration of any applicable limitations period, to preserve a superior position with respect to other creditors, or to seek equitable relief. |
13.4 | Choice of Law . This Agreement shall be governed by, and enforced and construed in accordance with, the Laws of the State of Delaware without giving effect to any choice of Law or conflict of Law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. |
13.5 | Jurisdiction and Venue . Each Party hereby irrevocably submits to the exclusive jurisdiction of the courts of the United States of America located in the State of Delaware, for the purposes of any Action arising out of this Agreement. Each Party agrees that service of any process, summons, notice, or document by personal delivery, by registered mail, or by a recognized international express delivery service to such Party’s respective address set forth in Section 13.13 (as such address may be changed by notice delivered pursuant to such section) shall be effective service of process for any Action in the applicable court with respect to any matters to which it has submitted to jurisdiction in this Section 13.5 . Each Party irrevocably and unconditionally waives any objection to the laying of venue of any Action arising out of this Agreement in such court, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Action brought in any such court has been brought in an inconvenient forum. |
13.6 | Construction . The definitions of the terms herein shall apply equally to the singular and plural forms of the terms defined. Any reference to the masculine, feminine or neuter gender shall be deemed to include any gender or all three as appropriate. The words “include,” “includes,” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall” and vice versa. The word “or” in this Agreement is disjunctive but not necessarily exclusive. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. The Parties hereto intend that each covenant and agreement contained herein shall have independent significance. If either Party has breached any covenant or agreement contained herein in any respect, the fact that there exists another covenant or agreement relating to the same subject matter (regardless of the relative levels of specificity) which such Party has not breached shall not detract from or mitigate the fact that such Party is in breach of the first covenant or agreement. Unless the context requires otherwise: (i) any definition of or reference to any agreement shall be construed as referring to such agreement as from time to time amended, supplemented or otherwise modified; (ii) any reference to any Laws herein shall be construed as referring to such Laws as from time to time enacted, repealed or amended; (iii) any reference herein to any Person shall be construed to include the Person’s permitted successors and assigns; (iv) the words “herein,” “hereof,” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof; and (v) all references herein to Articles, Sections or Exhibits, unless otherwise specifically provided, shall be construed to refer to Articles, Sections and Exhibits of this Agreement. |
13.7 | Counterparts . This Agreement may be executed simultaneously in two or more counterparts (including by means of facsimile or electronic transmission in portable document format (pdf)), any one of which need not contain the signatures of more than one Party, but all such counterparts taken together shall constitute one and the same Agreement. |
13.8 | Entire Agreement . This Agreement (together with any SOWs executed by BRNI and Neurotrope hereunder) constitutes the entire agreement among the Parties as to the subject matter of this Agreement and supersedes and merges all prior negotiations, representations, agreements, and understandings regarding the same. |
13.9 | Order of Precedence . In case of ambiguity or conflict between the terms and conditions of the body of this Agreement, on the one hand, and an SOW, on the other hand, the terms and conditions of the body of this Agreement shall control, except that when an SOW expressly references a term or condition of the body of this Agreement and expressly states the intent of the Parties to override such term or condition, the applicable term or condition of such SOW shall control for purposes of that particular SOW. |
13.10 | Force Majeure . No Party shall be liable for delay or failure in the performance of any of its obligations hereunder (other than obligations with respect to payment) if such delay or failure is due to a Force Majeure Event; provided, however, that the affected Party promptly notifies the other Party in writing and further provided that the affected Party shall use its commercially reasonable efforts to avoid or remove such causes of delay or failure and to mitigate the effect of such delay or failure, and shall continue performance with reasonable dispatch whenever such causes are removed. |
13.11 | Further Assurances . Each Party shall do and perform all such further acts and things and shall execute and deliver such other agreements, certificates, instruments, and documents necessary or that the other Party may deem advisable in order to carry out the intent and accomplish the purposes of this Agreement and to evidence, perfect, or otherwise confirm its rights hereunder (including, with respect to Neurotrope, to confirm BRNI’s ownership of the Licensed IP (including by the execution and delivery of any and all affidavits, declarations, oaths, samples, exhibits, specimens, assignments, powers of attorney and other documentation) and to assist a Party in prosecuting, maintain and enforcing the Licensed IP). |
13.12 | Headings . The headings and captions used in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. |
13.13 | Notices . All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given only: (i) when delivered personally to the recipient; (ii) one (1) business day after being sent to the recipient by reputable overnight courier service (charges prepaid) provided that confirmation of delivery is received; (iii) upon machine generated acknowledgment of receipt after transmittal by facsimile (provided that a confirmation copy is sent via reputable overnight courier service for delivery within two (2) business days thereafter); or (iv) five (5) after being mailed to the recipient by certified or registered mail (return receipt requested and postage prepaid). Such notices, demands and other communications shall be sent to the persons and addresses indicated below: |
If to BRNI:
Blanchette Rockefeller Neurosciences Institute | |
Address: | 8 Medical Center Drive |
Morgantown, WV 26505-3409 | |
Attention: | Shana Phares |
Chief Executive Officer | |
Telephone: | 304-293-1361 |
Facsimile: | 304-293-7536 |
With a copy to (which shall not constitute notice):
Address: | Steptoe & Johnson |
P.O. Box 1616 | |
Morgantown, WV 26507-1616 | |
Attention: | Tom Vorbach |
Telephone: | 304-598-8112 |
Facsimile: | 304-598-8116 |
If to NRV II:
NRV II, LLC c/o Neuroscience Research Ventures, Inc. | |
Address: | 364 Patteson Drive, #729 |
Morgantown, WV 26505 | |
Attention: | Tom Vorbach |
Assistant Secretary | |
Telephone: | 304-598-8112 |
Facsimile: | 304-598-8116 |
With a copy to (which shall not constitute notice):
Address: | Steptoe & Johnson |
P.O. Box 1616 | |
Morgantown, WV 26507-1616 | |
Attention: | Tom Vorbach |
Telephone: | 304-598-8112 |
Facsimile: | 304-598-8116 |
If to Neurotrope:
Neurotrope BioScience, Inc. | |
Address: | 10732 Hawk’s Vista St. |
Plantation, Florida 33324 | |
Attention: | Chief Executive Officer |
Jim New | |
Telephone: | 954-452-4656 |
Facsimile: | 954-452-4656 |
or to such other address or to the attention of such other individual person as the recipient Party has specified by prior written notice to the sending Party.
13.14 | Relationship of the Parties . Each Party is an independent contractor under this Agreement. Nothing contained herein is intended or is to be construed so as to constitute either Party as an agent of the other Party. Nothing in this Agreement shall be construed to create: (i) a partnership, joint venture or other joint business arrangement between the Parties; (ii) any fiduciary duty owed by a Party to the other Party or any of its Affiliates; or (iii) a relationship of employer and employee between or among any of the Parties or their respective Affiliates. The Parties are not joint employers, a single employer, associated employers or related employers for any purpose under this Agreement. Neither Party shall have the authority to commit the other Party contractually or otherwise to any obligations to any Third Party. |
13.15 | Severability . Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Agreement in such jurisdiction or affect the validity, legality or enforceability of any provision in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. |
13.16 | Third Party Beneficiaries . Except as expressly provided with respect to BRNI Indemnitees and Neurotrope Indemnitees in Article 10 , there are no third party beneficiaries intended hereunder and no other party shall have any right or obligation hereunder. |
13.17 | Waivers and Modifications . The failure of any Party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such Party thereafter to enforce each and every provision of this Agreement in accordance with its terms. No waiver of any of the provisions of this Agreement shall be effective unless it is expressly stated to be a waiver and communicated to the other Party in writing by the waiving Party. No modification or amendment of any provision of this Agreement shall be valid or effective unless in writing and signed by each of Parties hereto. |
13.18 | Remedies Cumulative . Unless expressly stated otherwise in this Agreement, all remedies provided in this Agreement will be cumulative and in addition to, and not in lieu of, any other remedies available to either Party at law, in equity, or otherwise. |
13.19 | Business Days . If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or legal holiday in the State of West Virginia, the time period shall automatically be extended to the business day immediately following such Saturday, Sunday or legal holiday. |
13.20 | Consent and Approval . Except as and to the extent otherwise expressly provided in such approval, permission or consent, an approval, permission or consent given by a Party under this Agreement shall not relieve the other Party from responsibility for complying with the requirements of this Agreement, nor shall it be construed as a waiver of any rights under this Agreement. Unless otherwise set forth herein, with respect to any consent, permission or approval of a Party required under this Agreement, such consent, permission or approval: (i) shall be subject to such Party’s sole discretion; and (ii) shall not be effective unless and until such consent, permission or approval is given in writing. |
13.21 | Right to Restructure Agreement . In the event the Internal Revenue Service proposes to deny or negatively affect the tax exempt status and/or public charity status of BRNI, or otherwise proposes to take substantially adverse action against any of the Parties, the Parties shall use their respective best efforts to restructure this Agreement in such a way as to avoid such affect and/or action by the Internal Revenue Service. |
*********
IN WITNESS WHEREOF , each of the Parties hereto, by its duly authorized representative, has caused this Agreement to be executed as of the Execution Date of this Agreement.
NEUROTROPE BIOSCIENCE, INC.
By:
/s/ John H. Abeles M.D
(Signature)
Name:
John H. Abeles M.D.
Title:
Chairman
BLANCHETTE ROCKEFELLER NEUROSCIENCES INSTITUTE
By:
/s/ William Singe
(Signature)
Name: William Singer
Title:
President
NRV II, LLC
By:
/s/ William Singer
(Signature)
Name: William Singer, Director of Neuroscience Research Ventures, Inc.
Title:
Managing Member of NRV II, LLC
Exhibit 10.14
Amendment
#1 to the Technology License and Services Agreement
Dated August 21, 2013
by and between
Neurotrope Bioscience, Inc., on the one hand,
and
Blanchette Rockefeller Neurosciences Institute and NRV II, LLC,
on the other hand
This Amendment #1 to the Technology License and Services Agreement (“ Amendment ”) is made and entered into as of August 21, 2013 (the “ Amendment Effective Date ”) by and between Neurotrope BioScience, Inc. (“ Neurotrope ”), on the one hand, and Blanchette Rockefeller Neurosciences Institute (“ BRNI ”) and NRV II, LLC (“ NRV II ”), on the other hand. Neurotrope, BRNI and NRV II are sometimes referred to herein, individually, as a “ Party ” or, collectively, as the “ Parties .”
WHEREAS, pursuant to the terms and conditions of that certain Technology License and Services Agreement (“ License ”), dated October 31, 2012, by and between Neurotrope, on the one hand, and BRNI and NRV II, on the other hand, BRNI and NRV II granted to Neurotrope, effective as of the Effective Date (as defined in the License), an exclusive license in and to the Licensed Patents (as defined in the License) and Licensed Technology (as defined in the License); and
WHEREAS, each of the Parties agrees the Neurotrope Board of Directors should resolve certain disputes relating to Services and that BRNI shall not commercially unreasonably withhold consent to Neurotrope engaging a Person other than BRNI to provide research or development services or other related scientific assistance and support services;
WHEREAS, the Parties desire to amend the License by this Amendment, including to provide for such agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows.
1. Terms used in this Amendment with initial capital letters, but not defined in this Amendment, shall have their respective meanings set forth in the License.
2. Section 3.1 of the License shall be deemed to be amended to include the following sentence:
In the event of a dispute regarding whether BRNI is able to provide any Services and no Third Party is clearly in a superior position to provide services identical or similar to such Services, the Board of Directors of Neurotrope shall resolve any such disputes.
3. The first sentence of Section 3.2 of the License shall be deemed to be replaced in its entirety with the following:
Neurotrope shall not engage any Person other than BRNI to provide any research or development services or other related scientific assistance and support services (including pre-clinical or clinical activities or trials), including any services identical or similar to the Services, without BRNI’s prior written consent which shall not be commercially unreasonably withheld.
IN WITNESS WHEREOF , each of the Parties hereto, by its duly authorized representative, has caused this Amendment to be executed as of the Amendment Effective Date.
