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): April 18, 2017

 

PLx Pharma Inc.

(Exact name of registrant as specified in its charter)

 

Delaware 001-36351 46-4995704
(State or other jurisdiction of
incorporation) 		(Commission File Number) (I.R.S. Employer
Identification No.)

 

8285 El Rio Street, Ste. 130  
Houston, Texas 77054 77054
(Address of principal executive offices) (zip code)

 

Registrant’s telephone number, including area code: (713) 842-1249

 

Dipexium Pharmaceuticals, Inc.

14 Wall Street, Suite 3D

New York, NY 10005

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Emerging growth company x

 

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

 

 

 

 

Item 2.01 Completion of Acquisition or Disposition of Assets.

 

On April 19, 2017, PLx Pharma Inc., formerly known as Dipexium Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”) completed its business combination (the “ Closing ”) with PLx Pharma Inc., a Delaware corporation (“ PLx ”), in accordance with the terms of an Agreement and Plan of Merger and Reorganization, dated as of December 22, 2016 (the “ Merger Agreement ”), among PLx, the Company and Dipexium Acquisition Corp., a Delaware corporation and wholly owned subsidiary of the Company (“ AcquireCo ”). Pursuant to the Merger Agreement, AcquireCo merged with and into PLx, with PLx surviving the merger and becoming a wholly owned subsidiary of the Company (the “ Merger ”). Also on April 19, 2017, the Company effected a 1-for-8 reverse stock split of its common stock (the “ Reverse Stock Split ”), discussed in Item 3.03 and Item 5.07 below, and changed its name to “PLx Pharma Inc.” The Company’s common stock, which is listed on The NASDAQ Capital Market, traded through the close of business on April 19, 2017 under the symbol “DPRX,” and continues trading on The NASDAQ Capital Market, on a post-split basis, under the symbol “PLXP” beginning on April 20, 2017.

 

As a result of the consummation of the Merger, and after giving effect to the Reverse Stock Split, each outstanding share of common stock of PLx was converted into the right to receive 0.7875625 shares of the Company’s common stock (the “ Equity Exchange Ratio ”). Additionally, as a result of the Merger, each outstanding option to purchase shares of PLx common stock, whether or not vested, that remained unexercised immediately prior to the consummation of the Merger was converted into an option to purchase shares of the Company’s common stock. All rights with respect to each PLx option were assumed by the Company in accordance with their terms.

 

The number of shares of Company common stock subject to each outstanding PLx option assumed by the Company was determined by multiplying the number of shares of PLx common stock that were subject to such option by the Equity Exchange Ratio and rounding the resulting number up to the nearest whole number of shares of Company common stock. The per share exercise price for the shares of Company common stock issuable upon exercise of each PLx option assumed by the Company was determined by dividing the per share exercise price of PLx common stock subject to such option by the Equity Exchange Ratio and rounding the resulting price up to the nearest whole cent (and then subsequently adjusted to reflect the Reverse Stock Split).

 

Immediately after the Merger, there were 6,037,824 shares of the Company’s common stock outstanding. Immediately after the Merger, the former PLx stockholders beneficially owned 76.75% of the Company. In addition, certain former PLx stockholders now holding approximately 49% of the Company’s outstanding common stock are party to lock-up agreements, pursuant to which such stockholders have agreed, except in limited circumstances, not to sell or transfer, or engage in swap or similar transactions with respect to, shares of PLx capital stock and stock options, including, as applicable, shares of Company common stock received in the Merger and issuable upon exercise of certain options, until 120 days after the Closing. Further, certain stockholders of the Company who held shares of the Company prior to the merger and who, in the aggregate, own approximately 9% of the outstanding shares of the Company’s common stock, are parties to lock-up agreements, whereby such stockholders agreed not to, except in limited circumstances, sell or transfer, or engage in swap or similar transactions with respect to, shares of Company capital stock and stock options until 120 days after the Closing.

 

 

 

 

The issuance of the shares of the Company’s common stock to the former stockholders of PLx in the Merger was registered with the U.S. Securities and Exchange Commission (the “ SEC ”) on a Registration Statement on Form S-4 (Reg. No. 333-215684) (the “ Registration Statement/Proxy ”).

 

On April 19, 2017, the Company issued a press release announcing the consummation of the Merger and related transactions. A copy of the press release is filed as Exhibit 99.1 hereto and is incorporated by reference herein.

 

The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed December 22, 2016.

 

Item 3.03 Material Modification of Rights of Security Holders.

 

At the annual meeting of the Company’s stockholders, held on April 18, 2017 (the “ Stockholder Meeting ”), the Company’s stockholders approved an amendment to the Company’s certificate of incorporation, as amended, to increase the number of authorized shares of common stock from 30,000,000 to 100,000,000 and effect the Reverse Stock Split (the “ Split Amendment ”). Additionally, the Company’s stockholders voted to approve an amendment to the Company’s certificate of incorporation, as amended, to change the name of the Company to “PLx Pharma Inc.” (the “ Name Change Amendment ”). Immediately prior to the Closing, the Company filed the Split Amendment with the Secretary of State of the State of Delaware and, immediately after the Closing, the Company filed the Name Change Amendment with the Secretary of State of the State of Delaware.

 

As a result of the Reverse Stock Split, the number of issued and outstanding shares of Company common stock immediately prior to the Reverse Stock Split was reduced to a smaller number of shares, such that every eight shares of Company common stock held by a stockholder immediately prior to the Reverse Stock Split were combined and reclassified into one share of Company common stock. Immediately following the Reverse Stock Split and the Merger, there were 6,037,824 shares of Company common stock outstanding.

 

No fractional shares were issued in connection with the Merger. Any PLx stockholder that was otherwise entitled to receive a fraction of a share received a cash payment equal to such fraction to which such stockholder would otherwise be entitled multiplied by the average of the closing price of Company common stock as quoted on The NASDAQ Capital Market for the ten consecutive trading days ending with the trading day immediately preceding the signing of the Merger Agreement.

 

 

 

 

No fractional shares were issued in connection with the Reverse Stock Split. Any Company stockholder that was otherwise entitled to receive a fraction of a share received a cash payment equal to such fraction to which such stockholder would otherwise have been entitled to multiplied by the closing price of Company common stock on The NASDAQ Capital Market on April 18, 2017.

 

The foregoing description of the Split Amendment and the Name Change Amendment is not complete and is subject to and qualified in its entirety by reference to the Split Amendment and the Name Change Amendment, copies of which are attached hereto as Exhibit 3.1 and Exhibit 3.2, respectively, and incorporated by reference herein.

 

Item 4.01 Changes in Registrant’s Certifying Accountant.

 

On April 19, 2017, after completion of the Merger, the Audit Committee of the Company’s board of directors dismissed CohnReznick LLP (“ CohnReznick ”) as the Company’s independent registered public accounting firm and appointed GBH CPAs, PC (“ GBH ”) as the Company’s independent registered public accounting firm for the year ending December 31, 2017, both with immediate effect.

 

CohnRezick’s report on the Company’s financial statements for each of the fiscal years ended December 31, 2016 and 2015 did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.

 

During the fiscal years ended December 31, 2016 and 2015 and the subsequent interim period, there were no: (i) disagreements with CohnReznick on any matter of accounting principles or practices, financial statement disclosure, or auditing scope of procedure which, if not resolved to the satisfaction of CohnReznick, would have caused CohnReznick to make reference to the matter in their report, or (ii) reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

 

During the fiscal years ended December 31, 2016 and 2015 and the subsequent interim period, neither the Company nor anyone acting on its behalf consulted GBH regarding either: (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).

 

The Company has provided the disclosure in this Item to CohnReznick, and, as required by Item 304(a)(3) of Regulation S-K, is filing as Exhibit 16.1 hereto the letter received from CohnReznick in response.

 

 

 

 

Item 5.01 Changes in Control of Registrant.

 

The information set forth in Item 2.01 regarding the Merger and the information set forth in Item 5.02 regarding the Company’s board of directors and executive officers following the Merger are incorporated by reference into this Item 5.01.

 

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

 

Directors

 

At the Stockholder Meeting, the Company’s stockholders voted to elect Robert J. DeLuccia, David P. Luci, Jack H. Dean, Michael Duffy, Thomas Harrison, William J. McSherry, Jr. and Barry Kagan as directors. On April 19, 2017, each of Robert J. DeLuccia, William J. McSherry, Jr., Jack H. Dean, Barry Kagan, Thomas Harrison and Michael Duffy resigned from the Company’s board of directors and committees of the board of directors on which they respectively served, which resignations were not the result of any disagreements with the Company relating to the Company’s operations, policies or practices.

 

The Merger Agreement provides that the Company’s board of directors at, or immediately after the Closing, will be fixed at seven members, consisting of six members designated by PLx, who are Michael J. Valentino, Natasha Giordano, Gary S. Balkema, Robert Casale, Kirk Calhoun and John W. Hadden, II, and one member designated by the Company, who is David P. Luci. In accordance with the Merger Agreement, at the Closing on April 19, 2017 the board of directors was reconstituted, with Michael J. Valentino, Natasha Giordano, Gary S. Balkema, Robert Casale, Kirk Calhoun, John W. Hadden, II and David P. Luci appointed as directors. In addition, each of Kirk Calhoun, Gary S. Balkema, Robert Casale and John W. Hadden, II were appointed to the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee.

 

There are no family relationships among any of the Company’s directors and executive officers.

 

Executive Officers

 

On April 19, 2017, each of Robert J. DeLuccia, David P. Luci and Robert G. Shawah resigned from their respective executive officer positions, which resignations were not the result of any disagreements with the Company relating to the Company’s operations, policies or practices. In accordance with the Merger Agreement, at the effective time of the Merger, on April 19, 2017 the Company’s board of directors appointed Natasha Giordano as President and Chief Executive Officer, David E. Jorden as Acting Chief Financial Officer, Gary Mossman as Chief Operating Officer and Michael J. Valentino as Executive Chairman.

 

 

 

 

There are no family relationships among any of the Company’s directors and executive officers.

 

Natasha Giordano

 

Ms. Giordano was appointed PLx’s President and Chief Executive Officer and a director of PLx effective January 1, 2016, per the terms of her employment agreement. Previously, Ms. Giordano served as the Interim Chief Executive Officer of ClearPoint Learning, Inc., a position she held from May 2015 through November 2015. She also served on the ClearPoint board of directors from December 2009 through November 2015. Previously, Ms. Giordano served as the Chief Executive Officer of Healthcare Corporation of America from January 2014 through August 2014. From June 2009 to August 2012, Ms. Giordano served as Chief Operating Officer and then as Chief Executive Officer, President and a member of the board of directors of Xanodyne Pharmaceuticals, Inc. a branded specialty pharmaceutical company with development and commercial capabilities focused on pain management. Prior to that, she served as President, Americas, for Cegedim Dendrite (formerly Dendrite International Inc.) from 2007 to 2008 and as Senior Vice President of the Global Customer Business Unit of Cegedim Dendrite from 2004 to 2007. She had been with Cegedim Dendrite since 2000 and served as Group President for Global Business Unit for major customers, and Vice President of Global Sales. Earlier in her career, she worked nine years with Parke-Davis, then owned by Warner Lambert, in several sales and marketing positions including Strategic Alliance management and Sales Integration. Ms. Giordano holds a Bachelor of Science degree in nursing from Wagner College.

 

Ms. Giordano entered into an employment agreement with PLx, effective as of January 1, 2016 (and assigned to the Company immediately following the Merger), providing for a base salary of $400,000 for her first two years of employment. Ms. Giordano is also eligible to participate in any incentive compensation programs that may exist from time to time including a potential incentive award bonus, and is also eligible to participate in any employee benefit plans that may be available to PLx’s employees, subject to the terms of those plans. Ms. Giordano’s employment agreement provides for an initial stock option award equal to 216,580 shares of common stock, with 25% of such shares vesting immediately upon commencement of employment, with an additional 25% of such shares vesting on each of the first, second and third anniversaries of such date, generally subject to Ms. Giordano’s continued employment with PLx. The options have an exercise price per share of $12.44, with a term of ten years from the date of grant.

 

The foregoing description of Ms. Giordano’s employment agreement is not complete and is subject to and qualified in its entirety by reference to her employment agreement, which is attached as Exhibit 10.1 hereto and incorporated herein by reference.

 

 

 

 

David E. Jorden

 

Mr. Jorden has served PLx as Acting Chief Financial Officer since June 2015, and served as a director of PLx from 2005 to February 2016. He is also CEO and director of Nanospectra Biosciences, Inc, a private company engaged in the development and commercialization of a nanoparticle based therapy for the precise thermal ablation of solid tumors and is Chief Executive Officer, Chief Financial Officer and a member of the board of directors of Nuo Therapeutics, Inc., a leading commercial developer of regenerative therapies. Mr. Jorden has served as an executive member of Nuo Therapeutics’ board of directors since September 2008, including as Executive Chairman from February 2012 until his appointment as Acting Chief Financial Officer in June 2015. From 2003 to 2008, he was with Morgan Stanley’s Private Wealth Management group where he was responsible for equity portfolio management for high net worth individuals. Prior to Morgan Stanley, Mr. Jorden served as CFO for Genometrix, Inc., a private genomics/life sciences company focused on high-throughput microarray applications. Mr. Jorden was previously a principal with Fayez Sarofim & Co. Mr. Jorden has a MBA from Northwestern University’s Kellogg School and a B.B.A. from University of Texas at Austin. He holds both Certified Financial Analyst and Certified Public Accountant (non-practicing) designations.

 

Mr. Jorden entered into an employment agreement with PLx, effective as of April 1, 2016 (and assigned to the Company immediately following the Merger), providing for a base salary of $150,000 per year, subject to annual review by the board of directors. Mr. Jorden’s employment agreement also provides that upon completion by PLx of an equity financing of $10 million or more, Mr. Jorden may receive a one-time bonus of up to $125,000. Mr. Jorden is also eligible to participate in any incentive compensation programs that may exist from time to time including a potential incentive award bonus. Mr. Jorden is also eligible to participate in any employee benefit plans that may be available to PLx’s employees, subject to the terms of those plans. Mr. Jorden’s employment agreement provides for an initial stock option award equal to 33,753 shares of common stock, all of which vested as of July 22, 2016. The options have an exercise price per share of $12.44, with a term of ten years from the date of grant.

 

The foregoing description of Mr. Jorden’s employment agreement is not complete and is subject to and qualified in its entirety by reference to his employment agreement, which is attached as Exhibit 10.2 hereto and incorporated herein by reference.

 

Gary Mossman

 

Mr. Mossman served as PLx’s Chief Operating Officer since April 2009, and previously served as a director of PLx from 2009 to February 2016. His senior executive experience includes more than 40 years of P&L responsibility in both public and private multinational companies engaged in the development, manufacture and sale of both small and large molecule products for the pharmaceutical and specialty chemical industries. Mr. Mossman’s expertise in business development, strategic alliances, operations and commercialization were key contributors to the successful growth of these firms. Prior to joining PLx he retired as President and CEO of Dixie Chemical Company, a private top tier global supplier of 70 specialty chemicals, intermediates and APIs. Prior to Dixie Chemical his next most recent assignment was Executive Vice President and COO of Cambrex and CEO of Cambrex Human Health with global responsibility for business units with diverse product portfolios. These included over 100 generic APIs, development services for biopharmaceuticals, high potency, taste masking, high energy reactions and drug delivery and contract manufacturing provided from 12 manufacturing facilities.

 

 

 

 

Mr. Mossman entered into an employment agreement with PLx, effective as of April 1, 2016 (and assigned to the Company immediately following the Merger), providing for a base salary of $160,000 per year, subject to annual review by the board of directors. Mr. Mossman’s employment agreement also provides that upon completion by PLx of an equity financing of $10 million or more, Mr. Mossman may receive a one-time bonus of up to $100,000. Mr. Mossman is also eligible to participate in any incentive compensation programs that may exist from time to time including a potential incentive award bonus. Mr. Mossman is also eligible to participate in any employee benefit plans that may be available to PLx’s employees, subject to the terms of those plans. Mr. Mossman’s employment agreement also provides for a grant of an initial stock option award equal to 69,755 shares of common stock, 51,754 of which vested as of July 22, 2016, with an additional 18,001 shares vesting on the second anniversary (July 22, 2017) of the initial grant date, generally subject to Mr. Mossman’s continued employment or consulting relationship with PLx. The options have an exercise price per share of $12.44, with a term of ten years from the date of grant.

 

The foregoing description of Mr. Mossman’s employment agreement is not complete and is subject to and qualified in its entirety by reference to his employment agreement, which is attached as Exhibit 10.3 hereto and incorporated herein by reference.

 

Michael J. Valentino

 

Mr. Valentino has served as Executive Chairman of the board of directors of PLx since July 2011 and brings over 30 years of experience in the healthcare industry, including a broad range of critical leadership positions at both major pharmaceutical companies and venture backed start-ups. He previously served as President and Chief Executive Officer of Xanodyne Pharmaceuticals, Inc. from June 2009 to May 2010. From June 2003, Mr. Valentino successfully built start-up Adams Respiratory Therapeutics into a fully integrated specialty pharmaceutical company with more than $490 million in annual revenue and leading OTC brands such as Mucinex® and Delsym®. Under his leadership, Adams completed its initial public offering in July 2005, which was ranked by The Wall Street Journal as the No. 1 Health Care IPO in 2005, and in December 2007, the Company entered into a definitive agreement under which it would be acquired by Reckitt Benckiser, a world leader in household cleaning, health and personal care, for approximately $2.3 billion. Previously, Mr. Valentino was President and Chief Operating Officer at Alpharma, a leading global generic pharmaceutical company. Prior to joining Alpharma, he served as Executive Vice President, Global Head Consumer Pharmaceuticals for Novartis AG. He earlier served as President and Chief Operating Officer of Novartis Consumer Healthcare, North America. Mr. Valentino was also President of Pharmacia & Upjohn’s Consumer Products Division. Throughout his career, Mr. Valentino has been at the forefront of seven major prescription to OTC switches including such well known consumer brands as Benadryl®, Rogaine Extra Strength®, Motrin Jr.®, Nasalcrom®, Lamisil®, Voltaren (EU) and Mucinex®. He has served as Chairman of the Consumer Healthcare Products Association.

 

 

 

 

Mr. Valentino entered into an employment agreement with PLx, effective as of April 1, 2016 (and assigned to the Company immediately following the Merger), providing for a base salary of $200,000 per year, subject to annual review and adjustment by the board of directors. Mr. Valentino’s employment agreement also provides that upon completion by PLx of an equity financing of $10 million or more, Mr. Valentino may receive a one-time bonus of up to $175,000. Mr. Valentino is also eligible for a potential incentive award bonus of up to 50% (or higher or lower amount if so determined by the board of directors) of his base salary on an annualized basis. Mr. Valentino’s agreement provides for the grant of an initial stock option award equal to 112,509 shares of common stock, 60,005 of which vested as of July 22, 2016, with an additional 26,252 shares becoming exercisable on each of the second and third anniversaries (July 22, 2017 and 2018) of the initial grant date, generally subject to Mr. Valentino’s continued employment or consulting relationship with PLx. The options have an exercise price per share of $12.44, with a term of ten years from the date of grant.

 

The foregoing description of Mr. Valentino’s employment agreement is not complete and is subject to and qualified in its entirety by reference to his employment agreement, which is attached as Exhibit 10.4 hereto and incorporated herein by reference.

 

Additionally, the Closing resulted in the acceleration of vesting of stock options to purchase 42,917 shares (on a post-split basis) of the Company’s common stock held by the directors and executive officers of the Company prior to the Merger. PLx’s executive officers also had options to purchase shares of PLx common stock that were converted into options to purchase shares of Company common stock upon Closing.

 

Indemnification Agreements

 

The Company entered into indemnification agreements with each of Michael J. Valentino, Natasha Giordano, Gary S. Balkema, Robert Casale, Kirk Calhoun, John W. Hadden, II and David P. Luci, effective as of April 19, 2017. Pursuant to the indemnification agreements, the Company has agreed to indemnify and hold harmless the directors to the fullest extent permitted by the Delaware General Corporate Law. The indemnification agreements generally cover expenses that a director incurs or amounts that a director becomes obligated to pay because of any proceeding to which he is made or threatened to be made a party or participant by reason of his service as a current or former director of the Company. The agreements also provide for the advancement of expenses to the directors subject to specified conditions. There are certain exceptions to the Company’s obligation to indemnify the directors, including any intentional malfeasance or act where the director did not in good faith believe he was acting in the Company’s best interests, with respect to “short-swing” profit claims under Section 16(b) of the Securities Exchange Act of 1934 and, with certain exceptions, with respect to proceedings that he initiates.

 

 

 

 

The foregoing description of the indemnification agreements is not complete and is subject to and qualified in its entirety by reference to the form of indemnification agreement, a copy of which is attached as Exhibit 10.5 hereto and is incorporated herein by reference.

 

Convertible Notes

 

Certain of PLx’s officers and directors have participated in PLx’s unregistered offerings of convertible bridge notes. Immediately prior to the closing of the Merger, the officers and directors of PLx held an aggregate of $588,300 in principal amount of convertible bridge notes. Please see the sections of the Registration Statement/Proxy entitled, “Principal Stockholders of PLx,” “Principal Stockholders of Combined Organization” and “Merger Agreement” for information regarding PLx’s convertible bridge notes, which such information is incorporated herein by reference.

 

PLx Plan

 

On April 19, 2017, pursuant to the Merger Agreement, the Company assumed the PLx 2015 Omnibus Incentive Plan (the “ PLx Plan ”). Please see the section of the Registration Statement/Proxy entitled, “Matters Being Submitted to a Vote of PLx Stockholders – PLx Proposal No. 2: Amendment to the 2015 Omnibus Incentive Plan to Increase Authorized Common Stock” for information regarding the PLx Plan, which such information is incorporated herein by reference. Such description of the PLx Plan is not complete and is subject to and qualified in its entirety by reference to the PLx Plan, which is incorporated by reference to Annex G to the Registration Statement/Proxy.

 

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

 

The information set forth in Item 3.03 of this Current Report on Form 8-K is hereby incorporated by reference.

 

Item 5.07 Submission of Matters to a Vote of Security Holders.

 

At the Stockholder Meeting, the following items were voted on and the final voting results for each matter submitted, which share amounts do not reflect the Reverse Stock Split, are as follows:

 

Proposal No. 1 . To approve the issuance of shares of Company common stock to PLx stockholders by virtue of the merger, as contemplated by the Merger Agreement.

 

Votes For   Votes Against   Abstentions
5,872,483   70,677   117,031

 

 

 

 

Proposal No. 2 . To authorize an amendment to the Company’s certificate of incorporation, as amended, to (a) increase the number of authorized shares of common stock from 30,000,000 to 100,000,000, as described in the Registration Statement/Proxy, the approval of which is necessary to enable the Company to issue the required number of shares of Company common stock to PLx stockholders in connection with the merger, and (b) change the name of the Company to “PLx Pharma Inc.” subject to the consummation of the Merger.

 

Votes For   Votes Against   Abstentions
5,826,255   117,348   116,588

 

Proposal No. 3 . To approve an amendment to the Company’s certificate of incorporation, as amended, effecting a reverse stock split of Company common stock of 1-for-8.

 

Votes For   Votes Against   Abstentions
8,014,593   667,203   118,953

 

Proposal No. 4 . To elect Robert J. DeLuccia, David P. Luci, Jack H. Dean, Michael Duffy, Thomas Harrison, William J. McSherry, Jr. and Barry Kagan as directors to serve for a term that expires at the 2018 Annual Meeting of Stockholders, or until his successor is elected and qualified or until his earlier resignation or removal.

 

Nominee   Votes For   Votes Against   Abstentions
Robert J. DeLuccia   5,814,498   0   245,693
David P. Luci   5,815,698   0   244,493
Jack H. Dean   5,694,650   0   365,541
Michael Duffy   5,815,298   0   244,893
Thomas Harrison   5,816,498   0   243,693
William J. McSherry, Jr.   5,814,348   0   245,843
Barry Kagan   5,814,498   0   245,784

 

Proposal No. 5 . To approve, on an advisory basis, the golden parachute compensation that may be paid or become payable to the Company’s named executive officers as disclosed in the Registration Statement/Proxy.

 

Votes For   Votes Against   Abstentions
5,636,725   285,015   138,451

 

Proposal No. 6 . To ratify the selection of CohnReznick LLP, an independent registered public accounting firm, as the independent auditor of the Company for the fiscal year ending December 31, 2017.

 

Votes For   Votes Against   Abstentions
8,372,526   240,531   187,692

 

 

 

 

Item 9.01 Financial Statements and Exhibits

 

(a) Financial Statements of Businesses Acquired.

 

PLx’s audited financial statements as of and for the years ended December 31, 2016 and 2015, together with the report of GBH CPAs, PC, with respect thereto and PLx’s unaudited financial statements for the three months ended March 31, 2017 and 2016, are attached as Exhibits 99.2 and 99.3, respectively, to this Current Report on Form 8-K.

 

(b) Pro Forma Financial Information

 

Unaudited pro forma condensed combined balance sheet and statement of operations as of and for the three months ended March 31, 2017 and statement of operations for the year ended December 31, 2016 are attached as Exhibit 99.4 to this Current Report on Form 8-K.

 

(d) Exhibits

 

Exhibit. No.   Description
     
2.1   Agreement and Plan of Merger and Reorganization (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed December 22, 2016)
3.1   Certificate of Amendment (Split Amendment) to the Certificate of Incorporation, as amended, of the Company, dated April 18, 2017
3.2   Certificate of Amendment (Name Change Amendment) to the Certificate of Incorporation, as amended, of the Company, dated April 19, 2017
10.1   Employment Agreement with Natasha Giordano, dated January 1, 2016    
10.2   Amended and Restated Employment Agreement with David E. Jorden, dated April 1, 2016
10.3   Amended and Restated Employment Agreement with Gary Mossman, dated April 1, 2016
10.4   Amended and Restated Employment Agreement with Michael J. Valentino, dated April 1, 2016
10.5   Form of Indemnification Agreement
10.6   PLx Pharma 2015 Omnibus Incentive Plan (incorporated by reference to Annex G to the Company’s Registration Statement on Form S-4 filed January 25, 2017)   
16.1   Letter from CohnReznick LLP
23.1   Consent of GBH CPAs, PC, relating to PLx’s financial statements as of and for the years ended December 31, 2016 and 2015
99.1   Press Release dated April 19, 2017

 

 

 

 

99.2   Audited Financial Statements of PLx Pharma Inc. for the years ended December 31, 2016 and 2015
99.3   Unaudited Consolidated Financial Statements of PLx Pharma Inc. for the three months ended March 31, 2017 and March 31, 2016
99.4   Unaudited Pro Forma Condensed Combined Balance Sheet and Statement of Operations of the Company for the three months ended March 31, 2017 and Condensed Combined Statement of Operations for the year ended December 31, 2016

 

 

 

 

SIGNATURES

 

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

 

  PLx Pharma Inc.
     
Date:  April 19, 2017    
  /s/ Natasha Giordano
  By: Natasha Giordano
  Title: President and Chief Executive Officer

 

 

 

 

Exhibit 3.1 

 

CERTIFICATE OF AMENDMENT
 
OF
 
CERTIFICATE OF INCORPORATION, AS AMENDED, OF
 
DIPEXIUM PHARMACEUTICALS, INC.

 

Pursuant to Section 242 of the General Corporation Law of the State of Delaware, Dipexium Pharmaceuticals, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify as follows:

 

1. The name of the Corporation is Dipexium Pharmaceuticals, Inc. The date of filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware was March 12, 2014, and a Certificate of Amendment was filed with the Secretary of State of the State of Delaware on May 25, 2016.

 

2. The Board of Directors of the Corporation has duly adopted a resolution pursuant to Section 242 of the General Corporation Law of the State of Delaware setting forth a proposed amendment to the Certificate of Incorporation, as amended, of the Corporation and declaring said amendment to be advisable. The requisite stockholders of the Corporation have duly approved said proposed amendment in accordance with Section 242 of the General Corporation Law of the State of Delaware. The amendment amends the Certificate of Incorporation, as amended, of the Corporation as follows:

 

Paragraph 1 of Article FOURTH is hereby deleted in its entirety and replaced with the following:

 

“ Classes of Stock . The Corporation is authorized to issue one class of shares of capital stock to be designated as common stock (“ Common Stock ”). The number of shares of Common Stock authorized to be issued is one hundred million (100,000,000), par value $0.001 per share.”

 

Article FOURTH is hereby amended by adding a Section 4 which reads as follows:

 

“4. Effective as of 4:30 P.M. eastern time, on April 19, 2017 (the “Effective Time”), the shares of Common Stock issued and outstanding immediately prior to the Effective Time and the shares of Common Stock issued and held in the treasury of the Corporation immediately prior to the Effective Time are reclassified into a smaller number of shares such that each eight (8) shares of issued Common Stock immediately prior to the Effective Time is reclassified into one (1) share of Common Stock. Notwithstanding the immediately preceding sentence, no fractional shares shall be issued and, in lieu thereof, any person who would otherwise be entitled to a fractional share of Common Stock as a result of the reclassification shall be entitled to a cash payment in lieu thereof at a price equal to the fraction to which the stockholder would otherwise be entitled multiplied by the closing price of the Common Stock on The NASDAQ Capital Market on the last trading day prior to the Effective Time, or if such price is not available, the average of the last bid and asked prices of the Common Stock on such day or other price determined by the Corporation’s Board of Directors.

 

Each stock certificate that, immediately prior to the Effective Time, represented shares of Common Stock that were issued and outstanding immediately prior to the Effective Time shall, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent that the number of whole shares of Common Stock after the Effective Time into which the shares of Common Stock formerly represented by such certificate shall have been reclassified (as well as the right to receive a whole share in lieu of a fractional share of Common Stock), provided, however, that each person of record holding a certificate that represented shares of Common Stock that were issued and outstanding immediately prior to the Effective Time shall receive, upon surrender of such certificate, a new certificate evidencing and representing the number of whole shares of Common Stock after the Effective Time into which the shares of Common Stock formerly represented by such certificate shall have been reclassified (including the right to receive a whole share in lieu of a fractional share of Common Stock).”

 

3. This Certificate of Amendment shall be effective April 19, 2017 at 4:30 P.M., eastern time.

 

 

 

 

IN WITNESS WHEREOF , the Corporation has caused this Certificate of Amendment to be signed by its Chief Executive Officer on this 18 th day of April, 2017.

 

DIPEXIUM PHARMACEUTICALS, INC.

 

  By:  /s/ David. P. Luci
     
    Name: David P. Luci
    Title:  Chief Executive Officer

 

 

 

Exhibit 3.2

 

CERTIFICATE OF AMENDMENT
 
OF
 
CERTIFICATE OF INCORPORATION, AS AMENDED, OF
 
DIPEXIUM PHARMACEUTICALS, INC.

 

Pursuant to Section 242 of the General Corporation Law of the State of Delaware, Dipexium Pharmaceuticals, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify as follows:

 

1. The name of the Corporation is Dipexium Pharmaceuticals, Inc. The date of filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware was March 12, 2014, a Certificate of Amendment was filed with the Secretary of State of the State of Delaware on May 25, 2016 and a Certificate of Amendment was filed with the Secretary of State of the State of Delaware on April 18, 2017.

 

2. The Board of Directors of the Corporation has duly adopted a resolution pursuant to Section 242 of the General Corporation Law of the State of Delaware setting forth a proposed amendment to the Certificate of Incorporation, as amended, of the Corporation and declaring said amendment to be advisable. The requisite stockholders of the Corporation have duly approved said proposed amendment in accordance with Section 242 of the General Corporation Law of the State of Delaware. The amendment amends the Certificate of Incorporation, as amended, of the Corporation as follows:

 

Article FIRST is hereby deleted in its entirety and replaced with the following:

 

“FIRST: The name of the corporation is PLx Pharma Inc. (hereinafter sometimes referred to as the “ Corporation ”).”

 

3. This Certificate of Amendment shall be effective April 19, 2017 at 5:30 P.M., eastern time.

 

 

 

 

IN WITNESS WHEREOF , the Corporation has caused this Certificate of Amendment to be signed by its Chief Executive Officer on this 19 th day of April, 2017.

 

DIPEXIUM PHARMACEUTICALS, INC.

 

  By:  /s/ David P. Luci
     
    Name: David P. Luci
    Title:  Chief Executive Officer

 

 

 

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “ Agreement ”) is made and entered into as of October 1, 2015, by and between Natasha Giordano (the “ Executive ”) and PLx Pharma Inc., a Delaware corporation (the “ Company ”).

 

WHEREAS, the Company desires to employ the Executive on the terms and conditions set forth herein; and

 

WHEREAS, the Executive desires to be employed by the Company on such terms and conditions; and

 

WHEREAS, the Company has finalized, or is the process of finalizing, a first underwritten public offering and sale of shares of common stock of the Company for cash pursuant to an effective registration statement on Form S-1 under the Securities Act of 1933, as amended (the “ Initial Public Offering ”).

 

NOW, THEREFORE, in consideration of the mutual covenants, promises and obligations set forth herein, the parties agree as follows:

 

1.     Term . The Executive’s employment hereunder shall be effective day after the closing of the Initial Public Offering but no later than January 1, 2016, or such earlier date as Executive and Company may mutually agree on in writing (the “ Effective Date ”) and shall continue until the second anniversary thereof, unless terminated earlier pursuant to Section 4 of this Agreement; provided that, on such second anniversary of the Effective Date and each annual anniversary thereafter (such date and each annual anniversary thereof, a “ Renewal Date ”), the Agreement shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of one year, unless either party provides written notice of its intention not to extend the term of the Agreement at least 90 days’ prior to the applicable Renewal Date. The period during which the Executive is employed by the Company hereunder is hereinafter referred to as the “ Employment Term. ”

 

2.     Position and Duties .

 

2.1    Position . During the Employment Term, the Executive shall serve as the President and Chief Executive Officer of the Company and as member of the Board of Directors, reporting directly to the Board of Directors of the Company (the “ Board ”). For purposes of this Agreement, it is expressly recognized that the Board may delegate its authority in a particular matter to one or more committees of the Board, including but not limited to the Compensation Committee of the Board (the “ Compensation Committee ”), as provided by the governing documents of the Company. In such position, the Executive shall have such duties, authority and responsibility as are consistent with the Executive’s position, including, without limitation supervising operations and management of the Company and its subsidiaries.

 

 

 

 

2.2    Duties . During the Employment Term, the Executive shall devote substantially all of her business time and attention to the performance of the Executive’s duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the performance of such services either directly or indirectly; provided however that the Executive’s service on the Board of Directors of Aceto Corporation is expressly permitted, without the prior written consent of the Board. Notwithstanding the foregoing, the Executive will be permitted to act or serve as a director, trustee, committee member or principal of any type of business, civic or charitable organization; provided that such activities do not interfere in any material way with the performance of the Executive’s duties and responsibilities to the Company as provided hereunder, including, but not limited to, the obligations set forth in Section 2 hereof.

 

3.     Compensation .

 

3.1    Base Salary . The Company shall pay the Executive an annual rate of base salary of $400,000. Such base salary shall be paid consistently with the Company’s then current pay practices. The Executive’s base salary shall be reviewed at least annually by the Board and the Board may, but shall not be required to, increase (but not decrease) base salary then in effect during the Employment Term. The Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as “ Base Salary ”.

 

3.2    Annual Bonus . The Executive shall be eligible to receive a target annual bonus of 50% of Base Salary pursuant to a bonus plan approved by the Board based on satisfaction of performance criteria to be established by the Compensation Committee. Payment of the target annual bonus, if any, shall be made in the same manner and at the same time that other senior-level executives receive their annual incentive compensation awards, the actual amount of which and the date upon which it is payable by the Company to be determined by the Board in its discretion; provided that, if granted, any annual bonus shall not exceed 100% of the Base Salary then in effect nor be less than 25% of the Base Salary then in effect. Any such bonuses shall be subject to all applicable withholding requirements.

 

3.3    Equity Awards . During the Employment Term, the Executive shall be eligible to participate in the Company’s 2015 Omnibus Incentive Plan or any successor plan (the “ Plan ”), subject to the terms of the Plan, as determined by the Board or the Compensation Committee, in its discretion. In conjunction with Executive’s entrance into this Agreement, Executive has been granted certain equity awards pursuant to the terms of the Award Agreement attached hereto as Exhibit A . Subject to the determination, by the Board in its discretion, that Executive has met certain performance goals, Executive shall be granted during the 2016 calendar year an additional option for purchase of 1% of the outstanding common stock of the Company. For the avoidance of doubt, in the event the Executive terminates for Good Reason, or the Company has a Change in Control (as defined the Plan) and Executive remains employed by the Company through the date such Change in Control is consummated, all unvested options granted under this Section 3.3 shall be accelerated and shall immediately vest upon the occurrence of such events. In addition, provided the Executive is not terminated by the Company for Cause or by the Executive without Good Reason, then the options will vest through the initial two year anniversary of the Effective Date.