NEUROTROPE BIOSCIENCE, INC. | |
By: /s/ Jim New (Signature) |
|
Name: Jim New | |
Title: CEO | |
BLANCHETTE ROCKEFELLER NEUROSCIENCES INSTITUTE | |
By: /s/ William Singer (Signature) |
|
Name: William Singer | |
Title: President | |
NRV II, LLC | |
By: /s/ William Singer (Signature) |
|
Name: William Singer, Director of Neuroscience Research Ventures, Inc. | |
Title: Managing Member of NRV II, LLC |
Exhibit 10.15
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
THIS AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this “ Agreement ”) is made and entered into as of August 23, 2013 by and among Neurotrope, Inc., a Nevada corporation (the “ Company ”), Neurosciences Research Ventures, Inc., a West Virginia corporation (“ NRV ”), Dan Alkon (“ Alkon ”) and each of the Persons listed on the Schedule of Abeles Group Stockholders attached hereto (each, an “ Abeles Stockholder ” and, collectively, the “ Abeles Stockholders ”). NRV, Alkon and the Abeles Stockholders are collectively referred to herein as the “ Stockholders ” and individually as a “ Stockholder .” The Company and the Stockholders are sometimes collectively referred to herein as the “ Parties ” and individually as a “ Party .” Capitalized terms used herein and not otherwise defined herein have the meanings given to such terms in Section 7.
WHEREAS, Neurotrope BioScience, Inc., a Delaware corporation (“ Neurotrope ”) and each of NRV, Alkon and the Abeles Stockholders are parties to a Stock Purchase Agreement, each dated as of October 31, 2012, as amended (the “ Founder Purchase Agreements ”), pursuant to which, among other things, each of NRV, Alkon and the Abeles Stockholders purchased shares of common stock of Neurotrope, par value $0.01 per share (the “ Neurotrope Common Stock ”), all on the terms and subject to the conditions set forth in their respective Founder Purchase Agreements;
WHEREAS, the Stockholders, Neurotrope, Blanchette Rockefeller Neurosciences Institute, a not-for-profit institution organized and existing under the laws of the state of West Virginia (" BRNI ") and NRV II, LLC, a Delaware limited liability company (“ NRV II ”) are parties to the Stockholders Agreement dated October 31, 2012 (the " Prior Agreement ");
WHEREAS, Neurotrope has entered into a merger agreement, dated August 23, 2013 (the " Merger Agreement ") with a newly formed subsidiary of the Company (" MergerCo "), pursuant to which MergerCo shall merge with and into Neurotrope, with Neurotrope remaining as the surviving entity after the merger and a wholly owned subsidiary of the Company (the “ Merger ”);
WHEREAS, pursuant to the Merger, the Stockholders will receive common stock of the Company (" Common Stock "), in exchange for their shares of Neurotrope Common Stock; and
WHEREAS, the Company and the parties to the Prior Agreement desire to amend and restate the Prior Agreement in its entirety, effective as of the Effective Time (as defined in the Merger Agreement) to (a) remove NRV II and BRNI as parties to the Agreement and (b) set forth certain agreements among the Company and the Stockholders with respect to the governance of the Company and the disposition of the Common Stock.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree that, as of the Effective Time, the Prior Agreement shall be amended and restated in its entirety as follows:
Section 1. Board of Directors .
1A. Board Composition . From and after the date hereof and until the provisions of this Section 1 cease to be effective or are amended in accordance with the provisions of Section 9 hereof, each holder of Stockholder Shares shall vote all of the securities of the Company that such holder beneficially owns (as such term is defined in SEC Rule 13d-3) and shall take all other necessary or desirable actions within his, her or its control, whether in his, her or its capacity as a stockholder, director, member of a board committee or officer of the Company or otherwise, and including attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings (and shall refrain from taking any action the purpose of which is to frustrate the purposes of this Section 1A ), and the Company shall take all necessary or desirable actions within its control, including calling special board and stockholder meetings, so that:
(i) the authorized number of directors shall be established and maintained at seven (7), with six (6) directors elected by the holders of a majority of the issued and outstanding Common Stock, voting as a separate class (each, a " Common Director ") and one (1) director elected by the holders of a majority of the issued and outstanding shares of Series A convertible preferred stock of the Company (the " Series A Preferred Stock "), voting as a separate class on an as-converted basis;
(ii) the following five (5) persons shall be nominated and elected to the Board as Common Directors:
(a) two (2) representatives designated by NRV (each, an “ NRV Designee ”), who initially shall be William S. Singer and Ralph Bean;
(b) two (2) representatives designated by the Majority Abeles Stockholders (each, an “ Abeles Designee ”), who initially shall be Dr. John Abeles and Dr. Jim New; and
(c) one (1) independent representative designated by the Board (the " Neurotrope Designee "), which designee has not been determined as of the date of this Agreement; and
(iii) subject to the provisions of applicable law, no NRV Designee, Abeles Designee or Neurotrope Designee shall be removed from the Board unless such removal is requested in writing by the party that designated such designee.
1B. Expense Reimbursement . The Company shall pay the reasonable out-of-pocket expenses (including travel expenses) incurred by each Director in connection with attending the meetings of the Board, any Subsidiary Board and any committee thereof on which such Director in then serving.
1C. Termination . Subject to Section 21 , the provisions of this Section 1 shall terminate automatically and shall be of no further force and effect upon the consummation of a Qualified Public Offering. For the avoidance of doubt, the Merger shall not be deemed to be a Qualified Public Offering.
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Section 2. Irrevocable Proxy; Conflicting Agreements .
2A. Irrevocable Proxy . In order to secure each holder’s obligation to vote his, her or its Stockholder Shares and other voting securities of the Company in accordance with the provisions of Section l , Section 4D and Section 24 , each Stockholder hereby appoints NRV as such Stockholder’s true and lawful proxy and attorney in fact, with full power of substitution, to vote all of such holder’s Stockholder Shares and other voting securities of the Company for the election and/or removal of Directors and all such other matters as expressly provided for in Section l , Section 4D and, with respect to the Abeles Stockholders only, Section 24 . NRV may exercise the irrevocable proxy granted to it hereunder at any time such holder fails to comply with the provisions of Section 1 , Section 4D or Section 24 of this Agreement. The proxies and powers granted by each holder pursuant to this Section 2A are coupled with an interest and are given to secure the performance of such holder’s obligations under this Agreement. Such proxies and powers will be irrevocable for the term of this Agreement and will survive the death, incompetence or disability of such holder and the respective holders of their Stockholder Shares. Subject to Section 21 , the proxy granted hereunder shall terminate automatically and shall be of no further force and effect upon the consummation of a Qualified Public Offering; provided that the proxy granted hereunder by the Abeles Stockholders with respect to voting obligations set forth in Section 24 shall expire upon the first to occur of (a) the completion of the Subsequent Financing and (b) the consummation of a Qualified Public Offering.
2B. Representations and Warranties; Conflicting Agreements . Each Stockholder represents that (i) this Agreement has been duly authorized, executed and delivered by such Stockholder and constitutes the valid and binding obligation of such Stockholder, enforceable in accordance with its terms, and (ii) such Stockholder has not granted and is not a party to any proxy, voting trust or other agreement that is inconsistent with or conflicts with the provisions of this Agreement. No holder of Stockholder Shares shall grant any proxy or become party to any voting trust or other agreement that is inconsistent with or conflicts with the provisions of this Agreement.
Section 3. [Reserved] .
Section 4. Transfer of Stockholder Shares .
4A. Required Consent . No Stockholder shall Transfer any interest in any Stockholder Shares without first obtaining the prior written consent of both the Board, which consent may be withheld in the Board’s sole discretion, and NRV, which consent may be withheld in NRV’s sole discretion (the “ Required Consent ”), except that any Stockholder may Transfer Stockholder Shares (i) pursuant to Section 4C (but not as a Transferring Stockholder unless in compliance therewith) or Section 4D , (ii) pursuant to any forfeiture or repurchase provisions set forth in any applicable Employment Agreement and/or Equity Agreement, (iii) in a Public Sale and (iv) to their respective Permitted Transferees, provided that , in the case of any Transfer by a Stockholder under this clause (iv), such Stockholder retains voting control of such Stockholder Shares (collectively, the “ Exempt Transfers ”). The restrictions contained in this Section 4A and Sections 4B , 4C and 4D shall terminate automatically and shall be of no further force and effect upon the consummation of a Qualified Public Offering. If any Person acquires Stockholder Shares pursuant to clause (iv) above as a Permitted Transferee by virtue of (y) such Person’s qualification as a member of a transferor’s Family Group under clauses (ii) or (iii) of the definition of Family Group or (z) such Person’s qualification as an Affiliate of a transferor, and such Person shall, at any time, cease to be either a member of such transferor’s Family Group or an Affiliate of such transferor (as applicable), then such Person shall be required to Transfer such Person’s Stockholder Shares to a Person that does qualify at the time of such required Transfer as either a member of the original transferor’s Family Group or as an Affiliate of the original transferor.
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4B. First Refusal Rights .
(i) Offer . Upon obtaining the Required Consent and subject to compliance with all other provisions of this Agreement, and after obtaining a bona fide written offer to acquire any Stockholder Shares (except pursuant to an Exempt Transfer), at least 60 days (or such shorter period as may be determined by the Board and NRV) prior to any Transfer of any Stockholder Shares (except pursuant to an Exempt Transfer), any Stockholder desiring to make such Transfer (the “ RFR Transferring Stockholder ”) shall deliver a written notice (the “ Offer Notice ”) to the Company and each other holder of Stockholder Shares, specifying in reasonable detail the identity, background and ownership (if applicable) of the prospective Transferee(s), the number and class of Stockholder Shares to be Transferred (the “ Offered Shares ”) and the price and other terms and conditions of the proposed Transfer. The Offer Notice shall constitute a binding offer to sell the subject shares on such terms and conditions. The RFR Transferring Stockholder shall not consummate such proposed Transfer until at least 60 days (or such shorter period as determined by the Board and NRV) after the delivery of the Offer Notice, unless the parties to the Transfer have been finally determined pursuant to this Section 4B and Section 4C prior to the expiration of such 60-day (or shorter) period (the date of the first to occur of (y) the expiration of such 60-day period (or such shorter period as determined by the Board and NRV) after delivery of the Offer Notice or (z) such final determination is referred to herein as the “ Authorization Date ”).
(ii) Company Election . The Company may elect to purchase all or any portion of the Offered Shares at the price and on the other terms set forth in the Offer Notice, by delivering written notice of such election to the RFR Transferring Stockholder and each holder of Stockholder Shares within 20 days after delivery of the Offer Notice.
(iii) Stockholder Election . If the Company does not elect to purchase all of the Offered Shares, then each holder of Stockholder Shares may elect to purchase all or any portion up to such holder’s pro rata share (based on the number of shares of Common Stock held by such holder on a fully-diluted, as-if-converted basis ) of the remaining Offered Shares at the price and on the other terms set forth in the Offer Notice, by delivering written notice of such election to the RFR Transferring Stockholder and the Company within 30 days after delivery of the Offer Notice. Any Offered Shares not elected to be purchased by the end of such 30-day period shall during the immediately following 5-day period be reoffered by the RFR Transferring Stockholder to the holders of Stockholder Shares who have elected to purchase their pro rata share of the remaining Offered Shares and, if such Persons collectively indicate interest within said 5-day period in acquiring additional Offered Shares in an amount in excess of the aggregate amount of Offered Shares remaining, such remaining Offered Shares will be allocated among such Persons pro rata in accordance with their respective holdings of Common Stock on a fully-diluted, as-if-converted basis.
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(iv) Closing . If the Company and/or the holder s of Stockholder Shares have elected to purchase all or any portion of the Offered Shares from the RFR Transferring Stockholder, such purchase shall be consummated as soon as practicable after the delivery of the election notice(s) to the RFR Transferring Stockholder, but in any event within 30 days after the Authorization Date. Notwithstanding any other provision hereof, in the event that the sale price, or any portion thereof, for the Offered Shares is not payable in the form of cash at closing or cash payable on a deferred basis (such as pursuant to promissory notes issued by the prospective Transferee(s) described in the Offer Notice), the Company and/or each holder of Stockholder Shares electing to purchase Offered Shares pursuant to this Section 4B shall be required to pay only such portion, if any, of the sale price described in the Offer Notice as consists of such cash consideration, and delivery of such consideration to the RFR Transferring Stockholder shall be payment in full for such Offered Shares.