 

3.4    Fringe Benefits and Perquisites . During the Employment Term, the Executive shall be entitled to fringe benefits and perquisites consistent with the practices of the Company, and to the extent the Company provides similar benefits or perquisites (or both) to similarly situated executives of the Company.

 

 

 

 

3.5    Employee Benefits . During the Employment Term, the Executive shall be entitled to participate in all employee benefit plans, practices and programs maintained by the Company and generally available to senior executives of the Company, as in effect from time to time (collectively, “ Employee Benefit Plans ”), to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its discretion, subject to the terms of such Employee Benefit Plan and applicable law.

 

3.6    Vacation . During the Employment Term, the Executive shall be entitled to 30 paid vacation days per calendar year (prorated for partial years) in accordance with the Company’s vacation policies, as in effect from time to time.

 

3.7    Business Expenses . The Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred by the Executive in connection with the performance of the Executive’s duties hereunder, subject to compliance with the Company’s expense reimbursement policies and procedures, specifically including (a) first-class air travel, (b) up to $15,000 per year for automobile lease and insurance payments, and (c) up to $12,000 in legal expenses incurred by Executive in connection with the negotiation of this Agreement.

 

3.8    Insurance .

 

(a)    Until such time as the Company has in place a comprehensive health insurance plan available to senior executives of the Company, the Company shall reimburse Executive monthly for health and dental insurance premiums for Executive (and any eligible dependants) up to a monthly maximum of $2,500.

 

(b)    The Company shall establish and maintain on behalf of Executive, at all times during the Employment Term, an eight hundred thousand dollar ($800,000) life insurance policy naming Executive’s spouse (or other individuals designated by Executive) as beneficiary.

 

(c)    The Company shall purchase director and officer liability insurance to be in place on or before the effectiveness of the Initial Public Offering and maintained throughout the Employment Term.

 

3.9    Indemnification .  The Executive shall be indemnified and advancement of expenses by the Company as provided in Company’s Bylaws and Certificate of Incorporation. The obligations under this paragraph shall survive any termination of the Employment Term.

 

 

 

 

3.10   Clawback Provisions . Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation or stock exchange listing requirement (including, without limitation, any changes required to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act), will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (including any policy required to be adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).

 

4.     Termination of Employment . The Employment Term and the Executive’s employment hereunder may be terminated by either the Company or the Executive at any time and for any reason; provided that, unless otherwise provided herein, either party shall be required to give the other party at least 30 days advance written notice of any termination of the Executive’s employment. Upon termination of the Executive’s employment during the Employment Term, the Executive shall be entitled to the compensation and benefits described in this Section 4 and shall have no further rights to any compensation or any other benefits from the Company or any of its affiliates. Executive may terminate this Agreement at any time prior to the Employment Term by delivering written notice to the Company, in which case the Executive shall not be entitled to any compensation or benefits whatsoever from the Company or any of its affiliates.

 

4.1    Termination For Cause or Without Good Reason .  

 

(a)    The Executive’s employment hereunder may be terminated by the Company for Cause or by the Executive without Good Reason. If the Executive’s employment is terminated by the Company for Cause or by the Executive without Good Reason, the Executive shall be entitled to receive:

 

(i) any accrued but unpaid Base Salary and accrued but unused vacation, which shall be paid in accordance with the Company’s customary payroll procedures;

 

(ii) any earned but unpaid Annual Bonus with respect to any completed fiscal year immediately preceding the Termination Date, which shall be paid on the otherwise applicable payment date; provided that, if the Executive’s employment is terminated by the Company for Cause, then any such accrued but unpaid Annual Bonus shall be forfeited;

 

(iii) reimbursement for unreimbursed business expenses properly incurred by the Executive, which shall be subject to and paid in accordance with the Company’s expense reimbursement policy; and

 

(iv) such employee benefits (including equity compensation), if any, as to which the Executive may be entitled under the Company’s employee benefit plans as of the Termination Date; provided that, in no event shall the Executive be entitled to any payments in the nature of severance or termination payments except as specifically provided herein.

 

Items 4.1(a)(i) through 4.1(a)(iv) are referred to herein collectively as the “ Accrued Amounts ”.

 

 

 

 

(b)    For purposes of this Agreement, “ Cause ” shall mean:

 

(i) the Executive’s willful failure to perform her duties (other than any such failure resulting from incapacity due to physical or mental illness), and such failure has not been cured after a period of thirty (30) days’ notice from the Company;

 

(ii) the Executive’s willful failure to comply with any valid and legal directive of the Board;

 

(iii) the Executive’s willful engagement in dishonesty, illegal conduct or gross misconduct, which is, in each case, materially injurious to the Company or its affiliates;

 

(iv) the Executive’s embezzlement, misappropriation or fraud, whether or not related to the Executive’s employment with the Company;

 

(v) the Executive’s conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude;

 

(vi) the Executive’s willful malfeasance or willful misconduct in connection with the Executive’s duties hereunder or any act or omission which is materially injurious to the financial condition or business reputation of the Company;

 

(vii) the Executive’s willful unauthorized disclosure of Confidential Information (as defined below);

 

(viii) the Executive’s material breach of any material obligation under this Agreement or any other written agreement between the Executive and the Company, which breach, if curable, remains uncured for a period of thirty (30) days after receipt by the Executive of written notice from the Company of such breach, which notice shall contain the specific reasonable cure requested by the Company.

 

For purposes of this provision, no act or failure to act on the part of the Executive shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company.

 

 

 

 

(c)    For purposes of this Agreement, “ Good Reason ” shall mean the occurrence of any of the following, in each case during the Employment Term without the Executive’s written consent:

 

(i) the Company employs a person besides the Executive as President or Chief Executive Officer;

 

(ii) a material reduction in the Executive’s Base Salary, bonus opportunity or benefits;

 

(iii) any material breach by the Company of any material provision of this Agreement which breach, if curable, remains uncured for a period of thirty (30) days after receipt by the Company of written notice from the Executive of such breach, which notice shall contain the specific reasonable cure requested by the Executive; a material, adverse change in the Executive’s title, authority, duties, responsibilities (other than temporarily while the Executive is physically or mentally incapacitated or as required by applicable law) or a requirement that the Executive report to a corporate officer or executive instead of reporting directly to the Board, taking into account the Company’s size, status as a public company and capitalization as of the date of this Agreement;

 

(iv) the Company’s requires the Executive to engage in dishonest or illegal conduct;

 

(v) the Company requires the Executive to be based at any office or location outside of 50 miles from the to be determined and Board approved employment location as of the Effective Date, except for travel reasonably required in the performance of the Executive’s responsibilities; or

 

(vi) a Change in Control of the Company in which this Agreement is not assumed.

 

The Executive cannot terminate her employment for Good Reason unless she has provided written notice to the Company of the existence of the circumstances providing grounds for termination for Good Reason within ninety (90) days of the initial existence of such grounds and the Company has had at least thirty (30) days from the date on which such notice is provided to cure such circumstances (to the extent curable). If the Executive does not terminate her employment for Good Reason within one hundred twenty (120) days after the first occurrence of the applicable grounds, then the Executive will be deemed to have waived her right to terminate for Good Reason with respect to such grounds.

 

(d)    “ Change in Control ” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the effective date of any following events:

 

(i) Acquisition of Stock by Third Party . Any Person is or becomes the Beneficial Owner (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and any rules and regulations promulgated thereunder), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company’s then outstanding shares of capital stock;

 

 

 

 

(ii) Change in Board . During any twelve-month period (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board of Directors of Company (the “ Board ”), and any new director (other than a director designated by a person who has effected a transaction described in subparagraph (i) of this definition without the consent of the Board) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a least a majority of the members of the Board;

 

(iii) Corporate Transactions . The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than a majority of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation which such shares give the holder(s) thereof the power to elect at least a majority of the board or other governing body of such surviving entity;

 

(iv) Liquidation . The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; or

 

(v) Other Events . There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirement.

 

4.2    Termination Without Cause or for Good Reason . The Employment Term and the Executive’s employment hereunder may be terminated by the Executive for Good Reason or by the Company without Cause. In the event of such termination, the Executive shall be entitled to receive the Accrued Amounts and subject to the Executive’s compliance with Sections 5 , 6 , 7 , and 8 of this Agreement and her execution of a release of claims in favor of the Company, its affiliates and their respective officers and directors in a form provided by the Company (the “ Release ”) and such Release becoming effective within thirty (30) days following the Termination Date (such 30-day period, the “ Release Execution Period ”), the Executive shall be entitled to receive the following:

 

(a)    an amount equal to 150% of the Base Salary in effect as of the Termination Date;

 

 

 

 

(b)    any Annual Bonus earned for a previously completed fiscal year but unpaid as of the Termination Date;

 

(c)    a payment equal to the product of (i) the Annual Bonus, if any, that the Executive would have earned for the fiscal year in which the Date of Termination occurs based on achievement of the applicable performance goals for such year and (ii) a fraction, the numerator of which is the number of days the Executive was employed by the Company during the year of termination and the denominator of which is the number of days in such year (the “ Pro-Rata Bonus ”);

 

(d)    such employee benefits (including equity compensation), if any, as to which the Executive may be entitled under the Company’s employee benefit plans as of the Termination Date;

 

(e)    any personal computer owned by the Company which was used primarily by the Executive prior to the Termination Date.

 

The amounts payable pursuant to subsections (a) through (c) above shall be paid to Executive in one lump sum, immediately following the Release Execution Period.

 

4.3    Death or Disability .  

 

(a)    The Executive’s employment hereunder shall terminate automatically upon the Executive’s death during the Employment Term, and the Company may terminate the Executive’s employment on account of the Executive’s Disability.

 

(b)    If the Executive’s employment is terminated during the Employment Term on account of the Executive’s death or Disability, the Executive (or the Executive’s estate and/or beneficiaries, as the case may be) shall be entitled to receive the following:

 

(i) the Accrued Amounts; and

 

(ii) a lump sum payment equal to the Pro-Rata Bonus/Annual Bonus, if any, that the Executive would have earned for the fiscal year in which the Termination Date occurs based on the achievement of applicable performance goals for such year, which shall be payable on the date that annual bonuses are paid to the Company’s similarly situated executives, but in no event later than two-and-a-half (2 1/2) months following the end of the fiscal year in which the Termination Date occurs.

 

Notwithstanding any other provision contained herein, all payments made in connection with the Executive’s Disability shall be provided in a manner which is consistent with federal and state law.

 

 

 

 

(c)    For purposes of this Agreement, Disability shall mean the Executive’s inability, due to physical or mental incapacity, to substantially perform her duties and responsibilities under this Agreement for one hundred eighty (180) days out of any three hundred sixty-five (365) day period or one hundred twenty (120) consecutive days. Any question as to the existence of the Executive’s Disability as to which the Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to the Executive and the Company. If the Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and the Executive shall be final and conclusive for all purposes of this Agreement.

 

4.4    Notice of Termination . Any termination of the Executive’s employment hereunder by the Company or by the Executive during the Employment Term (other than termination pursuant to Section 4.3(a) on account of the Executive’s death) shall be communicated by written notice of termination (“ Notice of Termination ”) to the other party hereto in accordance with Section 25 . The Notice of Termination shall specify:

 

(a)    The termination provision of this Agreement relied upon;

 

(b)    To the extent applicable, the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated; and

 

(c)    The applicable Termination Date.

 

4.5    Termination Date . The Executive’s Termination Date shall be:

 

(a)    If the Executive’s employment hereunder terminates on account of the Executive’s death, the date of the Executive’s death;

 

(b)    If the Executive’s employment hereunder is terminated on account of the Executive’s Disability, the date that it is determined that the Executive has a Disability;

 

(c)    If the Company terminates the Executive’s employment hereunder for Cause, the date the Notice of Termination is delivered to the Executive;

 

(d)    If the Company terminates the Executive’s employment hereunder without Cause, the date specified in the Notice of Termination, which shall be no less than fifteen (15) days following the date on which the Notice of Termination is delivered; provided that, the Company shall have the option to provide the Executive with a lump sum payment equal to fifteen (15) days’ Base Salary in lieu of such notice, which shall be paid in a lump sum on the Executive’s Termination Date and for all purposes of this Agreement, the Executive’s Termination Date shall be the date on which such Notice of Termination is delivered;

 

(e)    If the Executive terminates her employment hereunder with or without Good Reason, the date specified in the Executive’s Notice of Termination, which shall be no less than fifteen (15) days following the date on which the Notice of Termination is delivered (or forty-five (45) days in the case of termination without Good Reason); provided that, the Company may waive all or any part of such notice period for no consideration by giving written notice to the Executive and for all purposes of this Agreement, the Executive’s Termination Date shall be the date determined by the Company; and

 

 

 

 

(f)    If the Executive’s employment hereunder terminates because either party provides notice of non-renewal pursuant to Section 1 , the Renewal Date immediately following the date on which the applicable party delivers notice of non-renewal.

 

Notwithstanding anything contained herein, the Termination Date shall not occur until the date on which the Executive incurs a “separation from service” within the meaning of Section 409A.

 

4.6    Resignation of All Other Positions . Upon termination of the Executive’s employment hereunder for any reason, the Executive shall be deemed to have resigned from all positions that the Executive holds as an officer or member of the board of directors (or a committee thereof) of the Company or any of its affiliates or any position that Executive holds with any other entity at the request or designation of the Company. To the extent appropriate, Executive shall execute and deliver such notices or other instruments as shall be required by give effect to the foregoing as may reasonably be requested by the Company.

 

4.7    Section 280G .  

 

(a)    If any of the payments or benefits received or to be received by the Executive (including, without limitation, any payment or benefits received in connection with the Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement, or otherwise) (all such payments collectively referred to herein as the “280G Payments” ) constitute “parachute payments” within the meaning of Section 280G of the Code and will be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax” ), the Company shall pay to the Executive, no later than the time such Excise Tax is required to be paid by the Executive or withheld by the Company, an additional amount (the “280G Gross-Up Payment” ) equal to the sum of the Excise Tax payable by the Executive, plus the amount necessary to put the Executive in the same after-tax position (taking into account any and all applicable federal, state and local excise, income or other taxes at the highest applicable rates on such 280G Payments and on any payments under this Section 4.7 or otherwise as if no Excise Tax had been imposed).

 

(b)    All calculations and determinations under this Section 4.7 shall be made by an independent accounting firm or independent tax counsel appointed by the Company (the “Tax Counsel” ) whose determinations shall be conclusive and binding on the Company and the Executive for all purposes. For purposes of making the calculations and determinations required by this Section 4.7 , the Tax Counsel may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Company and the Executive shall furnish the Tax Counsel with such information and documents as the Tax Counsel may reasonably request in order to make its determinations under this Section 4.7 . The Company shall bear all costs the Tax Counsel may reasonably incur in connection with its services.

 

 

 

 

5.     Cooperation . To facilitate the orderly conduct of the Company, the Executive agrees to cooperate, at the Company’s expense, with the Company’s reasonable requests for information or assistance related to (i) the time of her employment, (ii) any investigations (including internal investigations) and audits of the Company’s management’s current and past conduct and business and accounting practices and (iii) the Company’s defense of, or other participation in, any administrative, judicial, or other proceeding arising from any charge, complaint or other action which has been or may be filed relating to the period during which Executive was employed by the Company. The Company will promptly reimburse Executive for her reasonable, customary and documented out-of-pocket business expenses in connection with the performance of her duties under this Section 5 .

 

6.      Confidential Information . The Executive understands and acknowledges that during the Employment Term, she will have access to and learn about Confidential Information, as defined below.

 

6.1    Confidential Information Defined .  

 

(a)     Definition .

 

For purposes of this Agreement, “ Confidential Information ” includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or indirectly to: business processes, practices, methods, policies, plans, publications, documents, research, operations, services, strategies, techniques, agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade secrets, work-in-process, databases, manuals, records, articles, systems, material, sources of material, supplier information, vendor information, financial information, results, accounting information, accounting records, legal information, marketing information, advertising information, pricing information, credit information, design information, payroll information, staffing information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, graphics, drawings, sketches, market studies, sales information, revenue, costs, formulae, notes, communications, algorithms, product plans, designs, styles, models, ideas, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, customer lists, client information, client lists, manufacturing information, factory lists, distributor lists, and buyer lists of the Company or its businesses or any existing or prospective customer, supplier, investor or other associated third party, or of any other person or entity that has entrusted information to the Company in confidence.

 

The Executive understands that the above list is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used.

 

The Executive understands and agrees that Confidential Information includes information developed by her in the course of her employment by the Company as if the Company furnished the same Confidential Information to the Executive in the first instance. Confidential Information shall not include information that is generally available to and known by the public at the time of disclosure to the Executive; provided that, such disclosure is through no direct or indirect fault of the Executive or person(s) acting on the Executive’s behalf.

 

 

 

 

(b)     Company Creation and Use of Confidential Information .

 

The Executive understands and acknowledges that the Company has invested, and continues to invest, substantial time, money and specialized knowledge into developing its resources, creating a customer base, generating customer and potential customer lists, training its employees, and improving its offerings in the pharmaceutical industry. The Executive understands and acknowledges that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential Information provides the Company with a competitive advantage over others in the marketplace.

 

(c)     Disclosure and Use Restrictions .

 

The Executive agrees and covenants: (i) to treat all Confidential Information as strictly confidential; (ii) not to directly or indirectly disclose, publish, communicate or make available Confidential Information, or allow it to be disclosed, published, communicated or made available, in whole or part, to any entity or person whatsoever (including other employees of the Company) not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company and, in any event, not to anyone outside of the direct employ of the Company except as required in the performance of the Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent); and (iii) not to access or use any Confidential Information, and not to copy any documents, records, files, media or other resources containing any Confidential Information, or remove any such documents, records, files, media or other resources from the premises or control of the Company, except as required in the performance of the Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent). Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency. The Executive shall, to the extent permitted by applicable law, promptly provide written notice of any such order to the Board.

 

The Executive understands and acknowledges that her obligations under this Agreement with regard to any particular Confidential Information shall commence immediately upon the Executive first having access to such Confidential Information (whether before or after she begins employment by the Company) and shall continue during and after her employment by the Company until such time as such Confidential Information has become public knowledge other than as a result of the Executive’s breach of this Agreement or breach by those acting in concert with the Executive or on the Executive’s behalf.

 

7.     Restrictive Covenants .

 

7.1    Acknowledgment . The Executive understands that the nature of the Executive’s position gives her access to and knowledge of Confidential Information and places her in a position of trust and confidence with the Company. The Executive understands and acknowledges that the intellectual or artistic services she provides to the Company are unique, special or extraordinary.

 

 

 

 

The Executive further understands and acknowledges that the Company’s ability to reserve these for the exclusive knowledge and use of the Company is of great competitive importance and commercial value to the Company, and that improper use or disclosure by the Executive is likely to result in unfair or unlawful competitive activity.

 

7.2    Non-competition . Because of the Company’s legitimate business interest as described herein and the good and valuable consideration offered to the Executive, during the Employment Term and for the eighteen (18) months, to run consecutively, beginning on the last day of the Executive’s employment with the Company, for any reason or no reason and whether employment is terminated at the option of the Executive or the Company, the Executive agrees and covenants not to engage in Prohibited Activity.

 

For purposes of this Section 7 , “ Prohibited Activity ” is activity in which the Executive participates, directly or indirectly, as an employee, employer, owner, operator, manager, advisor, consultant, agent, employee, partner, director, or officer, or any other similar capacity to an entity providing goods or services competitive with those offered by the Company during the Employment Term.

 

Nothing herein shall prohibit the Executive from purchasing or owning less than five percent (5%) of the publicly traded securities of any corporation, provided that such ownership represents a passive investment and that the Executive is not a controlling person of, or a member of a group that controls, such corporation.

 

This Section 7 does not, in any way, restrict or impede the Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation or order. The Executive shall, to the extent permitted by applicable law, promptly provide written notice of any such order to the Board.

 

7.3    Non-solicitation of Employees . The Executive agrees and covenants not to directly or indirectly solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of any employee of the Company during two (2) years, to run consecutively, beginning on the last day of the Executive’s employment with the Company.

 

7.4    Non-solicitation of Customers . The Executive understands and acknowledges that because of the Executive’s experience with and relationship to the Company, she will have access to and learn about much or all of the Company’s customer information. “ Customer Information ” includes, but is not limited to, names, phone numbers, addresses, e-mail addresses, order history, order preferences, chain of command, pricing information and other information identifying facts and circumstances specific to the customer and relevant to sales.

 

The Executive understands and acknowledges that loss of this customer relationship and/or goodwill will cause significant and irreparable harm.

 

The Executive agrees and covenants, during two (2) years, to run consecutively, beginning on the last day of the Executive’s employment with the Company, not to directly or indirectly solicit, contact (including but not limited to e-mail, regular mail, express mail, telephone, fax, and instant message), attempt to contact or meet with the Company’s current, former or prospective customers for purposes of offering or accepting goods or services competitive with those offered by the Company during the Employment Term.

 

 

 

 

8.     Non-disparagement . The Executive agrees and covenants that she will not at any time make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments or statements concerning the Company or its businesses, or any of its employees, officers, and existing and prospective customers, suppliers, investors and other associated third parties.

 

This Section 8 does not, in any way, restrict or impede the Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation or order. The Executive shall, to the extent permitted by applicable law, promptly provide written notice of any such order to the Board.

 

9.     Acknowledgement . The Executive acknowledges and agrees that the services to be rendered by her to the Company are of a special and unique character; that the Executive will obtain knowledge and skill relevant to the Company’s industry, methods of doing business and marketing strategies by virtue of the Executive’s employment; and that the restrictive covenants and other terms and conditions of this Agreement are reasonable and reasonably necessary to protect the legitimate business interest of the Company.

 

The Executive further acknowledges that the amount of her compensation reflects, in part, her obligations and the Company’s rights under Sections 6 , 7 , and 8 of this Agreement; that she has no expectation of any additional compensation, royalties or other payment of any kind not otherwise referenced herein in connection herewith; that she will not be subject to undue hardship by reason of her full compliance with the terms and conditions of Sections 6 , 7 , and 8 of this Agreement or the Company’s enforcement thereof.

 

10.   Remedies . In the event of a breach or threatened breach by the Executive of Sections 6 , 7 , and 8 of this Agreement, the Executive hereby consents and agrees that the Company shall be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages or other available forms of relief.

 

11.   Arbitration . Any dispute, controversy or claim arising out of or related to this Agreement or any breach of this Agreement shall be submitted to and decided by binding arbitration. Arbitration shall be administered exclusively by American Arbitration Association and shall be conducted consistent with the rules, regulations and requirements thereof as well as any requirements imposed by state law. The arbitration shall be held in the City of Morristown, New Jersey, or such other place as may be agreed upon at the time by the parties to the arbitration. The arbitrator(s) shall, in their award, allocate between the parties the costs of arbitration, which shall include reasonable attorneys’ fees of the parties, as well as the arbitrators’ fees and expenses, in such proportions as the arbitrator(s) deem just. Any arbitral award determination shall be final and binding upon the Parties.

 

 

 

 

12.   Proprietary Rights .

 

12.1  Work Product . The Executive acknowledges and agrees that all writings, works of authorship, technology, inventions, discoveries, ideas and other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived or reduced to practice by the Executive individually or jointly with others during the period of, and related to, her employment by the Company (regardless of when or where the Work Product is prepared or whose equipment or other resources is used in preparing the same) and all printed, physical and electronic copies, all improvements, rights and claims related to the foregoing, and other tangible embodiments thereof (collectively, “ Work Product ”), as well as any and all rights in and to copyrights, trade secrets, trademarks (and related goodwill), patents and other intellectual property rights therein arising in any jurisdiction throughout the world and all related rights of priority under international conventions with respect thereto, including all pending and future applications and registrations therefor, and continuations, divisions, continuations-in-part, reissues, extensions and renewals thereof (collectively, “ Intellectual Property Rights ”), shall be the sole and exclusive property of the Company.

 

For purposes of this Agreement, Work Product includes, but is not limited to, Company information, including plans, publications, research, strategies, techniques, agreements, documents, contracts, terms of agreements, negotiations, know-how, work in process, databases, manuals, results, developments, reports, graphics, drawings, sketches, market studies, formulae, notes, communications, algorithms, product plans, product designs, styles, models, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, client information, customer lists, client lists, manufacturing information, marketing information, advertising information and sales information.

 

12.2  Work Made for Hire; Assignment . The Executive acknowledges that, by reason of being employed by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, the Executive hereby irrevocably assigns to the Company, for no additional consideration, the Executive’s entire right, title and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim and recover for all past, present and future infringement, misappropriation or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company’s rights, title or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company would have had in the absence of this Agreement.

 

 

 

 

12.3  Further Assurances; Power of Attorney . During and after her employment, the Executive agrees to reasonably cooperate with the Company to (a) apply for, obtain, perfect and transfer to the Company the Work Product as well as an Intellectual Property Right in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, executing and delivering to the Company any and all applications, oaths, declarations, affidavits, waivers, assignments and other documents and instruments as shall be requested by the Company. The Executive hereby irrevocably grants the Company power of attorney to execute and deliver any such documents on the Executive’s behalf in her name and to do all other lawfully permitted acts to transfer the Work Product to the Company and further the transfer, issuance, prosecution and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if the Executive does not promptly cooperate with the Company’s request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be effected by the Executive’s subsequent incapacity.

 

12.4  No License . The Executive understands that this Agreement does not, and shall not be construed to, grant the Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software or other tools made available to her by the Company.

 

13.   Security .

 

13.1  Security and Access . The Executive agrees and covenants (a) to comply with all Company security policies and procedures as in force from time to time including without limitation those regarding computer equipment, telephone systems, voicemail systems, facilities access, monitoring, key cards, access codes, Company intranet, internet, social media and instant messaging systems, computer systems, e-mail systems, computer networks, document storage systems, software, data security, encryption, firewalls, passwords and any and all other Company facilities, IT resources and communication technologies (“ Facilities Information Technology and Access Resources ”); (b) not to access or use any Facilities and Information Technology Resources except as authorized by the Company; and (c) not to access or use any Facilities and Information Technology Resources in any manner after the termination of the Executive’s employment by the Company, whether termination is voluntary or involuntary. The Executive agrees to notify the Company promptly in the event she learns of any violation of the foregoing by others, or of any other misappropriation or unauthorized access, use, reproduction or reverse engineering of, or tampering with any Facilities and Information Technology Access Resources or other Company property or materials by others.

 

13.2  Exit Obligations . Upon (a) voluntary or involuntary termination of the Executive’s employment or (b) the Company’s request at any time during the Executive’s employment, the Executive shall (i) provide or return to the Company any and all Company property, including keys, key cards, access cards, identification cards, security devices, employer credit cards, network access devices, computers, cell phones, smartphones, PDAs, fax machines, equipment, speakers, webcams, manuals, reports, files, books, compilations, work product, e-mail messages, recordings, thumb drives or other removable information storage devices, hard drives, and data and all Company documents and materials belonging to the Company and stored in any fashion, including but not limited to those that constitute or contain any Confidential Information or Work Product, that are in the possession or control of the Executive, whether they were provided to the Executive by the Company or any of its business associates or created by the Executive in connection with her employment by the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in the Executive’s possession or control, including those stored on any non-Company devices, networks, storage locations and media in the Executive’s possession or control. For clarification, regardless of the circumstances of the termination, the Executive shall be entitled to retain, free and clear of any obligation to the Company, the cell phone, laptop computer, and desktop computer used by the Executive while employed by the Company.

 

 

 

 

14.   Publicity . The Executive hereby irrevocably consents, subject to a right of review and approval which approval shall not be unreasonably withheld, to any and all uses and displays, by the Company and its agents, representatives and licensees, of the Executive’s name, voice, likeness, image, appearance and biographical information in, on or in connection with any pictures, photographs, audio and video recordings, digital images, websites, television programs and advertising, other advertising and publicity, sales and marketing brochures, books, magazines, other publications, CDs, DVDs, tapes and all other printed and electronic forms and media throughout the world, at any time during, or solely with respect to uses and displays in practice during her period of employment, after, the period of her employment by the Company, for all legitimate commercial and business purposes of the Company (“ Permitted Uses ”), without further consent from or royalty, payment or other compensation to the Executive. The Executive hereby forever waives and releases the Company and its directors, officers, employees and agents from any and all claims, actions, damages, losses, costs, expenses and liability of any kind, arising under any legal or equitable theory whatsoever at any time during or after the period of her employment by the Company, arising directly or indirectly from the Company’s and its agents’, representatives’ and licensees’ exercise of their rights in connection with any Permitted Uses.

 

15.   Governing Law: Jurisdiction and Venue . This Agreement, for all purposes, shall be construed in accordance with the laws of the State of Delaware without regard to conflicts of law principles. Any action or proceeding by either of the parties to enforce this Agreement shall be brought only in a state or federal court located in the State of Delaware. The parties hereby irrevocably submit to the exclusive jurisdiction of such courts and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.

 

16.   Entire Agreement . Unless specifically provided herein, this Agreement contains all of the understandings and representations between the Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter. The parties mutually agree that the Agreement can be specifically enforced in court and can be cited as evidence in legal proceedings alleging breach of the Agreement.

 

17.   Modification and Waiver . No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by the Executive and the Company. No waiver by either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the other party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either of the parties in exercising any right, power or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.

 

 

 

 

18.   Severability . Should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified, or if any portion of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth in this Agreement.

 

The parties further agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law.

 

The parties expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had not been set forth herein.

 

19.   Captions . Captions and headings of the sections and paragraphs of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any section or paragraph.

 

20.   Counterparts . This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.

 

21.   Tolling . Should the Executive violate any of the terms of the restrictive covenant obligations articulated herein, the obligation at issue will run from the first date on which the Executive ceases to be in violation of such obligation.

 

22.   Section 409A . This Agreement is intended to comply with Section 409A or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A.

 

 

 

 

Notwithstanding any other provision of this Agreement, if any payment or benefit provided to the Executive in connection with her termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and the Executive is determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the Termination Date (the “ Specified Employee Payment Date ”). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date shall be paid to the Executive in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.

 

23.   Notification to Subsequent Employer . When the Executive’s employment with the Company terminates, the Executive agrees to notify any subsequent employer of the restrictive covenants section contained in this Agreement. In addition, the Executive authorizes the Company to provide a copy of the restrictive covenants section of this Agreement to third parties, including but not limited to, the Executive’s subsequent, anticipated or possible future employer.

 

24.   Successors and Assigns . This Agreement is personal to the Executive and shall not be assigned by the Executive. Any purported assignment by the Executive shall be null and void from the initial date of the purported assignment. The Company may assign this Agreement to any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company. This Agreement shall inure to the benefit of the Company and permitted successors and assigns.

 

25.   Notice . Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight carrier to the parties at the addresses set forth below (or such other addresses as specified by the parties by like notice):

 

If to the Company:

 

PLx Pharma Inc.

8285 El Rio, Suite 130

Houston, TX 77054

 

If to the Executive:

 

Natasha Giordano

9 Maria Drive

Sparta NJ 07871

 

26.   Representations of the Executive . The Executive represents and warrants to the Company that:

 

26.1 The Executive’s acceptance of employment with the Company and the performance of her duties hereunder will not conflict with or result in a violation of, a breach of, or a default under any contract, agreement or understanding to which she is a party or is otherwise bound.

 

 

 

 

26.2 The Executive’s acceptance of employment with the Company and the performance of her duties hereunder will not violate any non-solicitation, non-competition or other similar covenant or agreement of a prior employer.

 

27.  Withholding . The Company shall have the right to withhold from any amount payable hereunder any Federal, state and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.

 

28.  Survival . Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.

 

29.  Acknowledgment of Full Understanding . THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT she HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT she HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF her CHOICE BEFORE SIGNING THIS AGREEMENT.

 

[SIGNATURE PAGE FOLLOWS]

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

  PLX PHARMA INC.
   
  By:    
    Michael J. Valentino,
    Executive Chairman of the Board

 

  EXECUTIVE    
       
  Signature:    
  Print Name: Natasha Giordano  

 

 

 

 

EXHIBIT A

 

AWARD AGREEMENT

 

[Attached]

 

 

 

Exhibit 10.2

 

FINAL VERSION

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “ Agreement ”) is made and entered into as of May 13, 2016, by and between David Jorden (the “ Executive ”) and PLx Pharma Inc., a Delaware corporation (the “ Company ”), and amends and restates in its entirety that certain Employment Agreement between Executive and the Company dated September 25, 2015.

 

WHEREAS, the Company desires to employ the Executive on the terms and conditions set forth herein; and

 

WHEREAS, the Executive desires to be employed by the Company on such terms and conditions.

 

NOW, THEREFORE, in consideration of the mutual covenants, promises and obligations set forth herein, the parties agree as follows:

 

1.     Term . The Executive’s employment hereunder shall be effective as of April 1, 2016 (the “ Effective Date ”) and shall continue until the first anniversary thereof, unless terminated earlier pursuant to Section 5 of this Agreement; provided that, on such first anniversary of the Effective Date and each annual anniversary thereafter (such date and each annual anniversary thereof, a “ Renewal Date ”), the Agreement shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of one year, unless either party provides written notice of its intention not to extend the term of the Agreement at least 90 days’ prior to the applicable Renewal Date. The period during which the Executive is employed by the Company hereunder is hereinafter referred to as the “ Employment Term. ”

 

2.     Position and Duties .

 

2.1     Position . During the Employment Term, the Executive shall serve as the Acting Chief Financial Officer of the Company, reporting directly to the President and Chief Executive Officer and, as appropriate, Board of Directors of the Company (the “ Board ”). For purposes of this Agreement, it is expressly recognized that the Board may delegate its authority in a particular matter to one or more committees of the Board, including but not limited to the Audit Committee, as provided by the governing documents of the Company. In such position, the Executive shall have such duties, authority and responsibility as are consistent with the Executive’s position.

 

2.2     Duties . During the Employment Term, the Executive shall devote an appropriate amount of his business time and attention to the performance of the Executive’s duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the performance of such services either directly or indirectly without the prior written consent of the Board; provided, however, that the Executive’s current responsibilities as part-time Acting Chief Executive Officer and Acting Chief Financial Officer of Nuo Therapeutics, Inc. and part-time Chief Executive Officer of Nanospectra Biosciences, Inc. are exempted from this requirement. Notwithstanding the foregoing, the Executive will be permitted to (a) act or serve as a director, trustee, committee member or principal of any type of business, civic or charitable organization and (b) purchase or own less than three percent (3) of the publicly traded securities of any corporation; provided that such ownership represents a passive investment and that the Executive is not a controlling person of, or a member of a group that controls, such corporation; provided further that the activities described in clauses (a) and (b) do not interfere in any material way with the performance of the Executive’s duties and responsibilities to the Company as provided hereunder, including, but not limited to, the obligations set forth in Section 2 hereof.

 

 

 

 

3.     Compensation .

 

3.1      Base Salary .

 

(a)       The Company shall pay the Executive an annual rate of base salary of $150,000. Such base salary shall be paid consistently with the Company’s then current pay practices. The Executive’s base salary shall be reviewed at least annually by the Board and the Board may, but shall not be required to, increase (but not decrease) the base salary during the Employment Term. The Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as “ Base Salary ,” with 1 / 12 of such amount referred to as the “ Monthly Base Salary .”

 

(b)      Until such time as the Company consummates a Qualified Financing (as defined in Section 3.2(a) below) the monthly gross salary paid to the Executive shall be $4,500 (the “ Initial Monthly Base Salary ”). An aggregate amount (the “ Catch-Up Amount ”) equal to the product of (i) the number of months during which the Initial Monthly Base Salary was paid, multiplied by (ii) the difference between the Initial Monthly Base Salary and the Monthly Base Salary, shall be paid upon the closing of a Qualified Financing. It is understood and agreed that (a) the payment of any Catch-Up Amount prior to the closing of a Qualified Financing would jeopardize the ability of the Company to continue as a going concern, and (b) that, absent a determination to the contrary by the Board in its sole and absolute discretion, the earliest date on which the payment of any Catch- Up Amount can be made without such effect would be as soon as practicable following the closing of a Qualified Financing.

 

3.2      Discretionary Bonus .

 

(a)       Upon the closing by the Company of a Qualified Financing, the Company shall pay the Executive a one-time bonus of up to $125,000 (the “ Discretionary Bonus ”), subject to review and approval by the Board. For the purposes of this Agreement, a “ Qualified Financing ” means one or a series of related debt or equity financing transactions yielding aggregate gross proceeds to the Company of at least $10,000,000.

 

(b)      If the Company completes a financing of less than $10,000,000, the Discretionary Bonus shall be determined at the discretion of the Board.

 

3.3      Annual Bonus . The Executive shall be eligible to receive a bonus pursuant to any bonus plan established by the Board, The Board in its sole discretion shall determine the actual amount of any such bonus and the date upon which it is payable by the Company. Any such bonuses shall be subject to all applicable withholding requirements.