(v) No Election . If the Company and the holder s of Stockholder Shares do not elect, in the aggregate, to purchase all of the Offered Shares from the RFR Transferring Stockholder, then, subject to compliance with Section 4C below, the RFR Transferring Stockholder shall have the right, within the 60 days following the Authorization Date, to Transfer such Offered Shares which the Company and the holder s of Stock holder Shares have not elected to purchase to the Transferee(s) specified in the Offer Notice (less the number of Offered Shares acquired by the Company and the holders of Stockholder Shares) in the amounts specified in the Offer Notice at a price not less than the price per share specified in the Offer Notice and on other terms no more favorable to the Transferee(s) thereof than specified in the Offer Notice. Any Offered Shares not so Transferred within such 60-day period shall be reoffered to the Company and the holder s of Stockholder Shares pursuant to this Section 4B prior to any subsequent Transfer.
4C. Tag-Along Rights .
(i) Participation Right . At least 20 days prior to any Transfer of any Stockholder Shares by any Stockholder (other than an Exempt Transfer) , each Stockholder making such Transfer (the “ Transferring Stockholder ”) shall deliver a written notice (the “ Sale Notice ”) to the Company and the other holders of Stockholder Shares who have not elected to purchase Offered Shares pursuant to Section 4B ,, specifying in reasonable detail the identity of the prospective Transferee(s), the number and class of Stockholder Shares to be Transferred and the terms and conditions of the Transfer (including the price which will reflect each Stockholder Share’s Pro Rata Share). Such other holders of Stockholder Shares may elect to participate in the contemplated Transfer by delivering written notice to the Transferring Stockholder within 15 days after delivery of the Sale Notice; provided that if the Transferring Stockholder is selling a strip of securities, then any participating Stockholder shall be required to sell the same strip of securities (on the same terms and conditions and in the same proportion) that the Transferring Stockholder is so Transferring, to the extent possible. Such participation shall be based upon the Pro Rata Share represented by the Stockholder Shares requested to be included by each such holder relative to the Pro Rata Share of all Stockholder Shares held by the holders participating in such Transfer (including the Transferring Stockholder). If no other holder of Stockholder Shares has elected to participate in the contemplated Transfer (through notice to such effect or expiration of the 15-day period after delivery of the Sale Notice), then the Transferring Stockholder may Transfer the Stockholder Shares specified in the Sale Notice at a price and on terms no more favorable to the Transferee(s) thereof than specified in the Sale Notice, during the 60-day period immediately following the Authorization Date. Any Transferring Stockholder’s Stockholder Shares not Transferred within such 60-day period shall be subject to the provisions of this Section 4C upon subsequent Transfer.
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(ii) Participation Procedure; Conditions . With respect to any Transfer subject to Section 4C(i) , each Transferring Stockholder shall use his, her or its reasonable best efforts to obtain the agreement of the prospective Transferee(s) to the participation of the other holders of Stockholder Shares who have elected to participate in any contemplated Transfer, and no Transferring Stockholder shall Transfer any of its Stockholder Shares to any prospective Transferee if such prospective Transferee(s) declines to allow the participation of such other holders on the terms provided herein, unless in connection with such Transfer one or more of the Transferring Stockholders or their Affiliates purchase (on the same terms and conditions on which such Stockholder Shares were to be sold to the Transferee(s)) the number and class of Stockholder Shares from each such other holder which such other holder would have been entitled to sell pursuant to Section 4C(i) . Each Person Transferring Stockholder Shares pursuant to this Section 4C shall pay its share (on a Pro Rata Basis) of the expenses incurred by the Transferring Stockholder in connection with such Transfer and shall be obligated to join on a Pro Rata Basis in any indemnification or other obligations that the Transferring Stockholder agrees to provide in connection with such Transfer (other than any such obligations that relate specifically to a particular holder such as indemnification with respect to representations and warranties given by a Stockholder regarding such Stockholder’s title to and ownership of Stockholder Shares which shall be given on an individual basis); provided that unless a prospective Transferee permits a Stockholder to give a guarantee, letter of credit or other mechanism (which shall be dealt with on an individual basis), any escrow of proceeds of any such transaction shall be withheld on a Pro Rata Basis among all participating holders of Stockholder Shares.
4D. Approved Sale; Drag-Along Obligations .
(i) If at any time the Board approves a Fundamental Change or Change in Ownership (as applicable, an “ Approved Sale ”), each holder of Stockholder Shares and each Person that retains voting control of any Stockholder Shares Transferred in accordance with Section 4A (each, a “ Holder ”) shall (and shall cause any Director(s) designated by it to) take and otherwise facilitate the following actions:
(a) vote for (whether at a meeting of the Company’s stockholders or by written consent), consent to and raise no objections against , and not otherwise impede or delay, such Approved Sale;
(b) if the Approved Sale is structured as a (A) merger or consolidation, such Holder shall waive any dissenters rights, appraisal rights or similar rights in connection with such merger or consolidation or (B) sale of capital stock or other equity securities, such Holder shall agree to sell or dispose of (and shall sell and dispose of) all of such Holder’s Stockholder Shares and other securities of the Company on the terms and conditions approved by the Board; and
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(c) take all necessary or desirable actions (in such Holder’s capacity as a stockholder of the Company or otherwise) in connection with the consummation of the Approved Sale as reasonably requested by the Board (including any applicable purchase agreement, stockholders agreement and/or indemnification and/or contribution agreement and, only in the case of Holders who are Executive Stockholders and any other Holders that are Executives or Permitted Transferees thereof, executing and delivering non-competition and non-solicitation agreements and the like whether or not executed by non-Executive Holders) .
(ii) The obligations of the Holders with respect to the Approved Sale are subject to the satisfaction of the conditions that (and the Company shall take such actions as are necessary so that) each holder of Stockholder Shares shall receive in exchange for the Stockholder Shares held by such Holder the same portion of the aggregate consideration (however described or allocated) from such transaction that such holder of Stockholder Shares would have received if such aggregate consideration had been distributed by the Company pursuant to a liquidation, dissolution and winding up of the Company in accordance with the provisions of the Certificate of Incorporation.
(iii) Notwithstanding anything herein to the contrary, the Holders shall be severally obligated to join on a Pro Rata Basis (as if such indemnification obligations reduced the aggregate proceeds available for distribution or payment to the holders of Stockholder Shares in such Approved Sale) in any indemnification obligations the Board agreed to in connection with such Approved Sale; provided that no Holder shall be obligated to enter into indemnification obligations with respect to matters particular to any other Holder or such other Holder’s (or its Permitted Transferee’s) Stockholder Shares and no Holder shall be required to agree to indemnification obligations in excess of the proceeds received by such Holder (or its Permitted Transferee) in such Approved Sale; provided further that unless a prospective Transferee permits a Holder to give a guarantee, letter of credit or other mechanism (which shall be dealt with on an individual basis), any escrow of proceeds of any such transaction shall be withheld on a Pro Rata Basis among all Holders (as if such escrow reduced the aggregate proceeds available for distribution or payment to the holders of Stockholder Shares in such Approved Sale). Each Holder shall pay its share determined on a Pro Rata Basis (as if such expenses reduced the aggregate proceeds available for distribution or payment to the holders of Stockholder Shares in such Approved Sale) of the expenses incurred by the Company pursuant to an Approved Sale to the extent such expenses are incurred for the benefit of all Holders. Expenses incurred by any Holder on its his, her or its own behalf (including the fees and disbursements of counsel, advisors and other Persons retained by such Holder in connection with the Approved Sale) will not be considered costs incurred for the benefit of all Holders and, to the extent not paid by the Company, will be the responsibility of such Holder. Each Holder shall enter into any indemnification, contribution or stockholder /seller representative agreement requested by the Board to ensure compliance with this Section 4D and hereby consents and agrees to abide by the customary provisions of any merger or similar agreement providing for a stockholder /seller representative. Each Holder shall enter into any other agreement that the Board approves and (other than non- competition and non-solicitation agreements to be entered into by Holders who are also employees of the Company or any of its Subsidiaries) enter into such agreements on the same terms and conditions (other than as differences in such terms and conditions might result from holdings of different classes of Stockholder Shares). Without limiting the immediately prior sentence, e ach Holder shall enter into any indemnification, contribution or stockholder/seller representative agreement requested by the Board to ensure compliance with this Section 4D(iii), and the provisions of this Section 4D(iii) requiring several liability shall be deemed complied with if such requirement is addressed through such agreement, even if the purchase and sale agreement or merger agreement related to the Approved Sale provides for joint and several liability.
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(iv) If the Company or any of its Subsidiaries enters into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities and Exchange Commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), each Excluded Stockholder shall, at the request of the Company, appoint a “purchaser representative” (as such term is defined in Rule 501 promulgated under the Securities Act) designated by the Company. If any Holder so appoints such purchaser representative, the Company shall pay the fees of such purchaser representative. However, if any Holder declines to appoint the purchaser representative designated by the Company, such Holder shall appoint another purchaser representative (reasonably acceptable to the Company), and such Holder shall be responsible for the fees of the purchaser representative so appointed.
4E. Additional Restrictions on Transfer .
(i) Execution of Counterpart . Except in connection with an Approved Sale or a Public Sale, each Transferee of Stockholder Shares or other interests in the Company (including any Permitted Transferee or otherwise in connection with an Exempt Transfer other than a Public Sale) shall, as a condition precedent to such Transfer, execute and deliver to the Company a counterpart to this Agreement substantially in the form of Exhibit A attached hereto, pursuant to which such Transferee shall agree to be bound by the provisions of this Agreement. Notwithstanding the foregoing, any Person who acquires in any manner whatsoever, other than in connection with an Approved Sale or a Public Sale, any Stockholder Shares or other interest in the Company, irrespective of whether such Person has accepted and adopted in writing the terms and provisions of this Agreement, shall be deemed by the acceptance of the benefits of the acquisition thereof to have agreed to be subject to and bound by all of the terms and conditions of this Agreement that any predecessor in such Stockholder Shares or other interest in the Company of such Person was subject to or by which such predecessor was bound.
(ii) Notice . In connection with the Transfer of any Stockholder Shares, the holder of such Stockholder Shares will deliver written notice to the Company describing in reasonable detail the Transfer or proposed Transfer.
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(iii) Legal Opinion . No Transfer of Stockholder Shares or other interest in the Company may be made unless such Transfer would not violate any federal securities laws applicable to the Company or the interest to be Transferred. Upon reasonable request of the Company, the proposing Transferor shall deliver to the Company prior to the date of the Transfer an opinion of counsel reasonably acceptable to the Company as to the foregoing.
(iv) No Avoidance of Provisions . No holder of Stockholder Shares shall directly or indirectly (i) permit the Transfer of all or any portion of the direct or indirect equity or beneficial interest in such holder or (ii) otherwise seek to avoid the provisions of this Agreement by issuing, or permitting the issuance of, any direct or indirect equity or beneficial interest in such holder, in any such case in a manner which would fail to comply with this Section 4 if such holder had Transferred Stockholder Shares directly.
4F. Legend . Each certificate evidencing Stockholder Shares and each certificate issued in exchange for or upon the Transfer of any Stockholder Shares (if such shares remain Stockholder Shares as defined herein after such Transfer) shall be stamped or otherwise imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON AUGUST 23, 2013 HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR APPLICABLE STATE SECURITIES LAWS (“ STATE ACTS ”) AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR STATE ACTS OR AN EXEMPTION FROM REGISTRATION THEREUNDER.
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN AN AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF AUGUST 23, 2013 BY AND AMONG THE ISSUER OF SUCH SECURITIES (THE “ COMPANY ”) AND ITS STOCKHOLDERS (THE “ STOCKHOLDERS AGREEMENT ”). THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY ALSO BE SUBJECT TO ADDITIONAL TRANSFER RESTRICTIONS, CERTAIN VESTING PROVISIONS, REPURCHASE OPTIONS, OFFSET RIGHTS AND FORFEITURE PROVISIONS SET FORTH IN THE STOCKHOLDERS AGREEMENT AND/OR A SEPARATE AGREEMENT WITH THE INITIAL HOLDER HEREOF. A COPY OF SUCH CONDITIONS, REPURCHASE OPTIONS AND FORFEITURE PROVISIONS SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
The Company shall imprint such legend on certificates evidencing Stockholder Shares outstanding prior to the date hereof. The legend set forth above shall be removed from the certificates evidencing any shares which cease to be Stockholder Shares. If a Stockholder delivers to the Company an opinion of counsel, satisfactory in form and substance to the Board (which opinion may be waived by the Board), that no subsequent Transfer of Stockholder Shares will require registration under the Securities Act, the Company will promptly upon such contemplated Transfer deliver new certificates evidencing such Stockholder Shares which do not bear the portion of the restrictive legend relating to the Securities Act set forth in this Section 4F .