 

2

 

 

3.4      Equity Awards . During the Employment Term, the Executive shall be eligible to participate in the Company’s 2015 Omnibus Incentive Plan or any successor plan, subject to the terms of the 2015 Omnibus Incentive Plan or successor plan, as determined by the Board or the Compensation Committee, in its discretion. In conjunction with Executive’s entrance into this Agreement, Executive has been granted certain equity awards pursuant to the terms of the Award Agreement attached hereto as Exhibit A .

 

3.5      Fringe Benefits and Perquisites . During the Employment Term, the Executive shall be entitled to fringe benefits and perquisites consistent with the practices of the Company, and to the extent the Company provides similar benefits or perquisites (or both) to similarly situated executives of the Company.

 

3.6      Employee Benefits . During the Employment Term, the Executive shall be entitled to participate in all employee benefit plans, practices and programs maintained by the Company and generally available to senior executives of the Company, as in effect from time to time (collectively, “ Employee Benefit Plans ”), to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plan and applicable law.

 

3.7      Business Expenses . The Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred by the Executive in connection with the performance of the Executive’s duties hereunder, subject to compliance with the Company’s expense reimbursement policies and procedures.

 

3.8      Indemnification . The Executive shall be indemnified and advancement of expenses by the Company as provided in Company’s Bylaws and Certificate of Incorporation. The obligations under this paragraph shall survive any termination of the Employment Term.

 

3.9      Clawback Provisions . Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation or stock exchange listing requirement (including, without limitation, any changes required to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act), will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).

 

4.     Termination of Employment . The Employment Term and the Executive’s employment hereunder may be terminated by either the Company or the Executive at any time and for any reason; provided that, unless otherwise provided herein, either party shall be required to give the other party at least 15 days advance written notice of any termination of the Executive’s employment. Upon termination of the Executive’s employment during the Employment Term, the Executive shall be entitled to the compensation and benefits described in this Section 4 and shall have no further rights to any compensation or any other benefits from the Company or any of its affiliates.

 

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4.1      Termination For Cause or Without Good Reason .

 

(a)      The Executive’s employment hereunder may be terminated by the Company for Cause or by the Executive without Good Reason. If the Executive’s employment is terminated by the Company for Cause or by the Executive without Good Reason, the Executive shall be entitled to receive:

 

(i) any accrued but unpaid Base Salary, which shall be paid in accordance with the Company’s customary payroll procedures;

 

(ii) any earned but unpaid Annual Bonus with respect to any completed fiscal year immediately preceding the Termination Date, which shall be paid on the otherwise applicable payment date; provided that, if the Executive’s employment is terminated by the Company for Cause, then any such accrued but unpaid Annual Bonus shall be forfeited;

 

(iii) reimbursement for unreimbursed business expenses properly incurred by the Executive, which shall be subject to and paid in accordance with the Company’s expense reimbursement policy; and

 

(iv) such employee benefits (including equity compensation), if any, as to which the Executive may be entitled under the Company’s employee benefit plans as of the Termination Date; provided that, in no event shall the Executive be entitled to any payments in the nature of severance or termination payments except as specifically provided herein.

 

Items 4.1(a)(i) through 4.1(a)(iv) are referred to herein collectively as the “ Accrued Amounts ”.

 

(b)      For purposes of this Agreement, “ Cause ” shall mean:

 

(i) the Executive’s willful failure to perform his duties (other than any such failure resulting from incapacity due to physical or mental illness), and such failure has not been cured after a period of thirty (30) days’ notice from the Company;

 

(ii) the Executive’s willful failure to comply with any valid and legal directive of the Board;

 

(iii) the Executive’s willful engagement in dishonesty, illegal conduct or gross misconduct, which is, in each case, materially injurious to the Company or its affiliates;

 

(iv) the Executive’s embezzlement, misappropriation or fraud, whether or not related to the Executive’s employment with the Company;

 

(v) the Executive’s conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude;

 

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(vi) the Executive’s willful malfeasance or willful misconduct in connection with the Executive’s duties hereunder or any act or omission which is materially injurious to the financial condition or business reputation of the Company;

 

(vii) the Executive’s willful unauthorized disclosure of Confidential Information (as defined below);

 

(viii) the Executive’s material breach of any material obligation under this Agreement or any other written agreement between the Executive and the Company, which breach, if curable, remains uncured for a period of thirty (30) days after receipt by the Executive of written notice from the Company of such breach, which notice shall contain the specific reasonable cure requested by the Company.

 

For purposes of this provision, no act or failure to act on the part of the Executive shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company.

 

(c)      For purposes of this Agreement, “ Good Reason ” shall mean the occurrence of any of the following, in each case during the Employment Term without the Executive’s written consent:

 

(i) the Company employs another person as a full-time Chief Financial Officer;

 

(ii) a material reduction in the Executive’s Base Salary;

 

(iii) any material breach by the Company of any material provision of this Agreement, which breach, if curable, remains uncured for a period of thirty (30) days after receipt by the Company of written notice from the Executive of such breach, which notice shall contain the specific reasonable cure requested by the Executive;

 

(iv) a material, adverse change in the Executive’s title, authority, duties or responsibilities (other than temporarily while the Executive is physically or mentally incapacitated or as required by applicable law) taking into account the Company’s size, status as a public company and capitalization as of the date of this Agreement; or

 

(v) a relocation of the Company’s corporate offices outside of Houston, TX with a requirement that the Executive perform his duties in the new location;

 

(vi) a Change in Control of the Company in which this Agreement is not assumed.

 

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(d)     “ Change in Control ” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the effective date of any following events:

 

(i) Acquisition of Stock by Third Party . Any Person is or becomes the Beneficial Owner (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and any rules and regulations promulgated thereunder), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company’s then outstanding shares of capital stock;

 

(ii) Change in Board . During any one-year period (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board of Directors of Company (the “ Board ”), and any new director (other than a director designated by a person who has effected a transaction described in subparagraph (i) of this definition without the consent of the Board) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a least a majority of the members of the Board;

 

(iii) Corporate Transactions . The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than a majority of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation which such shares give the holder(s) thereof the power to elect at least a majority of the board or other governing body of such surviving entity;

 

(iv) Liquidation . The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; or

 

(v) Other Events . There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirement.

 

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The Executive cannot terminate his employment for Good Reason unless he has provided written notice to the Company of the existence of the circumstances providing grounds for termination for Good Reason within sixty (60) days of the initial existence of such grounds and the Company has had at least thirty (30) days from the date on which such notice is provided to cure such circumstances. If the Executive does not terminate his employment for Good Reason within one hundred twenty (120) days after the first occurrence of the applicable grounds, then the Executive will be deemed to have waived his right to terminate for Good Reason with respect to such grounds.

 

4.2      Termination Without Cause or for Good Reason . The Employment Term and the Executive’s employment hereunder may be terminated by the Executive for Good Reason or by the Company without Cause. In the event of such termination, the Executive shall be entitled to receive the Accrued Amounts and subject to the Executive’s compliance with Sections 5 , 6 , 7 , and 8 of this Agreement and his execution of a release of claims in favor of the Company, its affiliates and their respective officers and directors in a form provided by the Company (the “ Release ”) and such Release becoming effective within thirty (30) days following the Termination Date (such 30- day period, the “ Release Execution Period ”), the Executive shall be entitled to receive the following:

 

(a)      continued Base Salary for one year following the Termination Date payable in equal installments in accordance with the Company’s normal payroll practices, but no less frequently than monthly, which shall commence within thirty (30) days following the Termination Date;

 

(b)      any Annual Bonus earned for a previously completed fiscal year but unpaid as of the Termination Date;

 

(c)      a payment equal to the product of (i) the Annual Bonus, if any, that the Executive would have earned for the fiscal year in which the Date of Termination occurs based on achievement of the applicable performance goals for such year and (ii) a fraction, the numerator of which is the number of days the Executive was employed by the Company during the year of termination and the denominator of which is the number of days in such year (the “ Pro-Rata Bonus ”). This amount shall be paid on the date that annual bonuses are paid to similarly situated executives;

 

(d)      such employee benefits (including equity compensation), if any, as to which the Executive may be entitled under the Company’s employee benefit plans as of the Termination Date.

 

4.3      Death or Disability .

 

(a)      The Executive’s employment hereunder shall terminate automatically upon the Executive’s death during the Employment Term, and the Company may terminate the Executive’s employment on account of the Executive’s Disability.

 

(b)      If the Executive’s employment is terminated during the Employment Term on account of the Executive’s death or Disability, the Executive (or the Executive’s estate and/or beneficiaries, as the case may be) shall be entitled to receive the following:

 

(i) the Accrued Amounts; and

 

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(ii) a lump sum payment equal to the Pro-Rata Bonus/Annual Bonus, if any, that the Executive would have earned for the fiscal year in which the Termination Date occurs based on the achievement of applicable performance goals for such year, which shall be payable on the date that annual bonuses are paid to the Company’s similarly situated executives, but in no event later than two-and-a- half (2 1/2) months following the end of the fiscal year in which the Termination Date occurs.

 

Notwithstanding any other provision contained herein, all payments made in connection with the Executive’s Disability shall be provided in a manner which is consistent with federal and state law.

 

(c)      For purposes of this Agreement, Disability shall mean the Executive’s inability, due to physical or mental incapacity, to substantially perform his duties and responsibilities under this Agreement for one hundred eighty (180) days out of any three hundred sixty-five (365) day period or one hundred twenty (120) consecutive days. Any question as to the existence of the Executive’s Disability as to which the Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to the Executive and the Company. If the Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and the Executive shall be final and conclusive for all purposes of this Agreement.

 

4.4      Notice of Termination . Any termination of the Executive’s employment hereunder by the Company or by the Executive during the Employment Term (other than termination pursuant to Section 4.3(a) on account of the Executive’s death) shall be communicated by written notice of termination (“ Notice of Termination ”) to the other party hereto in accordance with Section 25 . The Notice of Termination shall specify:

 

(a)      The termination provision of this Agreement relied upon;

 

(b)      To the extent applicable, the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated; and

 

(c)      The applicable Termination Date.

 

4.5      Termination Date . The Executive’s Termination Date shall be:

 

(a)      If the Executive’s employment hereunder terminates on account of the Executive’s death, the date of the Executive’s death;

 

(b)      If the Executive’s employment hereunder is terminated on account of the Executive’s Disability, the date that it is determined that the Executive has a Disability;

 

(c)      If the Company terminates the Executive’s employment hereunder for Cause, the date the Notice of Termination is delivered to the Executive;

 

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(d)      If the Company terminates the Executive’s employment hereunder without Cause, the date specified in the Notice of Termination, which shall be no less than fifteen (15) days following the date on which the Notice of Termination is delivered; provided that, the Company shall have the option to provide the Executive with a lump sum payment equal to fifteen (15) days’ Base Salary in lieu of such notice, which shall be paid in a lump sum on the Executive’s Termination Date and for all purposes of this Agreement, the Executive’s Termination Date shall be the date on which such Notice of Termination is delivered;

 

(e)      If the Executive terminates his employment hereunder with or without Good Reason, the date specified in the Executive’s Notice of Termination, which shall be no less than fifteen (15) days following the date on which the Notice of Termination is delivered; provided that, the Company may waive all or any part of the fifteen (15) day notice period for no consideration by giving written notice to the Executive and for all purposes of this Agreement, the Executive’s Termination Date shall be the date determined by the Company; and

 

(f)       If the Executive’s employment hereunder terminates because either party provides notice of non-renewal pursuant to Section 1 , the Renewal Date immediately following the date on which the applicable party delivers notice of non-renewal.

 

Notwithstanding anything contained herein, the Termination Date shall not occur until the date on which the Executive incurs a “separation from service” within the meaning of Section 409A.

 

4.6      Resignation of All Other Positions . Upon termination of the Executive’s employment hereunder for any reason, the Executive shall be deemed to have resigned from all positions that the Executive holds as an officer or member of the board of directors (or a committee thereof) of the Company or any of its affiliates or any position that Executive holds with any other entity at the request or designation of the Company. To the extent appropriate, Executive shall execute and deliver such notices or other instruments as shall be required by give effect to the foregoing as may reasonably be requested by the Company.

 

4.7      Section 280G .

 

(a)      If any of the payments or benefits received or to be received by the Executive (including, without limitation, any payment or benefits received in connection with the Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement, or otherwise) (all such payments collectively referred to herein as the “280G Payments” ) constitute “parachute payments” within the meaning of Section 280G of the Code and will be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax” ), the Company shall pay to the Executive, no later than the time such Excise Tax is required to be paid by the Executive or withheld by the Company, an additional amount (the “280G Gross- Up Payment” ) equal to the sum of the Excise Tax payable by the Executive, plus the amount necessary to put the Executive in the same after-tax position (taking into account any and all applicable federal, state and local excise, income or other taxes at the highest applicable rates on such 280G Payments and on any payments under this Section 5.7 or otherwise as if no Excise Tax had been imposed).

 

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(b)      All calculations and determinations under this Section 5.7 shall be made by an independent accounting firm or independent tax counsel appointed by the Company (the “Tax Counsel” ) whose determinations shall be conclusive and binding on the Company and the Executive for all purposes. For purposes of making the calculations and determinations required by this Section 5.7 , the Tax Counsel may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Company and the Executive shall furnish the Tax Counsel with such information and documents as the Tax Counsel may reasonably request in order to make its determinations under this Section 5.7 . The Company shall bear all costs the Tax Counsel may reasonably incur in connection with its services.

 

5.     Cooperation . To facilitate the orderly conduct of the Company, the Executive agrees to cooperate, at no charge, with the Company’s reasonable requests for information or assistance related to (i) the time of his employment, (ii) any investigations (including internal investigations) and audits of the Company’s management’s current and past conduct and business and accounting practices and (iii) the Company’s defence of, or other participation in, any administrative, judicial, or other proceeding arising from any charge, complaint or other action which has been or may be filed relating to the period during which Executive was employed by the Company. The Company will promptly reimburse Executive for his reasonable, customary and documented out-of-pocket business expenses in connection with the performance of his duties under this Section 5 .

 

6.     Confidential Information . The Executive understands and acknowledges that during the Employment Term, he will have access to and learn about Confidential Information, as defined below.

 

6.1      Confidential Information Defined .

 

(a)       Definition .

 

For purposes of this Agreement, “ Confidential Information ” includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or indirectly to: business processes, practices, methods, policies, plans, publications, documents, research, operations, services, strategies, techniques, agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade secrets, work-in-process, databases, manuals, records, articles, systems, material, sources of material, supplier information, vendor information, financial information, results, accounting information, accounting records, legal information, marketing information, advertising information, pricing information, credit information, design information, payroll information, staffing information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, graphics, drawings, sketches, market studies, sales information, revenue, costs, formulae, notes, communications, algorithms, product plans, designs, styles, models, ideas, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, customer lists, client information, client lists, manufacturing information, factory lists, distributor lists, and buyer lists of the Company or its businesses or any existing or prospective customer, supplier, investor or other associated third party, or of any other person or entity that has entrusted information to the Company in confidence.

 

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The Executive understands that the above list is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used.

 

The Executive understands and agrees that Confidential Information includes information developed by him in the course of his employment by the Company as if the Company furnished the same Confidential Information to the Executive in the first instance. Confidential Information shall not include information that is generally available to and known by the public at the time of disclosure to the Executive; provided that, such disclosure is through no direct or indirect fault of the Executive or person(s) acting on the Executive’s behalf.

 

(b)       Company Creation and Use of Confidential Information .

 

The Executive understands and acknowledges that the Company has invested, and continues to invest, substantial time, money and specialized knowledge into developing its resources, creating a customer base, generating customer and potential customer lists, training its employees, and improving its offerings in the pharmaceutical industry. The Executive understands and acknowledges that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential Information provides the Company with a competitive advantage over others in the marketplace.

 

(c)       Disclosure and Use Restrictions .

 

The Executive agrees and covenants: (i) to treat all Confidential Information as strictly confidential; (ii) not to directly or indirectly disclose, publish, communicate or make available Confidential Information, or allow it to be disclosed, published, communicated or made available, in whole or part, to any entity or person whatsoever (including other employees of the Company) not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company and, in any event, not to anyone outside of the direct employ of the Company except as required in the performance of the Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent); and (iii) not to access or use any Confidential Information, and not to copy any documents, records, files, media or other resources containing any Confidential Information, or remove any such documents, records, files, media or other resources from the premises or control of the Company, except as required in the performance of the Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent). Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency. The Executive shall, to the extent permitted by applicable law, promptly provide written notice of any such order to the Board.

 

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The Executive understands and acknowledges that his obligations under this Agreement with regard to any particular Confidential Information shall commence immediately upon the Executive first having access to such Confidential Information (whether before or after he begins employment by the Company) and shall continue during and after his employment by the Company until such time as such Confidential Information has become public knowledge other than as a result of the Executive’s breach of this Agreement or breach by those acting in concert with the Executive or on the Executive’s behalf.

 

7.     Restrictive Covenants .

 

7.1      Acknowledgment . The Executive understands that the nature of the Executive’s position gives him access to and knowledge of Confidential Information and places him in a position of trust and confidence with the Company. The Executive understands and acknowledges that the intellectual or artistic services he provides to the Company are unique, special or extraordinary.

 

The Executive further understands and acknowledges that the Company’s ability to reserve these for the exclusive knowledge and use of the Company is of great competitive importance and commercial value to the Company, and that improper use or disclosure by the Executive is likely to result in unfair or unlawful competitive activity.

 

7.2      Non-competition . Because of the Company’s legitimate business interest as described herein and the good and valuable consideration offered to the Executive, during the Employment Term and for the two (2) years, to run consecutively, beginning on the last day of the Executive’s employment with the Company, for any reason or no reason and whether employment is terminated at the option of the Executive or the Company, the Executive agrees and covenants not to engage in Prohibited Activity.

 

For purposes of this Section 7 , “ Prohibited Activity ” is activity in which the Executive participates, directly or indirectly, as an employee, employer, owner, operator, manager, advisor, consultant, agent, employee, partner, director, or officer, or any other similar capacity to an entity providing goods or services competitive with those offered by the Company.

 

Nothing herein shall prohibit the Executive from purchasing or owning less than five percent (5%) of the publicly traded securities of any corporation, provided that such ownership represents a passive investment and that the Executive is not a controlling person of, or a member of a group that controls, such corporation.

 

This Section 7 does not, in any way, restrict or impede the Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation or order. The Executive shall, to the extent permitted by applicable law, promptly provide written notice of any such order to the Board.