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4G. Public Offering . In the event that the Board approves a Public Offering and such Public Offering is an underwritten offering and the managing underwriters advise the Company in writing that in their opinion the capital structure of the Company shall adversely affect the marketability of the offering, or in the event otherwise determined by the Board, then each Holder shall consent to and vote for a recapitalization, reorganization and/or exchange of the capital of the Company into securities that the managing underwriters and the Board find acceptable and shall take all necessary or desirable actions in connection with the consummation of the recapitalization, reorganization and/or exchange (including, without limitation, through the formation of a new parent holding company, as a result of which the Company would be a Subsidiary of such newly formed entity); provided , however , that the Company shall reimburse each Holder for the reasonable expenses incurred by such Holder in taking such actions.
4H. Transfer Fees and Expenses . Except as provided in Sections 4B , 4C or 4C , the Transferor and Transferee of any Stockholder Shares or other interest in the Company shall be jointly and severally obligated to reimburse the Company for all reasonable expenses (including attorneys’ fees and expenses) of any Transfer or proposed Transfer, whether or not consummated.
4I. Void Transfers . Any Transfer of any Stockholder Shares or other interest in the Company in contravention of this Agreement (including, without limitation, the failure of the Transferee to execute a counterpart to this Agreement) shall be void and of no effect and shall not bind or be recognized by the Company or any other Person.
Section 5. Holdback Agreement . No Stockholder shall (A) offer, sell, contract to sell, pledge or otherwise dispose of (including sales pursuant to Rule 144), directly or indirectly, any equity securities of the Company or any of its Subsidiaries, or any securities convertible into or exchangeable or exercisable for such securities (including equity securities of the Company or any of its Subsidiaries that may be deemed to be owned beneficially by such holder in accordance with the rules and regulations of the Securities and Exchange Commission), (B) enter into a transaction which would have the same effect as described in clause (A) above, (C) enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences or ownership of any securities referred to in clause (A) above, whether such transaction is to be settled by delivery of such securities, in cash or otherwise (each of (A), (B) and (C) above, a “ Sale Transaction ”), or (D) publicly disclose the intention to enter into any Sale Transaction, in any such case during the seven days prior to and the 90-day period beginning on the effective date of any underwritten registration (the “ Holdback Period ”), except as part of any such underwritten registration, unless the underwriters managing the registered public offering otherwise agree in writing. If requested by the managing underwriters, each Stockholder agrees to execute customary lock-up agreements consistent with the foregoing obligations with the managing underwriter(s) of an underwritten offering with a duration not to exceed the Holdback Period, as applicable. If (i) the Company issues an earnings release or discloses other material information or a material event relating to the Company occurs during the last 17 days of the Holdback Period (as applicable) or (ii) prior to the expiration of the Holdback Period (as applicable), the Company announces that it will release earnings results during the 16-day period beginning upon the expiration of such period, then to the extent necessary for a managing or co-managing underwriter of a registered offering required hereunder to comply with FINRA Rule 2711(f)(4), the Holdback Period (as applicable) will be extended until 18 days after the earnings release or disclosure of other material information or the occurrence of the material event, as the case may be (a “ Holdback Extension ”). The Company may impose stop-transfer instructions with respect to the shares of its Common Stock (or other securities) subject to the foregoing restriction during any Holdback Period or any period of Holdback Extension.
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Section 6. [ Reserved ] .
Section 7. Definitions .
“ Affiliate ” of any particular Person shall mean any other Person controlling, controlled by or under common control with such particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract or otherwise, and such “control” will be conclusively presumed if any Person owns ten percent (10%) or more of the voting capital stock or other ownership interests, directly or indirectly, of any other Person.
“ Certificate of Incorporation ” shall mean the Certificate of Incorporation of Neurotrope, Inc.
“ Change in Ownership ” means any sale, transfer or issuance or series of sales, transfers and/or issuances of shares of the Company’s capital stock by the Company or any holders thereof which results in the holders of Common Stock and Series A Preferred Stock as of the effective time of the Merger (and after giving effect to the Merger) ceasing to own more than 50% of the Company’s Common Stock (assuming conversion of the Series A Preferred Stock) immediately after such sale, transfer or issuance or series of sales, transfers and/or issuances.
“ Director ” shall mean an individual serving as a member of the Board.
“ Employment Agreement ” shall mean any employment agreement, consulting agreement, confidentiality agreement, non-competition agreement, non-solicitation agreement or any similar agreement between an Executive, on the one hand, and the Company and/or any of its Subsidiaries, on the other hand, each as amended, modified and/or waived from time to time.
“ Equity Agreement ” shall mean any document, instrument or agreement entered into in connection with any issuance of Stockholder Shares effecting the purchase of such Stockholder Shares and evidencing the terms and conditions thereof (including, without limitation, transfer restrictions, vesting and forfeiture or buyback provisions).
“ Equity Incentive Plan ” shall mean the Neurotrope, Inc. 2013 Equity Incentive Plan.
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“ Equity Securities ” shall mean (i) capital stock (including the Series A Preferred Stock and the Common Stock) of, membership interests, partnership interests or other equity interests in, the Company or any of its Subsidiaries (including, without limitation, other classes, groups or series thereof having such relative rights, powers, and/or obligations as may from time to time be established by the Board, including rights, powers, and/or duties different from, senior to or more favorable than existing classes, groups and series of units, stock and other equity interests in the Company or any of its Subsidiaries, and including, without limitation, any so-called “profits interests”); (ii) obligations, evidences of indebtedness or other debt or equity securities or interests convertible or exchangeable into such equity interests in the Company or any of its Subsidiaries; and (iii) warrants, options or other rights to purchase or otherwise acquire such equity interests in the Company or any of its Subsidiaries.
“ Executive ” shall mean any Person rendering services to the Company or any of its Subsidiaries as an officer, director, manager, employee, advisor, independent contractor or consultant.
“ Executive Stockholder ” shall mean any Stockholder who is or was an Executive, or any Stockholder which has any stockholders, partners, members or other owners who are or were Executives.
“ Fair Market Value ” shall mean (i) with respect to cash, the amount thereof; (ii) with respect to securities, their market price as determined in good faith by the Board; and (iii) with respect to any consideration other than cash and securities, its fair value determined on the basis of an orderly, arm’s length sale (structured to produce the highest price for such consideration) to a willing buyer, taking into account all relevant factors determinative of value, as determined jointly by the Board and NRV (without applying any marketability or other discounts). If such parties are unable to reach agreement within a reasonable period of time, such fair value shall be determined (without applying any marketability or other discounts) by an independent appraiser (other than one of the “Big Four” accounting firms) experienced in valuing assets such as such consideration jointly selected by the Board and NRV. The determination of such appraiser shall be final and binding upon the parties, and the Company shall pay the fees and expenses of such appraiser.
“ Family Group ” shall mean , as to any particular Person, (i) such Person’s spouse and descendants (whether natural or adopted); (ii) any trust solely for the benefit of such Person and/or such Person’s spouse and/or descendants; and (iii) any partnerships, corporations or limited liability companies where the only partners, stockholders or members are such Person and/or such Person’s spouse, descendants and/or trusts referred to in clause (ii) of this definition.
“ Fundamental Change ” means (a) any sale, transfer or exclusive license of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis (measured either by book value in accordance with generally accepted accounting principles consistently applied or by Fair Market Value determined in the good faith judgment of the Board) in any transaction or series of transactions (other than sales of inventory and other sales in the ordinary course of business consistent with past practice), (b) any merger or consolidation to which the Company is a party, except for (i) a merger or consolidation which is effected solely to change the state of incorporation of the Company or (ii) a merger or consolidation in which the Company is the surviving corporation, the terms and relative priorities of the Preferred Stock are not changed and the Preferred Stock is not exchanged for cash, securities or other property, and after giving effect to such merger or consolidation, the holders of Common Stock and the Series A Preferred Stock as of the effective time of the Merger (and after giving effect to the Merger) shall continue to own more than 50% of the Company’s Common Stock (assuming conversion of the Series A Preferred Stock).
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“ License Agreement ” shall mean that certain Technology License and Services Agreement, dated as of October 31, 2012, by and between Neurotrope, on the one hand, and BRNI and NRV II, on the other hand, as may be amended from time to time in accordance with the terms thereof.
“ Majority Abeles Stockholders ” shall mean , as of the date of any determination, the Abeles Stockholders holding a majority of the Stockholder Shares then held by all Abeles Stockholders.
“ Majority Common Stockholders ” shall mean , as of the date of any determination, the holders of Common Stock holding a majority of the Stockholder Shares then held by all holders of Common Stock.
“ Majority Stockholders ” shall mean , as of the date of any determination, the Stockholders holding a majority of the Stockholder Shares then held by all Stockholders.
“ Permitted Transferee ” shall mean (i) with respect to any Person who is an individual or a member of the Family Group of an Executive, a member of such Person’s Family Group; and (ii) with respect to any Person which is an entity (other than any Executive Stockholder or any other entity referred to in clause (i)), any of such Person’s Affiliates, but only for so long as such Person remains a Permitted Transferee of such Person.
“ Person ” shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
“ Pro Rata Basis ” shall mean , with respect to each Holder, and as determined with respect to any particular expense, liability or obligation incurred (or amount of proceeds withheld) in connection with any Transfer of Equity Securities pursuant to Section 4C or any Approved Sale, the amount such Holder’s proceeds would be reduced as a percentage of the aggregate reduction in proceeds to applicable Holders assuming the Total Equity Value implied by such Transfer or Approved Sale were being distributed in a liquidation, dissolution and winding up of the Corporation in accordance with the Certificate of Incorporation in connection with such Transfer or Approved Sale and as if such expense, liability or obligation were incurred and satisfied (or such amount of proceeds were withheld) prior to such distribution, as determined reasonably and in good faith by the Board.
“ Pro Rata Share ” shall mean , with respect to each share of Series A Preferred Stock or Common Stock, the proportionate amount such share would receive if an amount equal to the Total Equity Value were distributed in a liquidation, dissolution and winding up of the Corporation in accordance with the Certificate of Incorporation, and with respect to each Stockholder, such Stockholder’s proportionate share of the Total Equity Value based on the shares held by such Stockholder, in each case as determined reasonably and in good faith by the Board.
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“ Public Offering ” shall mean any offering by the Company of its capital stock or equity securities to the public pursuant to an effective registration statement under the Securities Act or any comparable statement under any similar federal statute then in force.
“ Public Sale ” shall mean any sale of Stockholder Shares to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to the provisions of Rule 144 adopted under the Securities Act (or any similar provision then in force).
“ Qualified Public Offering ” shall mean a Public Offering underwritten on a firm commitment basis by a nationally recognized investment bank in which (i) the aggregate proceeds received by the Company and any other selling stockholders in such Public Offering (net of discounts, commissions and expenses) shall be at least $50,000,000; and (ii) the price per share paid by the public for such shares will be an amount not less than $10 (as appropriately adjusted for stock splits, stock combinations, stock dividends and the like with respect to the Common Stock).
“ Securities Act ” shall mean the Securities Act of 1933, as amended, and applicable rules and regulations thereunder, and any successor to such statute, rules or regulations.
“ Stockholder Shares ” shall mean (i) any Common Stock purchased or otherwise acquired or held by any Stockholder; (ii) any Common Stock issued or issuable directly or indirectly upon the conversion, exercise or exchange of any securities purchased or otherwise acquired by any Stockholder which are convertible into or exercisable or exchangeable directly or indirectly for Common Stock (including the Series A Preferred Stock but excluding options to purchase Common Stock granted by the Company unless and until such options are exercised); and (iii) any other capital stock or equity securities issued or issuable directly or indirectly with respect to the securities referred to in clauses (i) or (ii) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular securities constituting Stockholder Shares hereunder, such Stockholder Shares shall cease to be Stockholder Shares hereunder when they have been (y) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them or (z) sold to the public through a broker, dealer or market maker pursuant to Rule 144 (or any similar provision then in force) under the Securities Act.
“ Subsequent Financing ” shall mean the sale by the Company, after the completion of the A Round Financing (as such term is defined in the License Agreement), of equity securities resulting in gross proceeds to the Company of not less than $12,000,000 (or such other amount as agreed by a unanimous vote of the Board).
“ Subsidiary ” shall mean , with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof; or (ii) if a limited liability company, partnership, association or other business entity, a majority of the limited liability company, partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of the limited liability company, partnership, association or other business entity gains or losses or shall be or control the managing member, general partner or managing director of such limited liability company, partnership, association or other business entity.
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“ Total Equity Value ” shall mean the aggregate proceeds which would be received by the Stockholders if: (i) the assets of the Company as a going concern were sold at their Fair Market Value; (ii) the Company satisfied and paid in full all of its obligations and liabilities (including all taxes, costs and expenses incurred in connection with such transaction and any reserves established by the Board for contingent liabilities); and (iii) such net sale proceeds were then distributed in a liquidation, dissolution and winding up of the Corporation in accordance with the Certificate of Incorporation. When determined in connection with a Fundamental Change or Change in Ownership, Total Equity Value shall be derived from the consideration paid in connection with such Fundamental Change or Change in Ownership.
“ Transfer ” shall mean any direct or indirect sale, transfer, assignment, pledge, mortgage, exchange, hypothecation, grant of a security interest or other direct or indirect disposition or encumbrance of an interest (whether with or without consideration, whether voluntarily or involuntarily or by operation of law) or the acts thereof or an offer or agreement to do the foregoing, including issuances, but excluding conversions and redemptions of shares of capital stock or other Equity Securities by the Company made in accordance with the Certificate of Incorporation. The terms “ Transferee ,” “ Transferor ,” “ Transferred ,” and other forms of the word “ Transfer ” shall have the correlative meanings.
Section 8. Transfers; Transfers in Violation of Agreement . Prior to Transferring any Stockholder Shares to any Person or entity, the transferring Stockholder shall cause the prospective transferee to execute and deliver to the Company and the other Stockholders a Joinder Agreement, substantially in the form of Exhibit A hereto. Any Transfer or attempted Transfer of any Stockholder Shares in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported transferee of such Stockholder Shares as the owner of such Stockholder Shares for any purpose.
Section 9. Amendments and Waivers . Subject to Section 21 , except as otherwise provided herein, the provisions of this Agreement may be amended or waived only upon the prior written consent of the Company and Majority Stockholders ; provided that , no amendment, modification or waiver may be made with respect to Section 1 , 2A, Section 4, Section 7, this Section 9, Section 21 or Section 24 without the prior written consent of NRV; provided further that , no amendment, modification or waiver may be made with respect to Section1 , Section 4, Section 7, this Section 9, Section 21 or Section 24 without the prior written consent of the Majority Abeles Stockholders; provided further that , for the avoidance of doubt, any amendment, modification or waiver diminishing or adversely affecting the rights of any holder or group of holders of Stockholder Shares in a manner disproportionately unfavorable to such holder or group of holders relative to the other holders or groups of holders of Stockholder Shares shall require the prior written consent of the holder(s) of a majority of the Stockholder Shares so disproportionately unfavorably affected. Each Stockholder agrees that any amendment, modification or waiver so approved shall be binding on such Stockholder, whether or not such Stockholder provided such consent. The failure of any Party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such Party thereafter to enforce each and every provision of this Agreement in accordance with its terms.
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Section 10. Severability . Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Agreement in such jurisdiction or affect the validity, legality or enforceability of any provision in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
Section 11. Entire Agreement . This Agreement and the documents explicitly referred to herein contain the complete agreement between the parties hereto with respect to the subject matter hereof and thereof and supersede any prior understandings, agreements and representations by or between the parties hereto (whether written or oral) which may have related to the subject matter hereof or thereof in any way.
Section 12. Successors and Assigns . Except as otherwise expressly provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Company and its successors and assigns and the Stockholders and any subsequent holders of Stockholder Shares and the respective successors and assigns of each of them, so long as they hold Stockholder Shares.
Section 13. Counterparts . This Agreement may be executed simultaneously in two or more counterparts (including by means of facsimile or electronic transmission in portable document format (pdf)), any one of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same Agreement.
Section 14. Remedies . The parties hereto shall be entitled to enforce their rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto agree and acknowledge that money damages would not be an adequate remedy for any breach of the provisions of this Agreement and that the Company and any Stockholder may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement.
Section 15. Notices . All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given only (i) when delivered personally to the recipient, (ii) one (1) business day after being sent to the recipient by reputable overnight courier service (charges prepaid) provided that confirmation of delivery is received, (iii) upon machine-generated acknowledgment of receipt after transmittal by facsimile (provided that a confirmation copy is sent via reputable overnight courier service for delivery within two (2) business days thereafter), or (iv) five (5) after being mailed to the recipient by certified or registered mail (return receipt requested and postage prepaid). Such notices, demands and other communications shall be sent to the Stockholders and to the Company at the addresses indicated below:
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Notices to the Company:
Neurotrope BioScience, Inc.
Address: | 10732 Hawk’s Vista St. |
Plantation, Florida 33324 | |
Attention: | Chief Executive Officer |
Jim New | |
Telephone: | 954-452-4656 |
With a copy (which shall not constitute notice) to:
Address: | Bilzin Sumberg Baena Price & Axelrod LLP |
1450 Brickell Avenue, 23rd Floor | |
Miami, FL 33131 | |
Attention: | Laura Vaughn |
Telephone: | 305-350-7282 |
Facsimile: | 305-351-2286 |
Notices to BRNI:
Blanchette Rockefeller Neurosciences Institute
Address: | 8 Medical Center Drive |
Morgantown, WV 26505-3409 | |
Attention: | Shana Phares |
Chief Executive Officer | |
Telephone: | 304-293-1361 |
Facsimile: | 304-293-7536 |
With a copy (which shall not constitute notice) to:
Address: | Kirkland & Ellis, LLP |
300 North LaSalle | |
Chicago, IL 60654 | |
Attention: | William Singer |
Telephone: | 312-862-2142 |
Facsimile: | 312-862-2200 |
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Notices to NRV:
Neuroscience Research Ventures, Inc.
Address: | 364 Patteson Drive, #279 |
Morgantown, WV 26505 | |
Attention: | Tom Vorbach |
Assistant Secretary | |
Telephone: | 304-598-8112 |
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
Section 16. Governing Law . The corporate law of the State of Nevada shall govern all issues and questions concerning the relative rights and obligations of the Company and its stockholders. All other issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of Nevada, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Nevada or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Nevada.
Section 17. [Reserved] .
Section 18. Business Days . If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or legal holiday in the state in which the Company’s chief executive office is then located, the time period shall automatically be extended to the business day immediately following such Saturday, Sunday or legal holiday.
Section 19. Descriptive Headings; Interpretation . The headings and captions used in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The use of the phrase “ordinary course of business” shall mean “ordinary course of business consistent with past practice, including with respect to frequency and quantity.” The use of the word “including” herein shall mean “including without limitation.” Any reference to the masculine, feminine or neuter gender shall be deemed to include any gender or all three as appropriate. Any reference herein to a holder of Stockholder Shares’ fully-diluted, as-if-converted ownership shall not include in the determination thereof any shares of Common Stock issuable upon exercise of stock options issued pursuant to the Equity Incentive Plan.
Section 20. No Strict Construction . The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. The Parties hereto intend that each covenant and agreement contained herein shall have independent significance. If any party has breached any covenant or agreement contained herein in any respect, the fact that there exists another covenant or agreement relating to the same subject matter (regardless of the relative levels of specificity) which such party has not breached shall not detract from or mitigate the fact that such party is in breach of the first covenant or agreement.
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Section 21. Termination . Notwithstanding anything to the contrary contained herein, the Parties acknowledge and agree that this Agreement shall automatically terminate and be of no further force and effect, without any further required action by any party, upon the termination of the License Agreement; provided that, for the avoidance of doubt, the provisions of Section 24 shall only be deemed to have terminated following completion of any actions required thereby.
Section 22. [Reserved].
Section 23. [Reserved].
Section 24. Voting Matters
24A. Voting Agreement of Abeles Stockholders . Notwithstanding anything in this Agreement to the contrary, each Abeles Stockholder shall vote all of his, her or its Stockholder Shares which are voting shares and any other voting securities of the Company over which such holder has voting control, shall cause the Abeles Directors to vote or consent, as applicable, and shall take all other necessary or desirable actions within his, her or its control (whether in his, her or its capacity as a stockholder, director, member of a board committee or officer of the Company or otherwise, and including attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), so that on each occasion that the board acts or proposes to act (whether at a meeting or by written consent) with respect to (a) licensing or sublicensing of Licensed IP (as such term is defined in the License Agreement), (b) a Fundamental Change or Change in Ownership or (c) the liquidation, dissolution or winding up of the Company (any action described in clauses (a) through (c) of this sentence, a “ Specified Board Action ”):
(i) each Abeles Designee shall (a) vote or execute a written consent, as applicable, in favor of any Specified Board Action approved (by vote or by execution of a written consent) by the NRV Designees and (b) vote against, or refrain from executing a written consent in favor of, as applicable, any Specified Board Action not approved (by vote or by execution of a written consent) by the NRV Designees; and
(ii) if a Specified Board Action is approved by the Board and submitted to the Company’s stockholders for approval, each Abeles Stockholder shall vote all of his, her or its Stockholder Shares in favor of such Specified Board Action.
24B. Company Action . The Company shall not take any action that is inconsistent with the provisions of this Section 24 .
24C. Termination . Subject to Section 21 , the provisions of this Section 24 shall terminate automatically and shall be of no further force and effect upon the first to occur of (a) the consummation of a Qualified Public Offering and (b) the closing of the Company’s Subsequent Financing.
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* * * * *
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IN WITNESS WHEREOF, the Parties have executed or caused to be executed on their behalf this Stockholders Agreement as of the date first written above.
COMPANY :
NEUROTROPE, INC.
By:
/s/ Jim New
Name: Jim New
Its: President and Chief Executive Officer
IN WITNESS WHEREOF, the Parties have executed or caused to be executed on their behalf this Stockholders Agreement as of the date first written above.
NRV :
NEUROSCIENCES RESEARCH
VENTURES, INC.
By:
/s/ William S. Singer
Name: William S. Singer
Its: Authorized Signatory
IN WITNESS WHEREOF, the Parties have executed or caused to be executed on their behalf this Stockholders Agreement as of the date first written above.
ALKON
:
/s/ Dan Alkon
Dan Alkon
IN WITNESS WHEREOF, the Parties have executed or caused to be executed on their behalf this Stockholders Agreement as of the date first written above.
ABELES GROUP STOCKHOLDERS
:
NORTHLEA PARTNERS LLLP
By:
/s/ John Abeles
Name: John Abeles
Its: _______________________________
JIM NEW
/s/ Jim New
SCHEDULE OF ABELES GROUP STOCKHOLDERS
Northlea Partners LLLP
Jim New
JOINDER AGREEMENT
Effective upon the execution hereof, the undersigned hereby agrees to become a party to and bound by that certain Stockholders Agreement, dated as of August 23, 2013, among Neurotrope, Inc., a Nevada corporation, and the other parties from time to time party thereto, as amended, modified and waived from time to time (the “ Stockholders Agreement ”). The undersigned, by executing this joinder agreement, shall be entitled to all of the rights and subject to all of the obligations of a Stockholder and a holder of Stockholder Shares under the Stockholders Agreement.
Dated: __________, 20__
[ INVESTOR NAME ]
By:
Its:
By:
Its:
By: _________________________
Name: _________________________
Its: _________________________
EXHIBIT 10.16
PREFERRED STOCKHOLDERS AGREEMENT
NEUROTROPE, INC.