 

7.3      Non-solicitation of Employees . The Executive agrees and covenants not to directly or indirectly solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of any employee of the Company during two (2) years, to run consecutively, beginning on the last day of the Executive’s employment with the Company.

 

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7.4       Non-solicitation of Customers . The Executive understands and acknowledges that because of the Executive’s experience with and relationship to the Company, he will have access to and learn about much or all of the Company’s customer information. “ Customer Information ” includes, but is not limited to, names, phone numbers, addresses, e-mail addresses, order history, order preferences, chain of command, pricing information and other information identifying facts and circumstances specific to the customer and relevant to sales.

 

The Executive understands and acknowledges that loss of this customer relationship and/or goodwill will cause significant and irreparable harm.

 

The Executive agrees and covenants, during two (2) years, to run consecutively, beginning on the last day of the Executive’s employment with the Company, not to directly or indirectly solicit, contact (including but not limited to e-mail, regular mail, express mail, telephone, fax, and instant message), attempt to contact or meet with the Company’s current, former or prospective customers for purposes of offering or accepting goods or services competitive with those offered by the Company.

 

8.     Non-disparagement . The Executive agrees and covenants that he will not at any time make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments or statements concerning the Company or its businesses, or any of its employees, officers, and existing and prospective customers, suppliers, investors and other associated third parties.

 

This Section 8 does not, in any way, restrict or impede the Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation or order. The Executive shall, to the extent permitted by applicable law, promptly provide written notice of any such order to the Board.

 

9.     Acknowledgement . The Executive acknowledges and agrees that the services to be rendered by him to the Company are of a special and unique character; that the Executive will obtain knowledge and skill relevant to the Company’s industry, methods of doing business and marketing strategies by virtue of the Executive’s employment; and that the restrictive covenants and other terms and conditions of this Agreement are reasonable and reasonably necessary to protect the legitimate business interest of the Company.

 

The Executive further acknowledges that the amount of his compensation reflects, in part, his obligations and the Company’s rights under Sections 6 , 7 , and 8 of this Agreement; that he has no expectation of any additional compensation, royalties or other payment of any kind not otherwise referenced herein in connection herewith; that he will not be subject to undue hardship by reason of his full compliance with the terms and conditions of Sections 6 , 7 , and 8 of this Agreement or the Company’s enforcement thereof.

 

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10.   Remedies . In the event of a breach or threatened breach by the Executive of Sections 6 , 7 , and 8 of this Agreement, the Executive hereby consents and agrees that the Company shall be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages or other available forms of relief.

 

11.   Arbitration . Any dispute, controversy or claim arising out of or related to this Agreement or any breach of this Agreement shall be submitted to and decided by binding arbitration. Arbitration shall be administered exclusively by American Arbitration Association and shall be conducted consistent with the rules, regulations and requirements thereof as well as any requirements imposed by state law. The arbitration shall be held in the City of Houston, Texas, or such other place as may be agreed upon at the time by the parties to the arbitration. The arbitrator(s) shall, in their award, allocate between the parties the costs of arbitration, which shall include reasonable attorneys’ fees of the parties, as well as the arbitrators’ fees and expenses, in such proportions as the arbitrator(s) deem just. Any arbitral award determination shall be final and binding upon the Parties.

 

12.   Proprietary Rights .

 

12.1    Work Product . The Executive acknowledges and agrees that all writings, works of authorship, technology, inventions, discoveries, ideas and other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived or reduced to practice by the Executive individually or jointly with others during the period of, and related to, his employment by the Company (regardless of when or where the Work Product is prepared or whose equipment or other resources is used in preparing the same) and all printed, physical and electronic copies, all improvements, rights and claims related to the foregoing, and other tangible embodiments thereof (collectively, “ Work Product ”), as well as any and all rights in and to copyrights, trade secrets, trademarks (and related goodwill), patents and other intellectual property rights therein arising in any jurisdiction throughout the world and all related rights of priority under international conventions with respect thereto, including all pending and future applications and registrations therefor, and continuations, divisions, continuations-in-part, reissues, extensions and renewals thereof (collectively, “ Intellectual Property Rights ”), shall be the sole and exclusive property of the Company.

 

For purposes of this Agreement, Work Product includes, but is not limited to, Company information, including plans, publications, research, strategies, techniques, agreements, documents, contracts, terms of agreements, negotiations, know-how, work in process, databases, manuals, results, developments, reports, graphics, drawings, sketches, market studies, formulae, notes, communications, algorithms, product plans, product designs, styles, models, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, client information, customer lists, client lists, manufacturing information, marketing information, advertising information and sales information.

 

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12.2    Work Made for Hire; Assignment . The Executive acknowledges that, by reason of being employed by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, the Executive hereby irrevocably assigns to the Company, for no additional consideration, the Executive’s entire right, title and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim and recover for all past, present and future infringement, misappropriation or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company’s rights, title or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company would have had in the absence of this Agreement.

 

12.3    Further Assurances; Power of Attorney . During and after his employment, the Executive agrees to reasonably cooperate with the Company to (a) apply for, obtain, perfect and transfer to the Company the Work Product as well as an Intellectual Property Right in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, executing and delivering to the Company any and all applications, oaths, declarations, affidavits, waivers, assignments and other documents and instruments as shall be requested by the Company. The Executive hereby irrevocably grants the Company power of attorney to execute and deliver any such documents on the Executive’s behalf in his name and to do all other lawfully permitted acts to transfer the Work Product to the Company and further the transfer, issuance, prosecution and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if the Executive does not promptly cooperate with the Company’s request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be effected by the Executive’s subsequent incapacity.

 

12.4    No License . The Executive understands that this Agreement does not, and shall not be construed to, grant the Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software or other tools made available to him by the Company.

 

13.   Security .

 

13.1    Security and Access . The Executive agrees and covenants (a) to comply with all Company security policies and procedures as in force from time to time including without limitation those regarding computer equipment, telephone systems, voicemail systems, facilities access, monitoring, key cards, access codes, Company intranet, internet, social media and instant messaging systems, computer systems, e-mail systems, computer networks, document storage systems, software, data security, encryption, firewalls, passwords and any and all other Company facilities, IT resources and communication technologies (“ Facilities Information Technology and Access Resources ”); (b) not to access or use any Facilities and Information Technology Resources except as authorized by the Company; and (iii) not to access or use any Facilities and Information Technology Resources in any manner after the termination of the Executive’s employment by the Company, whether termination is voluntary or involuntary. The Executive agrees to notify the Company promptly in the event he learns of any violation of the foregoing by others, or of any other misappropriation or unauthorized access, use, reproduction or reverse engineering of, or tampering with any Facilities and Information Technology Access Resources or other Company property or materials by others.

 

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13.2    Exit Obligations . Upon (a) voluntary or involuntary termination of the Executive’s employment or (b) the Company’s request at any time during the Executive’s employment, the Executive shall (i) provide or return to the Company any and all Company property, including keys, key cards, access cards, identification cards, security devices, employer credit cards, network access devices, computers, cell phones, smartphones, PDAs, fax machines, equipment, speakers, webcams, manuals, reports, files, books, compilations, work product, e-mail messages, recordings, thumb drives or other removable information storage devices, hard drives, and data and all Company documents and materials belonging to the Company and stored in any fashion, including but not limited to those that constitute or contain any Confidential Information or Work Product, that are in the possession or control of the Executive, whether they were provided to the Executive by the Company or any of its business associates or created by the Executive in connection with his employment by the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in the Executive’s possession or control, including those stored on any non-Company devices, networks, storage locations and media in the Executive’s possession or control.

 

14.   Publicity . The Executive hereby irrevocably consents to any and all uses and displays, by the Company and its agents, representatives and licensees, of the Executive’s name, voice, likeness, image, appearance and biographical information in, on or in connection with any pictures, photographs, audio and video recordings, digital images, websites, television programs and advertising, other advertising and publicity, sales and marketing brochures, books, magazines, other publications, CDs, DVDs, tapes and all other printed and electronic forms and media throughout the world, at any time during or after the period of his employment by the Company, for all legitimate commercial and business purposes of the Company (“ Permitted Uses ”). without further consent from or royalty, payment or other compensation to the Executive. The Executive hereby forever waives and releases the Company and its directors, officers, employees and agents from any and all claims, actions, damages, losses, costs, expenses and liability of any kind, arising under any legal or equitable theory whatsoever at any time during or after the period of his employment by the Company, arising directly or indirectly from the Company’s and its agents’, representatives’ and licensees’ exercise of their rights in connection with any Permitted Uses.

 

15.   Governing Law: Jurisdiction and Venue . This Agreement, for all purposes, shall be construed in accordance with the laws of the state of Texas without regard to conflicts of law principles. Any action or proceeding by either of the parties to enforce this Agreement shall be brought only in a state or federal court located in the City of Houston, Texas. The parties hereby irrevocably submit to the exclusive jurisdiction of such courts and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.

 

16.   Entire Agreement . Unless specifically provided herein, this Agreement contains all of the understandings and representations between the Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter. The parties mutually agree that the Agreement can be specifically enforced in court and can be cited as evidence in legal proceedings alleging breach of the Agreement.

 

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17.   Modification and Waiver . No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by the Executive and the Company. No waiver by either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the other party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either of the parties in exercising any right, power or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.

 

18.   Severability . Should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified, or if any portion of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth in this Agreement.

 

The parties further agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law.

 

The parties expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had not been set forth herein.

 

19.   Captions . Captions and headings of the sections and paragraphs of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any section or paragraph.

 

20.   Counterparts . This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.

 

21.   Tolling . Should the Executive violate any of the terms of the restrictive covenant obligations articulated herein, the obligation at issue will run from the first date on which the Executive ceases to be in violation of such obligation.

 

22.   Section 409A . This Agreement is intended to comply with Section 409A or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A.

 

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Notwithstanding any other provision of this Agreement, if any payment or benefit provided to the Executive in connection with his termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and the Executive is determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the Termination Date (the “ Specified Employee Payment Date ”). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date shall be paid to the Executive in a lump sum on the Specified Employee Payment Date and thereafer, any remaining payments shall be paid without delay in accordance with their original schedule.

 

23.   Notification to Subsequent Employer . When the Executive’s employment with the Company terminates, the Executive agrees to notify any subsequent employer of the restrictive covenants section contained in this Agreement. In addition, the Executive authorizes the Company to provide a copy of the restrictive covenants section of this Agreement to third parties, including but not limited to, the Executive’s subsequent, anticipated or possible future employer.

 

24.   Successors and Assigns . This Agreement is personal to the Executive and shall not be assigned by the Executive. Any purported assignment by the Executive shall be null and void from the initial date of the purported assignment. The Company may assign this Agreement to any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company. This Agreement shall inure to the benefit of the Company and permitted successors and assigns.

 

25.   Notice . Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight carrier to the parties at the addresses set forth below (or such other addresses as specified by the parties by like notice):

 

If to the Company:

 

Plx Pharma Inc.

8285 El Rio, Suite 130

Houston, TX 77054

 

If to the Executive:

 

David Jorden

2237 Wroxton

Houston, TX 77005

 

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26.   Representations of the Executive . The Executive represents and warrants to the Company that:

 

26.1   The Executive’s acceptance of employment with the Company and the performance of his duties hereunder will not conflict with or result in a violation of, a breach of, or a default under any contract, agreement or understanding to which he is a party or is otherwise bound.

 

26.2   The Executive’s acceptance of employment with the Company and the performance of his duties hereunder will not violate any non-solicitation, non-competition or other similar covenant or agreement of a prior employer.

 

27.   Withholding . The Company shall have the right to withhold from any amount payable hereunder any Federal, state and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.

 

28.   Survival . Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.

 

29.   Acknowledgment of Full Understanding . THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF HIS CHOICE BEFORE SIGNING THIS AGREEMENT.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

  PLX PHARMA INC.
     
  By:  
    Natasha Giordano, President

 

  EXECUTIVE  
     
  Signature:    
  Print Name: David E. Jorden  

 

 

 

 

Exhibit 10.3

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “ Agreement ”) is made and entered into as of May 13, 2016, by and between Gary Mossman (the “ Executive ”) and PLx Pharma Inc., a Delaware corporation (the “ Company ”).

 

WHEREAS, the Company desires to employ the Executive on the terms and conditions set forth herein; and

 

WHEREAS, the Executive desires to be employed by the Company on such terms and conditions; and

 

NOW, THEREFORE, in consideration of the mutual covenants, promises and obligations set forth herein, the parties agree as follows:

 

1.     Term . The Executive’s employment hereunder shall be effective as of April 1, 2016 (the “ Effective Date ”) and shall continue until the first anniversary thereof, unless terminated earlier pursuant to Section 5 of this Agreement; provided that, on such first anniversary of the Effective Date and each annual anniversary thereafter (such date and each annual anniversary thereof, a “ Renewal Date ”), the Agreement shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of one year, unless either party provides written notice of its intention not to extend the term of the Agreement at least 90 days’ prior to the applicable Renewal Date. The period during which the Executive is employed by the Company hereunder is hereinafter referred to as the “ Employment Term. ”

 

2.     Position and Duties .

 

2.1    Position . During the Employment Term, the Executive shall serve as the Chief Operating Officer of the Company, reporting directly to the President of the Company. In such position, the Executive shall have such duties, authority and responsibility as are consistent with the Executive’s position.

 

2.2    Duties . During the Employment Term, the Executive shall devote an appropriate amount of his business time and attention to the performance of the Executive’s duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the performance of such services either directly or indirectly without the prior written consent of the Board of Directors of the Company (the “ Board ”). Notwithstanding the foregoing, the Executive will be permitted to (a) act or serve as a director, trustee, committee member or principal of any type of business, civic or charitable organization and (b) purchase or own less than three percent (3) of the publicly traded securities of any corporation; provided that such ownership represents a passive investment and that the Executive is not a controlling person of, or a member of a group that controls, such corporation; provided further that the activities described in clauses (a) and (b) do not interfere in any material way with the performance of the Executive’s duties and responsibilities to the Company as provided hereunder, including, but not limited to, the obligations set forth in Section 2 hereof.

 

 

 

 

3.    Compensation .

 

3.1    Base Salary .

 

(a)   The Company shall pay the Executive an annual rate of base salary of $160,000. Such base salary shall be paid consistently with the Company’s then current pay practices. The Executive’s base salary shall be reviewed at least annually by the Board and the Board may, but shall not be required to, increase or decrease the base salary during the Employment Term, at the Board’s discretion. The Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as “ Base Salary ”, with 1 / 12 of such amount referred to as the “ Monthly Base Salary .

 

(b)   Until such time as the Company consummates a Qualified Financing (as defined in Section 3.2(a) below) the monthly gross salary paid to the Executive shall be $5,500 (the “ Initial Monthly Base Salary ”). An aggregate amount (the “ Catch-Up Amount ”) equal to the product of (i) the number of months during which the Initial Monthly Base Salary was paid, multiplied by (ii) the difference between the Initial Monthly Base Salary and the Monthly Base Salary, shall be paid upon the closing of a Qualified Financing. It is understood and agreed that (a) the payment of any Catch-Up Amount prior to the closing of a Qualified Financing would jeopardize the ability of the Company to continue as a going concern, and (b) that, absent a determination to the contrary by the Board in its sole and absolute discretion, the earliest date on which the payment of any Catch- Up Amount can be made without such effect would be as soon as practicable following the closing of a Qualified Financing.

 

3.2    Discretionary Bonus .

 

(a)   Upon the closing by the Company of a Qualified Financing, the Company shall pay the Executive a one-time bonus of up to $100,000 (the “ Discretionary Bonus ”), subject to review and approval by the Board. For the purposes of this Agreement, a “ Qualified Financing ” means one or a series of related debt or equity financing transactions yielding aggregate gross proceeds to the Company of at least $10,000,000. In addition, in the event of a Qualified Financing, the Executive shall be eligible for a one-time bonus in the amount of $80,000 based on the achievement of specific agreed upon and board approved Company objectives. Finally, an additional bonus in the amount of $100,000 shall be paid upon the Company’s achievement of full funding for a commercial launch of the Company’s lead aspirin product or the sale of the Company.

 

(b)   If the Company completes a financing of less than $10,000,000, the Discretionary Bonus shall be determined at the discretion of the Board.

 

3.3    Annual Bonus . The Executive shall be eligible to receive a bonus pursuant to any bonus

plan established by the Board with a target annual bonus of 50% of base salary. The Board in its sole discretion shall determine the actual amount of any such bonus and the date upon which it is payable by the Company. Any such bonuses shall be subject to all applicable withholding requirements.

 

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3.4    Equity Awards . During the Employment Term, the Executive shall be eligible to participate in the Company’s 2015 Omnibus Incentive Plan or any successor plan, subject to the terms of the 2015 Omnibus Incentive Plan or successor plan, as determined by the Board or the Compensation Committee, in its discretion. In conjunction with Executive’s entrance into this Agreement, Executive has been granted certain equity awards pursuant to the terms of the Award Agreement attached hereto as Exhibit A .

 

3.5    Fringe Benefits and Perquisites . During the Employment Term, the Executive shall be entitled to fringe benefits and perquisites consistent with the practices of the Company, and to the extent the Company provides similar benefits or perquisites (or both) to similarly situated executives of the Company.

 

3.6    Employee Benefits . During the Employment Term, the Executive shall be entitled to participate in all employee benefit plans, practices and programs maintained by the Company and generally available to senior executives of the Company, as in effect from time to time (collectively, “ Employee Benefit Plans ”), to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plan and applicable law.

 

3.7    Business Expenses . The Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred by the Executive in connection with the performance of the Executive’s duties hereunder, specifically including first-class air travel, subject to compliance with the Company’s expense reimbursement policies and procedures.

 

3.8    Indemnification . The Executive shall be indemnified and advancement of expenses by the Company as provided in Company’s Bylaws and Certificate of Incorporation. The obligations under this paragraph shall survive any termination of the Employment Term.

 

3.9    Clawback Provisions . Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation or stock exchange listing requirement (including, without limitation, any changes required to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act), will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).

 

4.     Termination of Employment . The Employment Term and the Executive’s employment hereunder may be terminated by either the Company or the Executive at any time and for any reason; provided that, unless otherwise provided herein, either party shall be required to give the other party at least 15 days advance written notice of any termination of the Executive’s employment. Upon termination of the Executive’s employment during the Employment Term, the Executive shall be entitled to the compensation and benefits described in this Section 4 and shall have no further rights to any compensation or any other benefits from the Company or any of its affiliates.

 

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4.1    Termination For Cause or Without Good Reason .