August 23, 2013
TABLE OF CONTENTS
1. | Definitions | 1 | |
2. | Registration Rights | ||
2.1 | Demand Registration | 4 | |
2.2 | Company Registration | 5 | |
2.3 | Underwriting Requirements | 6 | |
2.4 | Obligations of the Company | 6 | |
2.5 | Furnish Information | 8 | |
2.6 | Expenses of Registration | 9 | |
2.7 | Delay of Registration | 9 | |
2.8 | Indemnification | 10 | |
2.9 | Reports Under Exchange Act | 10 | |
2.10 | Limitations on Subsequent Registration Rights | 12 | |
2.11 | Transfer of Registration Rights | 12 | |
2.12 | Restrictions on Transfer | 13 | |
2.13 | Termination of Registration Rights | 14 | |
2.14 | Aggregation of Stock | 15 | |
3. | Voting Provisions | 15 | |
3.1 | Vote to Increase Authorized Common Stock | 15 | |
3.2 | Restrictions on Sales of Control of the Company | 15 | |
4. | Agreement Among the Company and the Stockholders | 15 | |
4.1 | Right of First Refusal | 15 | |
4.2 | Effect of Failure to Comply | 17 | |
4.3 | Exempt Transfers | 17 | |
4.4 | Prohibited Transfers | 18 | |
4.5 | Termination of Transfer Rights and Restrictions | 18 | |
5. | Legends | 18 | |
6. | Lock-Up | 19 | |
6.1 | Agreement to Lock-Up | 19 | |
6.2 | Stop Transfer Instructions | 19 | |
7. | Additional Covenants | 19 | |
7.1 | Insurance | 19 |
i |
TABLE OF CONTENTS
8. | Miscellaneous | 20 | |
8.1 | Transfers | 20 | |
8.2 | Successors and Assigns | 20 | |
8.3 | Governing Law | 20 | |
8.4 | Counterparts | 20 | |
8.5 | Titles and Subtitles | 20 | |
8.6 | Notices | 20 | |
8.7 | Amendments and Waivers | 21 | |
8.8 | Severability | 21 | |
8.9 | Aggregation of Stock | 21 | |
8.10 | Additional Stockholders | 21 | |
8.11 | Entire Agreement | 21 | |
8.12 | Dispute Resolution | 21 | |
8.13 | Delays or Omissions | 21 | |
Schedule A - Schedule of Stockholders
ii |
PREFERRED STOCKHOLDERS AGREEMENT
THIS PREFERRED STOCKHOLDERS AGREEMENT (the “ Agreement ”) is made as of the 23rd day of August, 2013, by and among Neurotrope, Inc., a Nevada corporation (the “ Company ”), each of the stockholders listed on Schedule A hereto, each of which is referred to in this Agreement as a “ Stockholder, ” and any additional Person that becomes a party to this Agreement in accordance with the terms hereof.
RECITALS
WHEREAS , the Stockholders are holders of Series A Preferred Stock of the Company.
WHEREAS , the Series A Preferred Stock of the Company held by the Stockholders was issued pursuant to the terms of the Merger Agreement, dated as of the date hereof, by and among Neurotrope Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of the Company, and Neurotrope BioScience, Inc., a Delaware corporation (“ Neurotrope ”, and such agreement, the “ Merger Agreement ”), pursuant to which Neurotrope Acquisition, Inc. merged with and into Neurotrope, with Neurotrope as the surviving corporation, and each outstanding share of Series A Preferred Stock of Neurotrope was converted into one share of Series A Preferred Stock of the Company (the “ Merger ”).
WHEREAS , certain of the Stockholders were parties to the Investor Rights Agreement, Voting Agreement and Investor Rights Agreement, each dated February 28, 2013, between the Company and certain of its stockholders (the “ Prior Agreements ”).
WHEREAS , in connection with the Merger, the Stockholders wish to terminate the Prior Agreements and enter into this Agreement, which shall provide for certain rights and obligations of the Stockholders as set forth in this Agreement;
NOW, THEREFORE , the parties hereby agree as follows:
1. Definitions . For purposes of this Agreement:
1.1 “ Affiliate ” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.
1.2 “ Capital Stock ” means (a) shares of Common Stock and Preferred Stock (whether now outstanding or hereafter issued in any context), (b) shares of Common Stock issued or issuable upon conversion of Preferred Stock and (c) shares of Common Stock issued or issuable upon exercise or conversion, as applicable, of stock options, warrants or other convertible securities of the Company, in each case now owned or subsequently acquired by any Stockholder, or their respective successors or permitted transferees or assigns. For purposes of the number of shares of Capital Stock held by a Stockholder (or any other calculation based thereon), all shares of Preferred Stock shall be deemed to have been converted into Common Stock at the then-applicable conversion ratio.
1.3 “ Change of Control ” means a transaction or series of related transactions in which a person, or a group of related persons, acquires from stockholders of the Company shares representing more than fifty percent (50%) of the outstanding voting power of the Company.
1.4 “ Common Stock ” means shares of the Company’s common stock, par value $0.0001 per share.
1.5 “ Company Notice ” means written notice from the Company notifying the selling Stockholder that the Company intends to exercise its Right of First Refusal as to some or all of the Transfer Stock with respect to any Proposed Transfer.
1.6 “ Damages ” means any loss, damage, claim or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, claim or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.
1.7 “ Derivative Securities ” means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly) , Common Stock, including options and warrants.
1.8 “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
1.9 “ Excluded Registration ” means (i) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.
1.10 “ Form S-1 ” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.
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1.11 “ Form S-3 ” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.
1.12 “ GAAP ” means generally accepted accounting principles in the United States.
1.13 “ Holder ” means any holder of Registrable Securities who is a party to this Agreement.
1.14 “ Immediate Family Member ” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, domestic partner, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, of a natural person referred to herein.
1.15 “ Initiating Holders ” means, collectively, Holders who properly initiate a registration request under this Agreement.
1.16 “ Person ” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
1.17 “ Preferred Stock ” means collectively, all shares of Series A Preferred Stock.
1.18 “ Proposed Transfer Notice ” means written notice from a Stockholder setting forth the terms and conditions of a Proposed Transfer.
1.19 “ Proposed Transfer ” means any assignment, sale, offer to sell, pledge, mortgage, hypothecation, encumbrance, disposition of or any other like transfer or encumbering of any Transfer Stock (or any interest therein) proposed by any of the Stockholders.
1.20 “ Prospective Transferee ” means any person to whom a Stockholder proposes to make a Proposed Transfer.
1.21 “ Qualified Public Offering ” means an underwritten public offering of equity securities of the Company with a price to the public of at least $5 per share and aggregate gross proceeds of at least $30,000,000.
1.22 “ Registrable Securities then outstanding ” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.
1.23 “ Registrable Securities ” means (i) the Common Stock issuable or issued upon conversion of the Series A Preferred Stock and (ii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (i) and (ii) above; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Subsection 2.12 , and excluding for purposes of Section 0 any shares for which registration rights have terminated pursuant to Subsection 0 of this Agreement.
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1.24 “ Restricted Securities ” means the securities of the Company required to bear the legend set forth in Subsection 0 hereof.
1.25 “ Right of First Refusal ” means the right, but not an obligation, of the Company, or its permitted transferees or assigns, to purchase some or all of the Transfer Stock with respect to a Proposed Transfer, on the terms and conditions specified in the Proposed Transfer Notice.
1.26 “ SEC Rule 144 ” means Rule 144 promulgated by the SEC under the Securities Act.
1.27 “ SEC Rule 145 ” means Rule 145 promulgated by the SEC under the Securities Act.
1.28 “ SEC ” means the Securities and Exchange Commission.
1.29 “ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
1.30 “ Selling Expenses ” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Subsection 0.
1.31 “ Series A Director ” means any director of the Company that the holders of record of the Series A Preferred Stock are entitled to elect pursuant to the Company’s Certificate of Incorporation.
1.32 “ Series A Preferred Stock ” means shares of the Company’s Series A Preferred Stock, par value $0.0001 per share.
1.33 “ Stockholder Notice ” means written notice from a Stockholder notifying the Company and the selling Stockholder that such Stockholder intends to exercise its Secondary Refusal Right as to a portion of the Transfer Stock with respect to any Proposed Transfer.
1.34 “ Transfer Stock ” means shares of Capital Stock owned by a Stockholder, or issued to a Stockholder after the date hereof (including, without limitation, in connection with any stock split, stock dividend, recapitalization, reorganization, or the like).
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2. Registration Rights . The Company covenants and agrees as follows:
2.1 Demand Registration .
(a) Form S-1 Demand . If at any time after the earlier of (i) five (5) years after the date of this Agreement or (ii) one hundred eighty (180) days after the effective date of the registration statement for a Qualified Public Offering, the Company receives a request from Holders of forty percent (40%) of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement with respect to Registrable Securities having an anticipated aggregate offering price, net of Selling Expenses, of at least $15 million, then the Company shall (x) within ten (10) days after the date such request is given, give notice thereof (the “ Demand Notice ”) to all Holders other than the Initiating Holders; and (y) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Subsection 2.1 0 , Subsection 2.1 0 and Subsection 0 .
(b) Form S-3 Demand . If at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders of at least thirty percent (30%) of the Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $1 million, then the Company shall (i) within ten (10) days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within forty-five (45) days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Subsection 2.1 0, Subsection 2.1(d) and Subsection 0 .
(c) Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Subsection 0 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to be filed and it is therefore necessary to defer the filing of such registration statement, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than one hundred twenty (120) days after the request of the Initiating Holders is given; provided , however , that the Company may not invoke this right more than once in any twelve (12) month period; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such one hundred twenty (120) day period other than an Excluded Registration.
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(d) The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1 0 : (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided , that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (ii) after the Company has effected two registrations pursuant to Subsection 2.1 0 ; or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Subsection 2.1 0 . The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1 0: (i) during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a prior registration, provided , that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or (ii) if the Company has effected two registrations pursuant to Subsection 2.1 0 within the twelve (12) month period immediately preceding the date of such request. A registration shall not be counted as “effected” for purposes of this Subsection 2.1 0 until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Subsection 0 , in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Subsection 2.1 0 .
2.2 Company Registration . If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Subsection 0, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Subsection 0 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Subsection 0.
2.3 Underwriting Requirements .
(a) If, pursuant to Subsection 0 , the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Subsection 0 , and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Subsection 0 ) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Subsection 0, if the underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided , however , that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.
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(b) In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Subsection 0 , the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares. Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, or (ii) the number of Registrable Securities included in the offering be reduced below thirty percent (30%) of the total number of securities included in such offering, unless such offering is a Qualified Public Offering, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering. For purposes of the provision in this Subsection 2.3 0 concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.
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2.4 Obligations of the Company . Whenever required under this Section 0 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided , however , that (i) such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration, and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such one hundred twenty (120) day period shall be extended for up to 60 days, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;
(b) prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;
(c) furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;
(d) use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;
(e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;
(f) use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;
(g) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;
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(h) promptly make available for inspection by the selling Holders, any underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;
(i) notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and
(j) after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.
In addition, the Company shall ensure that, at all times after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, its insider trading policy shall provide that the Company’s directors may implement a trading program under Rule 10b5-1 of the Exchange Act.
2.5 Furnish Information . It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 0 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.
2.6 Expenses of Registration . All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 0 , including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements, not to exceed $50,000, of one counsel for the selling Holders (“Selling Holder Counsel”), shall be borne and paid by the Company; provided , however , that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Subsection 0 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Subsection 0 or Subsection 0 , as the case may be. All Selling Expenses relating to Registrable Securities registered pursuant to this Section 0 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.
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2.7 Delay of Registration . No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2 .
2.8 Indemnification . If any Registrable Securities are included in a registration statement under this Section 0 :
(a) To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided , however , that the indemnity agreement contained in this Subsection 2.8 0 shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.
(b) To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided , however , that the indemnity agreement contained in this Subsection 2.8 0 shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Subsections 2.8 0 and 2.8 0 exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.
(c) Promptly after receipt by an indemnified party under this Subsection 0 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Subsection 0 , give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided , however , that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Subsection 0 , to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Subsection 0 .
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(d) To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Subsection 0 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Subsection 0 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Subsection 0 , then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided , however , that, in any such case, (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Subsection 2.8 0 , when combined with the amounts paid or payable by such Holder pursuant to Subsection 2.8 0 , exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.
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(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.
(f) Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Subsection 0 shall survive the completion of any offering of Registrable Securities in a registration under this Section 0 , and otherwise shall survive the termination of this Agreement.
2.9 Reports Under Exchange Act . With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144.
2.10 Limitations on Subsequent Registration Rights . From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that (i) would provide to such holder the right to include securities in any registration on other than either a pro rata basis with respect to the Registrable Securities or on a subordinate basis after all Holders have had the opportunity to include in the registration and offering all shares of Registrable Securities that they wish to so include; provided that this limitation shall not apply to any additional Stockholder who becomes a party to this Agreement pursuant to the terms hereof.
2.11 Transfer of Registration Rights . The rights under this Section 2 may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (i) is an Affiliate of a Holder; (ii) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one or more of such Holder’s Immediate Family Members; or (iii) after such transfer, holds at least 500,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations, and other recapitalizations); provided , however , that (x) the transferee receives the Registrable Securities in a transfer that complies with the requirements of Section 2.12 and Section 4 hereof, (y) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (z) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 6 . For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is an Affiliate or stockholder of a Holder; (2) who is a Holder’s Immediate Family Member; or (3) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder; provided further that all transferees who would not qualify individually for assignment of rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Section 2 .
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2.12 Restrictions on Transfer .
(a) The Preferred Stock and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Preferred Stock and the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.
(b) Each certificate or instrument representing (i) the Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities issued in respect of the securities referenced in clauses (i) and (ii), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Subsection 2.12 0 ) be stamped or otherwise imprinted with a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Subsection 0 .
(c) The holder of each certificate representing Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 0 . Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a legal opinion or “no action” letter in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration; provided that each transferee agrees in writing to be subject to the terms of this Subsection 0 . Each certificate or instrument evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Subsection 2.12 0 , except that such certificate shall not bear such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act. The obligations set forth in this Subsection 2.12 are in addition to any other restrictions on transfer set forth in this Agreement.
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2.13 Termination of Registration Rights . The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Subsection 0 or Subsection 0 shall terminate upon the earliest to occur of:
(a) the closing of a Deemed Liquidation Event, as such term is defined in the Company’s Certificate of Incorporation;
(b) such time as Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Holder’s shares without limitation during a three-month period without registration; and
(c) the fifth (5th) anniversary of the Company’s first Qualified Public Offering after the date hereof.
2.14 Aggregation of Stock . All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.
3. Voting Provisions .
3.1 Vote to Increase Authorized Common Stock . Each Stockholder agrees to vote or cause to be voted all Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to increase the number of authorized shares of Common Stock from time to time to ensure that there will be sufficient shares of Common Stock available for conversion of all of the shares of Preferred Stock outstanding at any given time.
3.2 Restrictions on Sales of Control of the Company . No Stockholder shall be a party to any transaction or series of related transactions in which a Person, or a group of related Persons, acquires from stockholders of the Company shares representing more than fifty percent (50%) of the outstanding voting power of the Company (a “ Stock Sale ”) unless all holders of Preferred Stock are allowed to participate in such transaction and the consideration received pursuant to such transaction is allocated among the parties thereto in the manner specified in the Company’s Certificate of Incorporation in effect immediately prior to the Stock Sale (as if such transaction were a Deemed Liquidation Event), unless the holders of a majority of the Preferred Stock elect otherwise by written notice given to the Company at least 10 days prior to the effective date of any such transaction or series of related transactions.
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4. Agreement Among the Company and the Stockholders .
4.1 Right of First Refusal .
(a) Grant . Subject to the terms of Section 0 below, each Stockholder hereby unconditionally and irrevocably grants to the Company a Right of First Refusal to purchase all or any portion of Transfer Stock that such Stockholder may propose to transfer in a Proposed Transfer, at the same price and on the same terms and conditions as those offered to the Prospective Transferee.
(b) Notice . Each Stockholder proposing to make a Proposed Transfer must deliver a Proposed Transfer Notice to the Company not later than forty-five (45) days prior to the consummation of such Proposed Transfer. Such Proposed Transfer Notice shall contain the material terms and conditions (including price and form of consideration) of the Proposed Transfer and the identity of the Prospective Transferee. To exercise its Right of First Refusal under this Section 4.1 , the Company must deliver a Company Notice to the selling Stockholder within fifteen (15) days after delivery of the Proposed Transfer Notice.
(c) Grant of Secondary Refusal Right to Stockholders . Subject to the terms of Section 0 below, each Stockholder hereby unconditionally and irrevocably grants to the other Stockholders a Secondary Refusal Right to purchase all or any portion of the Transfer Stock not purchased by the Company pursuant to the Right of First Refusal, as provided in this Subsection 4.1 0 . If the Company does not intend to exercise its Right of First Refusal with respect to all Transfer Stock subject to a Proposed Transfer, the Company must deliver a Secondary Notice to the selling Stockholder and to each other Stockholder to that effect no later than fifteen (15) days after the selling Stockholder delivers the Proposed Transfer Notice to the Company. To exercise its Secondary Refusal Right, a Stockholder must deliver a Stockholder Notice to the selling Stockholder and the Company within ten (10) days after the Company’s deadline for its delivery of the Secondary Notice as provided in the preceding sentence.
(d) Undersubscription of Transfer Stock . If options to purchase have been exercised by the Company and the Stockholder with respect to some but not all of the Transfer Stock by the end of the 10-day period specified in the last sentence of Subsection 4.1 0) (the “ Stockholder Notice Period ”), then the Company shall, immediately after the expiration of the Stockholder Notice Period, send written notice (the “ Company Undersubscription Notice ”) to those Stockholders who fully exercised their Secondary Refusal Right within the Stockholder Notice Period (the “ Exercising Stockholders ”). Each Exercising Stockholder shall, subject to the provisions of this Subsection 4.1 0 , have an additional option to purchase all or any part of the balance of any such remaining unsubscribed shares of Transfer Stock on the terms and conditions set forth in the Proposed Transfer Notice. To exercise such option, an Exercising Stockholder must deliver an Undersubscription Notice to the selling Stockholder and the Company within ten (10) days after the expiration of the Stockholder Notice Period. In the event there are two or more such Exercising Stockholders that choose to exercise the last-mentioned option for a total number of remaining shares in excess of the number available, the remaining shares available for purchase under this Subsection 4.1 0 shall be allocated to such Exercising Stockholders pro rata based on the number of shares of Transfer Stock each such Exercising Stockholder has elected to purchase pursuant to the Secondary Refusal Right (without giving effect to any shares of Transfer Stock that any such Exercising Stockholder has elected to purchase pursuant to the Company Undersubscription Notice). If the options to purchase the remaining shares are exercised in full by the Exercising Stockholders, the Company shall immediately notify all of the Exercising Stockholders and the selling Stockholder of that fact.
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(e) Consideration; Closing . If the consideration proposed to be paid for the Transfer Stock is in property, services or other non-cash consideration, the fair market value of the consideration shall be as determined in good faith by the Company’s Board of Directors and as set forth in the Company Notice. If the Company or any Stockholder cannot for any reason pay for the Transfer Stock in the same form of non-cash consideration, the Company or such Stockholder may pay the cash value equivalent thereof, as determined in good faith by the Board of Directors and as set forth in the Company Notice. The closing of the purchase of Transfer Stock by the Company and the Stockholders shall take place, and all payments from the Company and the Stockholders shall have been delivered to the selling Stockholder, by the later of (i) the date specified in the Proposed Transfer Notice as the intended date of the Proposed Transfer and (ii) forty-five (45) days after delivery of the Proposed Transfer Notice.
(f) Additional Compliance . If the Company and the Stockholders have not elected to purchase all the Transfer Stock, the Stockholder proposing the Proposed Transfer may sell such Transfer Stock to the Prospective Transferee on terms not more advantageous to the Prospective Transferee than those set forth in the Proposed Transfer Notice. If any Proposed Transfer is not consummated within sixty (60) days after receipt of the Proposed Transfer Notice by the Company, the Stockholder proposing the Proposed Transfer may not sell any Transfer Stock unless they first comply in full with each provision of this Section 0 . The exercise or election not to exercise any right by any Stockholder hereunder shall not adversely affect its right to participate in any other sales of Transfer Stock subject to this Subsection 4.1 .
4.2 Effect of Failure to Comply .
(a) Transfer Void; Equitable Relief . Any Proposed Transfer not made in compliance with the requirements of this Agreement shall be null and void ab initio, shall not be recorded on the books of the Company or its transfer agent and shall not be recognized by the Company. Each party hereto acknowledges and agrees that any breach of this Agreement would result in substantial harm to the other parties hereto for which monetary damages alone could not adequately compensate. Therefore, the parties hereto unconditionally and irrevocably agree that any non-breaching party hereto shall be entitled to seek protective orders, injunctive relief and other remedies available at law or in equity (including, without limitation, seeking specific performance or the rescission of purchases, sales and other transfers of Transfer Stock not made in strict compliance with this Agreement).
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(b) Violation of First Refusal Right . If any Stockholder becomes obligated to sell any Transfer Stock to the Company or any Stockholder (each, a “ Buyer ”) under this Agreement and fails to deliver such Transfer Stock in accordance with the terms of this Agreement, such Buyer may, at its option, in addition to all other remedies it may have, send to such Stockholder the purchase price for such Transfer Stock as is herein specified and transfer to the name of the Buyer (or request that the Company effect such transfer in the name of an Stockholder) on the Company’s books the certificate or certificates representing the Transfer Stock to be sold.
4.3 Exempt Transfers .
(a) Exempted Transfers. Notwithstanding the foregoing or anything to the contrary herein, the provisions of Subsections 4.1 shall not apply: (a) in the case of a Stockholder that is an entity, upon a transfer by such Stockholder to its stockholders, members, partners or other equity holders, (b) to a pledge of Transfer Stock that creates a mere security interest in the pledged Transfer Stock, provided that the pledgee thereof agrees in writing in advance to be bound by and comply with all applicable provisions of this Agreement to the same extent as if it were the Stockholder making such pledge, or (c) in the case of a Stockholder that is a natural person, upon a transfer of Transfer Stock by such Stockholder that is made (i) for bona fide estate planning purposes, either during his or her lifetime or on death by will or intestacy and (ii) to his or her spouse, child (natural or adopted), or any other direct lineal descendant of such Stockholder (or his or her spouse) (all of the foregoing collectively referred to as “family members”), or any other person approved by the Board of Directors of the Company, or any custodian or trustee of any trust, partnership or limited liability company for the benefit of, or the ownership interests of which are owned wholly by, such Stockholder or their respective family members; provided that in the case of clause(s) (a) or (c), the Stockholder shall deliver prior written notice to the other Stockholder of such pledge, gift or transfer and such shares of Transfer Stock shall at all times remain subject to the terms and restrictions set forth in this Agreement and such transferee shall, as a condition to such issuance, deliver a counterpart signature page to this Agreement as confirmation that such transferee shall be bound by all the terms and conditions of this Agreement as a Stockholder, as applicable (but only with respect to the securities so transferred to the transferee), including the obligations of a Stockholder with respect to Proposed Transfers of such Transfer Stock pursuant to Section 0 .
(b) Exempted Offerings. Notwithstanding the foregoing or anything to the contrary herein, the provisions of Section 4 shall not apply to the sale of any Transfer Stock (a) to the public in an offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (a “ Public Offering ”) or (b) pursuant to a Deemed Liquidation Event (as defined in the Company’s Certificate of Incorporation in effect immediately prior to such transaction).
4.4 Prohibited Transfers . Notwithstanding the foregoing, no Stockholder shall transfer any Transfer Stock (a) unless such transfer has been approved by the Company’s Board of Directors, (b) to any entity which, in the determination of the Company’s Board of Directors, directly or indirectly competes with the Company or (c) to any customer, distributor or supplier of the Company, if the Company’s Board of Directors should determine that such transfer would result in such customer, distributor or supplier receiving information that would place the Company at a competitive disadvantage with respect to such customer, distributor or supplier.
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4.5 Termination of Transfer Rights and Restrictions . The provisions of this Section 4 shall automatically terminate upon the earlier of (a) immediately prior to the consummation of a Qualified Public Offering and (b) the consummation of a Deemed Liquidation Event (as defined in the Company’s Certificate of Incorporation in effect immediately prior to such transaction).
5. Legends . In addition to the legend set forth in Section 2.12 , each certificate representing shares of Transfer Stock held by the Stockholders or issued to any permitted transferee in connection with a transfer permitted by Section 4 hereof shall be endorsed with the following legends:
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO, AND IN CERTAIN CASES PROHIBITED BY, THE TERMS AND CONDITIONS OF A CERTAIN STOCKHOLDERS AGREEMENT BETWEEN THE STOCKHOLDER, THE CORPORATION AND CERTAIN OTHER HOLDERS OF STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION. by accepting any interest in such Shares the person accepting such interest shall be deemed to agree to and shall become bound by all the provisions of that STOCKHOLDERS Agreement, including certain restrictions on transfer and ownership set forth therein.