 

(a)   The Executive’s employment hereunder may be terminated by the Company for Cause or by the Executive without Good Reason. If the Executive’s employment is terminated by the Company for Cause or by the Executive without Good Reason, the Executive shall be entitled to receive:

 

(i) any accrued but unpaid Base Salary, which shall be paid in accordance with the Company’s customary payroll procedures;

 

(ii) any earned but unpaid Annual Bonus with respect to any completed fiscal year immediately preceding the Termination Date, which shall be paid on the otherwise applicable payment date; provided that, if the Executive’s employment is terminated by the Company for Cause, then any such accrued but unpaid Annual Bonus shall be forfeited;

 

(iii) reimbursement for unreimbursed business expenses properly incurred by the Executive, which shall be subject to and paid in accordance with the Company’s expense reimbursement policy; and

 

(iv) such employee benefits (including equity compensation), if any, as to which the Executive may be entitled under the Company’s employee benefit plans as of the Termination Date; provided that, in no event shall the Executive be entitled to any payments in the nature of severance or termination payments except as specifically provided herein.

 

Items 4.1(a)(i) through 4.1(a)(iv) are referred to herein collectively as the “ Accrued Amounts ”.

 

(b)   For purposes of this Agreement, “ Cause ” shall mean:

 

(i) the Executive’s willful failure to perform his duties (other than any such failure resulting from incapacity due to physical or mental illness), and such failure has not been cured after a period of thirty (30) days’ notice from the Company;

 

(ii) the Executive’s willful failure to comply with any valid and legal directive of the Board;

 

(iii) the Executive’s willful engagement in dishonesty, illegal conduct or gross misconduct, which is, in each case, materially injurious to the Company or its affiliates;

 

(iv) the Executive’s embezzlement, misappropriation or fraud, whether or not related to the Executive’s employment with the Company;

 

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(v) the Executive’s conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude;

 

(vi) the Executive’s willful malfeasance or willful misconduct in connection with the Executive’s duties hereunder or any act or omission which is materially injurious to the financial condition or business reputation of the Company;

 

(vii) the Executive’s willful unauthorized disclosure of Confidential Information (as defined below);

 

(viii) the Executive’s material breach of any material obligation under this Agreement or any other written agreement between the Executive and the Company, which breach, if curable, remains uncured for a period of thirty (30) days after receipt by the Executive of written notice from the Company of such breach, which notice shall contain the specific reasonable cure requested by the Company.

 

For purposes of this provision, no act or failure to act on the part of the Executive shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company.

 

(c)   For purposes of this Agreement, “ Good Reason ” shall mean the occurrence of any of the following, in each case during the Employment Term without the Executive’s written consent:

 

(i) the Company employs another person as a senior-level operations, manufacturing or supply-chain executive;

 

(ii) a material reduction in the Executive’s Base Salary;

 

(iii) any material breach by the Company of any material provision of this Agreement, which breach, if curable, remains uncured for a period of thirty (30) days after receipt by the Company of written notice from the Executive of such breach, which notice shall contain the specific reasonable cure requested by the Executive;

 

(iv) a material, adverse change in the Executive’s title, authority, duties or responsibilities (other than temporarily while the Executive is physically or mentally incapacitated or as required by applicable law) taking into account the Company’s size, status as a public company and capitalization as of the date of this Agreement; or

 

(v) a Change in Control of the Company in which this Agreement is not assumed.

 

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(d)   “ Change in Control ” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the effective date of any following events:

 

(i) Acquisition of Stock by Third Party . Any Person is or becomes the Beneficial Owner (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and any rules and regulations promulgated thereunder), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company’s then outstanding shares of capital stock;

 

(ii) Change in Board . During any period of one year (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board of Directors of Company (the “ Board ”), and any new director (other than a director designated by a person who has effected a transaction described in subparagraph (i) of this definition without the consent of the Board) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a least a majority of the members of the Board;

 

(iii) Corporate Transactions . The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than a majority of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation which such shares give the holder(s) thereof the power to elect at least a majority of the board or other governing body of such surviving entity;

 

(iv) Liquidation . The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; or

 

(v) Other Events . There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirement.

 

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The Executive cannot terminate his employment for Good Reason unless he has provided written notice to the Company of the existence of the circumstances providing grounds for termination for Good Reason within sixty (60) days of the initial existence of such grounds and the Company has had at least thirty (30) days from the date on which such notice is provided to cure such circumstances. If the Executive does not terminate his employment for Good Reason within one hundred twenty (120) days after the first occurrence of the applicable grounds, then the Executive will be deemed to have waived his right to terminate for Good Reason with respect to such grounds.

 

4.2    Termination Without Cause or for Good Reason . The Employment Term and the Executive’s employment hereunder may be terminated by the Executive for Good Reason or by the Company without Cause. In the event of such termination, the Executive shall be entitled to receive the Accrued Amounts and subject to the Executive’s compliance with Sections 5 , 6 , 7 , and 8 of this Agreement and his execution of a release of claims in favor of the Company, its affiliates and their respective officers and directors in a form provided by the Company (the “ Release ”) and such Release becoming effective within thirty (30) days following the Termination Date (such 30- day period, the “ Release Execution Period ”), the Executive shall be entitled to receive the following:

 

(a)   continued Base Salary for one year following the Termination Date payable in equal installments in accordance with the Company’s normal payroll practices, but no less frequently than monthly, which shall commence within thirty (30) days following the Termination Date;

 

(b)   any Annual Bonus earned for a previously completed fiscal year but unpaid as of the Termination Date;

 

(c)   a payment equal to the product of (i) the Annual Bonus, if any, that the Executive would have earned for the fiscal year in which the Date of Termination occurs based on achievement of the applicable performance goals for such year and (ii) a fraction, the numerator of which is the number of days the Executive was employed by the Company during the year of termination and the denominator of which is the number of days in such year (the “ Pro-Rata Bonus ”). This amount shall be paid on the date that annual bonuses are paid to similarly situated executives;

 

(d)   such employee benefits (including equity compensation), if any, as to which the Executive may be entitled under the Company’s employee benefit plans as of the Termination Date.

 

4.3    Death or Disability .

 

(a)   The Executive’s employment hereunder shall terminate automatically upon the Executive’s death during the Employment Term, and the Company may terminate the Executive’s employment on account of the Executive’s Disability.

 

(b)   If the Executive’s employment is terminated during the Employment Term on account of the Executive’s death or Disability, the Executive (or the Executive’s estate and/or beneficiaries, as the case may be) shall be entitled to receive the following:

 

(i) the Accrued Amounts; and

 

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(ii) a lump sum payment equal to the Pro-Rata Bonus/Annual Bonus, if any, that the Executive would have earned for the fiscal year in which the Termination Date occurs based on the achievement of applicable performance goals for such year, which shall be payable on the date that annual bonuses are paid to the Company’s similarly situated executives, but in no event later than two-and-a- half (2 1/2) months following the end of the fiscal year in which the Termination Date occurs.

 

Notwithstanding any other provision contained herein, all payments made in connection with the Executive’s Disability shall be provided in a manner which is consistent with federal and state law.

 

(c)   For purposes of this Agreement, Disability shall mean the Executive’s inability, due to physical or mental incapacity, to substantially perform his duties and responsibilities under this Agreement for one hundred eighty (180) days out of any three hundred sixty-five (365) day period or one hundred twenty (120) consecutive days. Any question as to the existence of the Executive’s Disability as to which the Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to the Executive and the Company. If the Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and the Executive shall be final and conclusive for all purposes of this Agreement.

 

4.4    Notice of Termination . Any termination of the Executive’s employment hereunder by the Company or by the Executive during the Employment Term (other than termination pursuant to Section 4.3(a) on account of the Executive’s death) shall be communicated by written notice of termination (“ Notice of Termination ”) to the other party hereto in accordance with Section 25 . The Notice of Termination shall specify:

 

(a)   The termination provision of this Agreement relied upon;

 

(b)   To the extent applicable, the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated; and

 

(c)   The applicable Termination Date.

 

4.5    Termination Date . The Executive’s Termination Date shall be:

 

(a)   If the Executive’s employment hereunder terminates on account of the Executive’s death, the date of the Executive’s death;

 

(b)   If the Executive’s employment hereunder is terminated on account of the Executive’s Disability, the date that it is determined that the Executive has a Disability;

 

(c)   If the Company terminates the Executive’s employment hereunder for Cause, the date the Notice of Termination is delivered to the Executive;

 

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(d)   If the Company terminates the Executive’s employment hereunder without Cause, the date specified in the Notice of Termination, which shall be no less than fifteen (15) days following the date on which the Notice of Termination is delivered; provided that, the Company shall have the option to provide the Executive with a lump sum payment equal to fifteen (15) days’ Base Salary in lieu of such notice, which shall be paid in a lump sum on the Executive’s Termination Date and for all purposes of this Agreement, the Executive’s Termination Date shall be the date on which such Notice of Termination is delivered;

 

(e)   If the Executive terminates his employment hereunder with or without Good Reason, the date specified in the Executive’s Notice of Termination, which shall be no less than fifteen (15) days following the date on which the Notice of Termination is delivered; provided that, the Company may waive all or any part of the fifteen (15) day notice period for no consideration by giving written notice to the Executive and for all purposes of this Agreement, the Executive’s Termination Date shall be the date determined by the Company; and

 

(f)    If the Executive’s employment hereunder terminates because either party provides notice of non-renewal pursuant to Section 1 , the Renewal Date immediately following the date on which the applicable party delivers notice of non-renewal.

 

Notwithstanding anything contained herein, the Termination Date shall not occur until the date on which the Executive incurs a “separation from service” within the meaning of Section 409A.

 

4.6    Resignation of All Other Positions . Upon termination of the Executive’s employment hereunder for any reason, the Executive shall be deemed to have resigned from all positions that the Executive holds as an officer or member of the board of directors (or a committee thereof) of the Company or any of its affiliates or any position that Executive holds with any other entity at the request or designation of the Company. To the extent appropriate, Executive shall execute and deliver such notices or other instruments as shall be required by give effect to the foregoing as may reasonably be requested by the Company.

 

4.7    Section 280G .

 

(a)   If any of the payments or benefits received or to be received by the Executive (including, without limitation, any payment or benefits received in connection with the Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement, or otherwise) (all such payments collectively referred to herein as the “280G Payments” ) constitute “parachute payments” within the meaning of Section 280G of the Code and will be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax” ), the Company shall pay to the Executive, no later than the time such Excise Tax is required to be paid by the Executive or withheld by the Company, an additional amount (the “280G Gross-Up Payment” ) equal to the sum of the Excise Tax payable by the Executive, plus the amount necessary to put the Executive in the same after-tax position (taking into account any and all applicable federal, state and local excise, income or other taxes at the highest applicable rates on such 280G Payments and on any payments under this Section 5.7 or otherwise as if no Excise Tax had been imposed).

 

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(b)   All calculations and determinations under this Section 5.7 shall be made by an independent accounting firm or independent tax counsel appointed by the Company (the “Tax Counsel” ) whose determinations shall be conclusive and binding on the Company and the Executive for all purposes. For purposes of making the calculations and determinations required by this Section 5.7 , the Tax Counsel may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Company and the Executive shall furnish the Tax Counsel with such information and documents as the Tax Counsel may reasonably request in order to make its determinations under this Section 5.7 . The Company shall bear all costs the Tax Counsel may reasonably incur in connection with its services.

 

5.    Cooperation . To facilitate the orderly conduct of the Company, the Executive agrees to cooperate, at no charge, with the Company’s reasonable requests for information or assistance related to (i) the time of his employment, (ii) any investigations (including internal investigations) and audits of the Company’s management’s current and past conduct and business and accounting practices and (iii) the Company’s defence of, or other participation in, any administrative, judicial, or other proceeding arising from any charge, complaint or other action which has been or may be filed relating to the period during which Executive was employed by the Company. The Company will promptly reimburse Executive for his reasonable, customary and documented out-of-pocket business expenses in connection with the performance of his duties under this Section 5 .

 

6.    Confidential Information . The Executive understands and acknowledges that during the Employment Term, he will have access to and learn about Confidential Information, as defined below.

 

6.1    Confidential Information Defined .

 

(a)    Definition .

 

For purposes of this Agreement, “ Confidential Information ” includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or indirectly to: business processes, practices, methods, policies, plans, publications, documents, research, operations, services, strategies, techniques, agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade secrets, work-in-process, databases, manuals, records, articles, systems, material, sources of material, supplier information, vendor information, financial information, results, accounting information, accounting records, legal information, marketing information, advertising information, pricing information, credit information, design information, payroll information, staffing information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, graphics, drawings, sketches, market studies, sales information, revenue, costs, formulae, notes, communications, algorithms, product plans, designs, styles, models, ideas, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, customer lists, client information, client lists, manufacturing information, factory lists, distributor lists, and buyer lists of the Company or its businesses or any existing or prospective customer, supplier, investor or other associated third party, or of any other person or entity that has entrusted information to the Company in confidence.

 

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The Executive understands that the above list is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used.

 

The Executive understands and agrees that Confidential Information includes information developed by him in the course of his employment by the Company as if the Company furnished the same Confidential Information to the Executive in the first instance. Confidential Information shall not include information that is generally available to and known by the public at the time of disclosure to the Executive; provided that, such disclosure is through no direct or indirect fault of the Executive or person(s) acting on the Executive’s behalf.

 

(b)    Company Creation and Use of Confidential Information .

 

The Executive understands and acknowledges that the Company has invested, and continues to invest, substantial time, money and specialized knowledge into developing its resources, creating a customer base, generating customer and potential customer lists, training its employees, and improving its offerings in the pharmaceutical industry. The Executive understands and acknowledges that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential Information provides the Company with a competitive advantage over others in the marketplace.

 

(c)    Disclosure and Use Restrictions .

 

The Executive agrees and covenants: (i) to treat all Confidential Information as strictly confidential; (ii) not to directly or indirectly disclose, publish, communicate or make available Confidential Information, or allow it to be disclosed, published, communicated or made available, in whole or part, to any entity or person whatsoever (including other employees of the Company) not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company and, in any event, not to anyone outside of the direct employ of the Company except as required in the performance of the Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent); and (iii) not to access or use any Confidential Information, and not to copy any documents, records, files, media or other resources containing any Confidential Information, or remove any such documents, records, files, media or other resources from the premises or control of the Company, except as required in the performance of the Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent). Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency. The Executive shall, to the extent permitted by applicable law, promptly provide written notice of any such order to the Board.

 

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The Executive understands and acknowledges that his obligations under this Agreement with regard to any particular Confidential Information shall commence immediately upon the Executive first having access to such Confidential Information (whether before or after he begins employment by the Company) and shall continue during and after his employment by the Company until such time as such Confidential Information has become public knowledge other than as a result of the Executive’s breach of this Agreement or breach by those acting in concert with the Executive or on the Executive’s behalf.

 

7.     Restrictive Covenants .

 

7.1    Acknowledgment . The Executive understands that the nature of the Executive’s position gives him access to and knowledge of Confidential Information and places him in a position of trust and confidence with the Company. The Executive understands and acknowledges that the intellectual or artistic services he provides to the Company are unique, special or extraordinary.

 

The Executive further understands and acknowledges that the Company’s ability to reserve these for the exclusive knowledge and use of the Company is of great competitive importance and commercial value to the Company, and that improper use or disclosure by the Executive is likely to result in unfair or unlawful competitive activity.

 

7.2    Non-competition . Because of the Company’s legitimate business interest as described herein and the good and valuable consideration offered to the Executive, during the Employment Term and for the two (2) years, to run consecutively, beginning on the last day of the Executive’s employment with the Company, for any reason or no reason and whether employment is terminated at the option of the Executive or the Company, the Executive agrees and covenants not to engage in Prohibited Activity.

 

For purposes of this Section 7 , “ Prohibited Activity ” is activity in which the Executive participates, directly or indirectly, as an employee, employer, owner, operator, manager, advisor, consultant, agent, employee, partner, director, or officer, or any other similar capacity to an entity providing goods or services competitive with those offered by the Company.

 

Nothing herein shall prohibit the Executive from purchasing or owning less than five percent (5%) of the publicly traded securities of any corporation, provided that such ownership represents a passive investment and that the Executive is not a controlling person of, or a member of a group that controls, such corporation.

 

This Section 7 does not, in any way, restrict or impede the Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation or order. The Executive shall, to the extent permitted by applicable law, promptly provide written notice of any such order to the Board.

 

7.3    Non-solicitation of Employees . The Executive agrees and covenants not to directly or indirectly solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of any employee of the Company during two (2) years, to run consecutively, beginning on the last day of the Executive’s employment with the Company.

 

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7.4    Non-solicitation of Customers . The Executive understands and acknowledges that because of the Executive’s experience with and relationship to the Company, he will have access to and learn about much or all of the Company’s customer information. “ Customer Information ” includes, but is not limited to, names, phone numbers, addresses, e-mail addresses, order history, order preferences, chain of command, pricing information and other information identifying facts and circumstances specific to the customer and relevant to sales.

 

The Executive understands and acknowledges that loss of this customer relationship and/or goodwill will cause significant and irreparable harm.

 

The Executive agrees and covenants, during two (2) years, to run consecutively, beginning on the last day of the Executive’s employment with the Company, not to directly or indirectly solicit, contact (including but not limited to e-mail, regular mail, express mail, telephone, fax, and instant message), attempt to contact or meet with the Company’s current, former or prospective customers for purposes of offering or accepting goods or services competitive with those offered by the Company.

 

8.    Non-disparagement . The Executive agrees and covenants that he will not at any time make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments or statements concerning the Company or its businesses, or any of its employees, officers, and existing and prospective customers, suppliers, investors and other associated third parties.

 

This Section 8 does not, in any way, restrict or impede the Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation or order. The Executive shall, to the extent permitted by applicable law, promptly provide written notice of any such order to the Board.

 

9.    Acknowledgement . The Executive acknowledges and agrees that the services to be rendered by him to the Company are of a special and unique character; that the Executive will obtain knowledge and skill relevant to the Company’s industry, methods of doing business and marketing strategies by virtue of the Executive’s employment; and that the restrictive covenants and other terms and conditions of this Agreement are reasonable and reasonably necessary to protect the legitimate business interest of the Company.

 

The Executive further acknowledges that the amount of his compensation reflects, in part, his obligations and the Company’s rights under Sections 6 , 7 , and 8 of this Agreement; that he has no expectation of any additional compensation, royalties or other payment of any kind not otherwise referenced herein in connection herewith; that he will not be subject to undue hardship by reason of his full compliance with the terms and conditions of Sections 6 , 7 , and 8 of this Agreement or the Company’s enforcement thereof.