Each Stockholder agrees that the Company may instruct its transfer agent to impose transfer restrictions on the shares represented by certificates bearing the legend referred to in this Section 5 above to enforce the provisions of this Agreement, and the Company agrees to promptly do so. The legend shall be removed upon termination of this Agreement at the request of the holder.
6. Lock-Up .
6.1 Agreement to Lock-Up . Each Stockholder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the Company’s first Qualified Public Offering after the date hereof and ending on the date specified by the Company and the managing underwriter (such period not to exceed 180 days), or such other period as may be requested by the Company or an underwriter to accommodate regulatory restrictions on (1) the publication or other distribution of research reports and (2) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto), (a) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Capital Stock held immediately prior to the effectiveness of the registration statement for the Qualified Public Offering or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Capital Stock, whether any such transaction described in clause (a) or (b) above is to be settled by delivery of Capital Stock or other securities, in cash or otherwise. The foregoing provisions of this Section 6 shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, or the transfer of any shares to any trust for the direct or indirect benefit of the Stockholder or the immediate family of the Stockholder, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, and shall only be applicable to the Stockholders if all officers, directors and holders of more than ten percent (10%) of the outstanding Common Stock (after giving effect to the conversion into Common Stock of all outstanding Preferred Stock) enter into similar agreements. The underwriters in connection with the Qualified Public Offering are intended third-party beneficiaries of this Section 6 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Each Stockholder further agrees to execute such agreements as may be reasonably requested by the underwriters in the Qualified Public Offering that are consistent with this Section 6 or that are necessary to give further effect thereto.
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6.2 Stop Transfer Instructions . In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the shares of Capital Stock of each Stockholder (and transferees and assignees thereof) until the end of such restricted period.
7. Additional Covenants .
7.1 Insurance . The Company shall use its commercially reasonable efforts to obtain, within ninety (90) days of the date hereof, from financially sound and reputable insurers Directors and Officers liability insurance and term “key-person” insurance on Jim New, each in an amount and on terms and conditions satisfactory to the Board of Directors, and will use commercially reasonable efforts to cause such insurance policies to be maintained until such time as the Board of Directors determines that such insurance should be discontinued. The key-person policy shall name the Company as loss payee, and neither policy shall be cancelable by the Company without prior approval by the Board of Directors.
8. Miscellaneous .
8.1 Transfers . Each transferee or assignee of any Capital Stock subject to this Agreement shall continue to be subject to the terms hereof, and, as a condition precedent to the Company’s recognizing such transfer, each transferee or assignee shall agree in writing to be subject to each of the terms of this Agreement by executing and delivering a counterpart signature page to this Agreement. Upon the execution and delivery of such counterpart signature page by any transferee, such transferee shall be deemed to be a party hereto as if such transferee were the transferor and such transferee’s signature appeared on the signature pages of this Agreement and shall be deemed to be Stockholder. The Company shall not permit the transfer of the Capital Stock subject to this Agreement on its books or issue a new certificate representing any such Capital Stock unless and until such transferee shall have complied with the terms of this Subsection 8.1 . Each certificate representing Capital Stock subject to this Agreement if issued on or after the date of this Agreement shall be endorsed by the Company with the legend set forth in Section 5 .
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8.2 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. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
8.3 Governing Law . This Agreement shall be governed by the internal law of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.
8.4 Counterparts . 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. Counterparts may be delivered via facsimile, electronic mail (including pdf) 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.
8.5 Titles and Subtitles . The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.
8.6 Notices . All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Subsection 0. If notice is given to the Company, a copy shall also be sent to Laura Vaughn, Bilzin Sumberg Baena Price & Axelrod LLP, 1450 Brickell Avenue, 23rd Floor, Miami, FL 33131.
8.7 Amendments and Waivers . This Agreement may be amended, modified or terminated and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument executed by (a) the Company and (b) the holders of a majority of the shares of Common Stock issued or issuable upon conversion of the then outstanding shares of Preferred Stock held by the Stockholders (voting as a single class and on an as-converted basis; provided , that , Section 2 of this Agreement may be amended and the observance of any term of Section 2 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 a majority of the Registrable Securities then outstanding; provided that the Company may in its sole discretion waive compliance with Subsection 0 (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Subsection 0 shall be deemed to be a waiver). Any amendment, modification, termination or waiver so effected shall be binding upon the Company, the Stockholders and all of their respective successors and permitted assigns whether or not such party, assignee or other shareholder entered into or approved such amendment, modification, termination or waiver. Notwithstanding the foregoing, this Agreement may not be amended, modified or terminated and the observance of any term hereunder may not be waived with respect to any Stockholder without the written consent of such Stockholder unless such amendment, modification, termination or waiver applies to all Stockholder in the same fashion. The Company shall give prompt written notice of any amendment, modification or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, modification, termination or waiver. 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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8.8 Severability . In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.
8.9 Aggregation of Stock . All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.
8.10 Additional Stockholders . Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of the Company’s Preferred Stock after the date hereof, any purchaser of such shares of Preferred Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed a “Stockholder” for all purposes hereunder. No action or consent by the Stockholders shall be required for such joinder to this Agreement by such additional Stockholder, so long as such additional Stockholder has agreed in writing to be bound by all of the obligations as an “Stockholder” hereunder.
8.11 Entire Agreement . This Agreement (including any Schedules and Exhibits hereto) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.
8.12 Dispute Resolution . The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of Delaware and to the jurisdiction of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of Delaware or the United States District Court for the District of Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or 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 suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.
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Waiver of Jury Trial : EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT,, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
8.13 Delays or Omissions . No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
NEUROTROPE, INC.
By: ______________________________________
Name: ____________________________________
Title: _____________________________________
Signature Page to Preferred Stockholders Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
Individual Stockholder: | Entity Stockholder: | |
__________________________________________________ | _____________________________________________________ | |
(Signature) | (Name of Entity) | |
__________________________________________________ | By: _______________________________________________ | |
(Print Name) | ||
Name: _______________________________________________ | ||
Date: _____________________________________________ | Title: _______________________________________________ | |
Date: _______________________________________________ |
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THE SIGNATURE PAGE OF YOUR SUBSCRIPTION AGREEMENT.
Signature Page to Preferred Stockholders Agreement
SCHEDULE A
Stockholders
EXHIBIT 10.17
VOTING AGREEMENT
August 23, 2013
THIS VOTING AGREEMENT (this “ Agreement ”) is made and entered into as of 23, 2013 by and among Neurotrope, Inc., a Nevada corporation (the “ Parent ”), Neurosciences Research Ventures, Inc., a West Virginia corporation (“ NRV ”), Northlea Partners LLLP (" Abeles "), Jim New (" New "), Dan Alkon (" Alkon "), Hannah Rose Holdings, LLC (" HRH ") and Gottbetter Capital Group, Inc. (" GCG ") (each, a " Party " and together, the " Parties ").
WHEREAS, Neurotrope BioScience, Inc. (“ Neurotrope ”), Neurotrope Acquisition Corp. (“ Merger Sub ”), a wholly-owned subsidiary of Parent, and the Parent plan to enter into an Agreement and Plan of Merger and Reorganization (the “ Merger Agreement ”), pursuant to which Neurotrope would merge with an into Merger Sub (the “ Merger ”) and become a wholly-owned subsidiary of Parent.
WHEREAS, upon the consummation of the Merger, NRV, Abeles, New, Alkon, HRH and GCG will hold issued and outstanding shares of the common stock of Parent, par value $.0001 per share (the " Common Stock ") in the numbers set forth opposite each such Party's name on Exhibit A hereto.
WHEREAS, the aforementioned holders of Common Stock wish to enter into this Agreement with respect to the voting of shares of Common Stock for the election of the directors of Parent after the Merger.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
1. | From and after the Effective Time (as such term is defined in the Merger Agreement) and until such time as HRH and GCP cease to own or control shares of Common Stock, each of HRH and GCP shall vote all of the Common Stock that each beneficially owns (as such term is defined in SEC Rule 13d-3) and shall take all other necessary or desirable actions within his, her or its control, whether in his, her or its capacity as a stockholder, director, member of a board committee or officer of the Parent or otherwise, and including attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings (and shall refrain from taking any action the purpose of which is to frustrate the purposes of this Section 1 ), and the Parent shall take all necessary or desirable actions within its control, including calling special board and stockholder meetings, so that: |
(i) the authorized number of directors shall be established and maintained at seven (7), with six (6) directors elected by the holders of a majority of the issued and outstanding Common Stock, voting as a separate class (each, a " Common Director ") and one (1) director elected by the holders of a majority of the issued and outstanding Series A convertible preferred stock of Parent (the " Series A Preferred Stock "), voting as a separate class on an as-converted basis;
(ii) the following five (5) persons shall be nominated and elected to the Board as Common Directors:
(A) two (2) representatives designated by NRV (each, an “ NRV Designee ”), who initially shall be William S. Singer and Ralph Bean;
(B) two (2) representatives designated by the holders of a majority in interest of the Shares of Common Stock of Parent held by New and Abeles (each, an “ Abeles Designee ”), who initially shall be Dr. John Abeles and Dr. Jim New; and
(C) one (1) independent representative designated by the Board of the Parent (the " Neurotrope Designee "), which designee has not been determined as of the date of this Agreement; and
(iii) subject to the provisions of applicable law, no NRV Designee, Abeles Designee or Neurotrope Designee shall be removed from the Board unless such removal is requested in writing by the party that designated such designee.
2. | Each of NRV, Abeles, New and Alkon shall vote all of the Common Stock that each beneficially owns (as such term is defined in SEC Rule 13d-3) in favor of electing as a Common Director after the Effective Time one independent representative designated by HRH (the " HRH Designee ") as soon as practicable after such representative has been identified by HRH. For the avoidance of doubt, NRV, Abeles, New and Alkon agree to vote their Common Stock in favor of the election of the HRH Designee only at the time of such individual's initial appointment to the Parent's Board, and nothing herein shall obligate NRV, Abeles, New or Alkon to vote in favor of the election of any other individual as an HRH Designee or in favor of the continuing service of the HRH Designee once elected to the Board. |
This Agreement may be executed in two or more counterparts and by facsimile, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
[Signature pages follow]
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IN WITNESS WHEREOF , the parties hereto have executed this Voting Agreement on the day and year first above written.
NEUROTROPE, INC.
By: /s/ Ronald A. Warren
Name: Ronald A. Warren
Title: President
IN WITNESS WHEREOF , the parties hereto have executed this Voting Agreement on the day and year first above written.
NEUROSCIENCES RESEARCH VENTURES, INC.
By: /s/ William S. Singer
Name: William S. Singer
Title: Director
[Signature Page to Voting Agreement] |
IN WITNESS WHEREOF , the parties hereto have executed this Voting Agreement on the day and year first above written.
NORTHLEA PARTNERS LLLP
By: /s/ John Abeles
Name: John Abeles
Title: Manager of General Partner
[Signature Page to Voting Agreement] |
IN WITNESS WHEREOF , the parties hereto have executed this Voting Agreement on the day and year first above written.
JIM NEW
/s/ Jim New
[Signature Page to Voting Agreement] |
IN WITNESS WHEREOF , the parties hereto have executed this Voting Agreement on the day and year first above written.
DAN ALKON
/s/ Dan Alkon
[Signature Page to Voting Agreement] |
IN WITNESS WHEREOF , the parties hereto have executed this Voting Agreement on the day and year first above written.
HANNAH ROSE HOLDINGS, LLC
By: /s/ Matthew Rosenblum
Name: Matthew Rosenblum
Title: CEO
[Signature Page to Voting Agreement] |
IN WITNESS WHEREOF , the parties hereto have executed this Voting Agreement on the day and year first above written.
GOTTBETTER CAPITAL GRoup, Inc.
By: /s/ Adam S. Gottbetter
Name: Adam S. Gottbetter
Title: President
[Signature Page to Voting Agreement] |
EXHIBIT A
Stockholder | Common Stock Held at Closing of Merger |
Neurosciences Research Ventures, Inc. | 9,025,000 |
Northlea Partners LLLP | 5,187,000 |
Jim New | 3,838,000 |
Dan Alkon | 950,000 |
Hannah Rose Holdings, LLC | 2,014,424 |
Gottbetter Capital Group, Inc. | 488,079 |
TOTAL | 21,502,503 |