 

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10.    Remedies . In the event of a breach or threatened breach by the Executive of Sections 6 , 7 , and 8 of this Agreement, the Executive hereby consents and agrees that the Company shall be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages or other available forms of relief.

 

11.    Arbitration . Any dispute, controversy or claim arising out of or related to this Agreement or any breach of this Agreement shall be submitted to and decided by binding arbitration. Arbitration shall be administered exclusively by American Arbitration Association and shall be conducted consistent with the rules, regulations and requirements thereof as well as any requirements imposed by state law. The arbitration shall be held in the City of Houston, Texas, or such other place as may be agreed upon at the time by the parties to the arbitration. The arbitrator(s) shall, in their award, allocate between the parties the costs of arbitration, which shall include reasonable attorneys’ fees of the parties, as well as the arbitrators’ fees and expenses, in such proportions as the arbitrator(s) deem just. Any arbitral award determination shall be final and binding upon the Parties.

 

12.    Proprietary Rights .

 

12.1    Work Product . The Executive acknowledges and agrees that all writings, works of authorship, technology, inventions, discoveries, ideas and other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived or reduced to practice by the Executive individually or jointly with others during the period of, and related to, his employment by the Company (regardless of when or where the Work Product is prepared or whose equipment or other resources is used in preparing the same) and all printed, physical and electronic copies, all improvements, rights and claims related to the foregoing, and other tangible embodiments thereof (collectively, “ Work Product ”), as well as any and all rights in and to copyrights, trade secrets, trademarks (and related goodwill), patents and other intellectual property rights therein arising in any jurisdiction throughout the world and all related rights of priority under international conventions with respect thereto, including all pending and future applications and registrations therefor, and continuations, divisions, continuations-in-part, reissues, extensions and renewals thereof (collectively, “ Intellectual Property Rights ”), shall be the sole and exclusive property of the Company.

 

For purposes of this Agreement, Work Product includes, but is not limited to, Company information, including plans, publications, research, strategies, techniques, agreements, documents, contracts, terms of agreements, negotiations, know-how, work in process, databases, manuals, results, developments, reports, graphics, drawings, sketches, market studies, formulae, notes, communications, algorithms, product plans, product designs, styles, models, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, client information, customer lists, client lists, manufacturing information, marketing information, advertising information and sales information.

 

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12.2    Work Made for Hire; Assignment . The Executive acknowledges that, by reason of being employed by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, the Executive hereby irrevocably assigns to the Company, for no additional consideration, the Executive’s entire right, title and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim and recover for all past, present and future infringement, misappropriation or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company’s rights, title or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company would have had in the absence of this Agreement.

 

12.3    Further Assurances; Power of Attorney . During and after his employment, the Executive agrees to reasonably cooperate with the Company to (a) apply for, obtain, perfect and transfer to the Company the Work Product as well as an Intellectual Property Right in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, executing and delivering to the Company any and all applications, oaths, declarations, affidavits, waivers, assignments and other documents and instruments as shall be requested by the Company. The Executive hereby irrevocably grants the Company power of attorney to execute and deliver any such documents on the Executive’s behalf in his name and to do all other lawfully permitted acts to transfer the Work Product to the Company and further the transfer, issuance, prosecution and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if the Executive does not promptly cooperate with the Company’s request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be effected by the Executive’s subsequent incapacity.

 

12.4    No License . The Executive understands that this Agreement does not, and shall not be construed to, grant the Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software or other tools made available to him by the Company.

 

13.    Security .

 

13.1    Security and Access . The Executive agrees and covenants (a) to comply with all Company security policies and procedures as in force from time to time including without limitation those regarding computer equipment, telephone systems, voicemail systems, facilities access, monitoring, key cards, access codes, Company intranet, internet, social media and instant messaging systems, computer systems, e-mail systems, computer networks, document storage systems, software, data security, encryption, firewalls, passwords and any and all other Company facilities, IT resources and communication technologies (“ Facilities Information Technology and Access Resources ”); (b) not to access or use any Facilities and Information Technology Resources except as authorized by the Company; and (iii) not to access or use any Facilities and Information Technology Resources in any manner after the termination of the Executive’s employment by the Company, whether termination is voluntary or involuntary. The Executive agrees to notify the Company promptly in the event he learns of any violation of the foregoing by others, or of any other misappropriation or unauthorized access, use, reproduction or reverse engineering of, or tampering with any Facilities and Information Technology Access Resources or other Company property or materials by others.

 

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13.2    Exit Obligations . Upon (a) voluntary or involuntary termination of the Executive’s employment or (b) the Company’s request at any time during the Executive’s employment, the Executive shall (i) provide or return to the Company any and all Company property, including keys, key cards, access cards, identification cards, security devices, employer credit cards, network access devices, computers, cell phones, smartphones, PDAs, fax machines, equipment, speakers, webcams, manuals, reports, files, books, compilations, work product, e-mail messages, recordings, thumb drives or other removable information storage devices, hard drives, and data and all Company documents and materials belonging to the Company and stored in any fashion, including but not limited to those that constitute or contain any Confidential Information or Work Product, that are in the possession or control of the Executive, whether they were provided to the Executive by the Company or any of its business associates or created by the Executive in connection with his employment by the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in the Executive’s possession or control, including those stored on any non-Company devices, networks, storage locations and media in the Executive’s possession or control.

 

14.    Publicity . The Executive hereby irrevocably consents to any and all uses and displays, by the Company and its agents, representatives and licensees, of the Executive’s name, voice, likeness, image, appearance and biographical information in, on or in connection with any pictures, photographs, audio and video recordings, digital images, websites, television programs and advertising, other advertising and publicity, sales and marketing brochures, books, magazines, other publications, CDs, DVDs, tapes and all other printed and electronic forms and media throughout the world, at any time during or after the period of his employment by the Company, for all legitimate commercial and business purposes of the Company (“ Permitted Uses ”). without further consent from or royalty, payment or other compensation to the Executive. The Executive hereby forever waives and releases the Company and its directors, officers, employees and agents from any and all claims, actions, damages, losses, costs, expenses and liability of any kind, arising under any legal or equitable theory whatsoever at any time during or after the period of his employment by the Company, arising directly or indirectly from the Company’s and its agents’, representatives’ and licensees’ exercise of their rights in connection with any Permitted Uses.

 

15.    Governing Law: Jurisdiction and Venue . This Agreement, for all purposes, shall be construed in accordance with the laws of the state of Texas without regard to conflicts of law principles. Any action or proceeding by either of the parties to enforce this Agreement shall be brought only in a state or federal court located in the City of Houston, Texas. The parties hereby irrevocably submit to the exclusive jurisdiction of such courts and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.

 

16.    Entire Agreement . Unless specifically provided herein, this Agreement contains all of the understandings and representations between the Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter. The parties mutually agree that the Agreement can be specifically enforced in court and can be cited as evidence in legal proceedings alleging breach of the Agreement.

 

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17.    Modification and Waiver . No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by the Executive and the Company. No waiver by either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the other party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either of the parties in exercising any right, power or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.

 

18.    Severability . Should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified, or if any portion of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth in this Agreement.

 

The parties further agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law.

 

The parties expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had not been set forth herein.

 

19.    Captions . Captions and headings of the sections and paragraphs of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any section or paragraph.

 

20.    Counterparts . This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.

 

21.    Tolling . Should the Executive violate any of the terms of the restrictive covenant obligations articulated herein, the obligation at issue will run from the first date on which the Executive ceases to be in violation of such obligation.

 

22.    Section 409A . This Agreement is intended to comply with Section 409A or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A.

 

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Notwithstanding any other provision of this Agreement, if any payment or benefit provided to the Executive in connection with his termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and the Executive is determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the Termination Date (the “ Specified Employee Payment Date ”). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date shall be paid to the Executive in a lump sum on the Specified Employee Payment Date and thereafer, any remaining payments shall be paid without delay in accordance with their original schedule.

 

23.    Notification to Subsequent Employer . When the Executive’s employment with the Company terminates, the Executive agrees to notify any subsequent employer of the restrictive covenants section contained in this Agreement. In addition, the Executive authorizes the Company to provide a copy of the restrictive covenants section of this Agreement to third parties, including but not limited to, the Executive’s subsequent, anticipated or possible future employer.

 

24.    Successors and Assigns . This Agreement is personal to the Executive and shall not be assigned by the Executive. Any purported assignment by the Executive shall be null and void from the initial date of the purported assignment. The Company may assign this Agreement to any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company. This Agreement shall inure to the benefit of the Company and permitted successors and assigns.

 

25.    Notice . Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight carrier to the parties at the addresses set forth below (or such other addresses as specified by the parties by like notice):

 

If to the Company: PLx Pharma Inc.

8285 El Rio, Suite 130

Houston, TX 77054

 

If to the Executive:

 

Gary Mossman 18627 Point Lookout

Houston, TX 77058

 

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26.    Representations of the Executive . The Executive represents and warrants to the Company that:

 

26.1   The Executive’s acceptance of employment with the Company and the performance of his duties hereunder will not conflict with or result in a violation of, a breach of, or a default under any contract, agreement or understanding to which he is a party or is otherwise bound.

 

26.2   The Executive’s acceptance of employment with the Company and the performance of his duties hereunder will not violate any non-solicitation, non-competition or other similar covenant or agreement of a prior employer.

 

27.    Withholding . The Company shall have the right to withhold from any amount payable hereunder any Federal, state and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.

 

28.    Survival . Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.

 

29.    Acknowledgment of Full Understanding . THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF HIS CHOICE BEFORE SIGNING THIS AGREEMENT.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

  PLX PHARMA INC.
     
  By:  
    Natasha Giordano, President

 

  EXECUTIVE    
       
  Signature:    
  Print Name: Gary Mossman  

 

 

 

 

EXHIBIT A

 

AWARD AGREEMENT

 

 

 

Exhibit 10.4

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “ Agreement ”) is made and entered into as of May 13, 2016, by and between Michael J. Valentino (the “ Executive ”) and PLx Pharma Inc., a Delaware corporation (the “ Company ”).

 

WHEREAS, the Company desires to employ the Executive on the terms and conditions set forth herein; and

 

WHEREAS, the Executive desires to be employed by the Company on such terms and conditions; and

 

NOW, THEREFORE, in consideration of the mutual covenants, promises and obligations set forth herein, the parties agree as follows:

 

1.   Term . The Executive’s employment hereunder shall be effective as of April 1, 2016 (the “ Effective Date ”) and shall continue until the first anniversary thereof, unless terminated earlier pursuant to Section 5 of this Agreement; provided that, on such first anniversary of the Effective Date and each annual anniversary thereafter (such date and each annual anniversary thereof, a “ Renewal Date ”), the Agreement shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of one year, unless either party provides written notice of its intention not to extend the term of the Agreement at least 90 days’ prior to the applicable Renewal Date. The period during which the Executive is employed by the Company hereunder is hereinafter referred to as the “ Employment Term. ”

 

2.   Position and Duties .

 

2.1   Position . During the Employment Term, the Executive shall serve as the Executive Chairman of the Company, reporting directly to the Board of Directors of the Company (the “ Board ”). For purposes of this Agreement, it is expressly recognized that the Board may delegate its authority in a particular matter to one or more committees of the Board, including but not limited to the Compensation Committee, as provided by the governing documents of the Company. In such position, the Executive shall have such duties, authority and responsibility as are consistent with the Executive’s position.

 

2.2   Duties . During the Employment Term, the Executive shall devote an adequate time and attention to the performance of the Executive’s duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the performance of such services either directly or indirectly without the prior written consent of the Board. Notwithstanding the foregoing, the Executive will be permitted to purchase or own less than three percent (3) of the publicly traded securities of any corporation; provided that such ownership represents a passive investment and that the Executive is not a controlling person of, or a member of a group that controls, such corporation; provided further that the activities described herein do not interfere in any material way with the performance of the Executive’s duties and responsibilities to the Company as provided hereunder, including, but not limited to, the obligations set forth in Section 2 hereof.

 

 

 

 

3.   Compensation .

 

3.1   Base Salary .

 

(a)  The Company shall pay the Executive an annual rate of base salary of $200,000. Such base salary shall be paid consistently with the Company’s then current pay practices. The Executive’s base salary shall be reviewed at least annually by the Board and the Board may, but shall not be required to, increase (but not decrease) the base salary during the Employment Term. The Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as “ Base Salary ”, with 1 / 12 of such amount referred to as the “ Monthly Base Salary .”

 

(b)  Until such time as the Company consummates a Qualified Financing (as defined in Section 3.2(a) below) the monthly gross salary paid to the Executive shall be $5,500 (the “ Initial Monthly Base Salary ”). An aggregate amount (the “ Catch-Up Amount ”) equal to the product of (i) the number of months during which the Initial Monthly Base Salary was paid, multiplied by (ii) the difference between the Initial Monthly Base Salary and the Monthly Base Salary, shall be paid upon the closing of a Qualified Financing. It is understood and agreed that (a) the payment of any Catch-Up Amount prior to the closing of a Qualified Financing would jeopardize the ability of the Company to continue as a going concern, and (b) that, absent a determination to the contrary by the Board in its sole and absolute discretion, the earliest date on which the payment of any Catch- Up Amount can be made without such effect would be as soon as practicable following the closing of a Qualified Financing.

 

3.2   Discretionary Bonus .

 

(a)  Upon the closing by the Company of a Qualified Financing, the Company shall pay the Executive a one-time bonus of up to $175,000 (the “ Discretionary Bonus ”), subject to review and approval by the Board. For the purposes of this Agreement, a “ Qualified Financing ” means one or a series of related debt or equity financing transactions yielding aggregate gross proceeds to the Company of at least $10,000,000.

 

(b)  If the Company completes a financing of less than $10,000,000, the Discretionary Bonus shall be determined at the discretion of the Board.

 

3.3   Annual Bonus . The Executive shall be eligible to receive a bonus pursuant to any bonus plan established by the Board. The Board in its sole discretion shall determine the actual amount of any such bonus and the date upon which it is payable by the Company. Any such bonuses shall be subject to all applicable withholding requirements.

 

3.4   Equity Awards . During the Employment Term, the Executive shall be eligible to participate in the Company’s 2015 Omnibus Incentive Plan or any successor plan, subject to the terms of the 2015 Omnibus Incentive Plan or successor plan, as determined by the Board or the Compensation Committee, in its discretion. In conjunction with Executive’s entrance into this Agreement, Executive has been granted certain equity awards pursuant to the terms of the Award Agreement attached hereto as Exhibit A .

 

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3.5   Fringe Benefits and Perquisites . During the Employment Term, the Executive shall be entitled to fringe benefits and perquisites consistent with the practices of the Company, and to the extent t h e Company provides similar benefits or perquisites (or both) to similarly situated executives of the Company.

 

3.6   Employee Benefits . During the Employment Term, the Executive shall be entitled to participate in all employee benefit plans, practices and programs maintained by the Company and generally available to senior executives of the Company, as in effect from time to time (collectively, “ Employee Benefit Plans ”), to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plan and applicable law.

 

3.7   Business Expenses . The Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred by the Executive in connection with the performance of the Executive’s duties hereunder, specifically including first-class air travel, subject to compliance with the Company’s expense reimbursement policies and procedures.

 

3.8   Indemnification . The Executive shall be indemnified and advancement of expenses by the Company as provided in Company’s Bylaws and Certificate of Incorporation. The obligations under this paragraph shall survive any termination of the Employment Term.

 

3.9   Clawback Provisions . Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation or stock exchange listing requirement (including, without limitation, any changes required to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act), will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).

 

4.   Termination of Employment . The Employment Term and the Executive’s employment hereunder may be terminated by either the Company or the Executive at any time and for any reason; provided that, unless otherwise provided herein, either party shall be required to give the other party at least 15 days advance written notice of any termination of the Executive’s employment. Upon termination of the Executive’s employment during the Employment Term, the Executive shall be entitled to the compensation and benefits described in this Section 4 and shall have no further rights to any compensation or any other benefits from the Company or any of its affiliates.

 

4.1   Termination For Cause or Without Good Reason .

 

(a)  The Executive’s employment hereunder may be terminated by the Company for Cause or by the Executive without Good Reason. If the Executive’s employment is terminated by the Company for Cause or by the Executive without Good Reason, the Executive shall be entitled to receive:

 

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(i) any accrued but unpaid Base Salary, which shall be paid in accordance with the Company’s customary payroll procedures;

 

(ii) any earned but unpaid Annual Bonus with respect to any completed fiscal year immediately preceding the Termination Date, which shall be paid on the otherwise applicable payment date; provided that, if the Executive’s employment is terminated by the Company for Cause, then any such accrued but unpaid Annual Bonus shall be forfeited;

 

(iii) reimbursement for unreimbursed business expenses properly incurred by the Executive, which shall be subject to and paid in accordance with the Company’s expense reimbursement policy; and

 

(iv) such employee benefits (including equity compensation), if any, as to which the Executive may be entitled under the Company’s employee benefit plans as of the Termination Date; provided that, in no event shall the Executive be entitled to any payments in the nature of severance or termination payments except as specifically provided herein.

 

Items 4.1(a)(i) through 4.1(a)(iv) are referred to herein collectively as the “ Accrued Amounts ”.

 

(b) For purposes of this Agreement, “ Cause ” shall mean:

 

(i) the Executive’s willful failure to perform his duties (other than any such failure resulting from incapacity due to physical or mental illness), and such failure has not been cured after a period of thirty (30) days’ notice from the Company;

 

(ii) the Executive’s willful failure to comply with any valid and legal directive of the Board;

 

(iii) the Executive’s willful engagement in dishonesty, illegal conduct or gross misconduct, which is, in each case, materially injurious to the Company or its affiliates;

 

(iv) the Executive’s embezzlement, misappropriation or fraud, whether or not related to the Executive’s employment with the Company;

 

(v) the Executive’s conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude;

 

(vi) the Executive’s willful malfeasance or willful misconduct in connection with the Executive’s duties hereunder or any act or omission which is materially injurious to the financial condition or business reputation of the Company;

 

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(vii) the Executive’s willful unauthorized disclosure of Confidential Information (as defined below);

 

(viii) the Executive’s material breach of any material obligation under this Agreement or any other written agreement between the Executive and the Company, which breach, if curable, remains uncured for a period of thirty (30) days after receipt by the Executive of written notice from the Company of such breach, which notice shall contain the specific reasonable cure requested by the Company.

 

For purposes of this provision, no act or failure to act on the part of the Executive shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company.

 

(c)  For purposes of this Agreement, “ Good Reason ” shall mean the occurrence of any of the following, in each case during the Employment Term without the Executive’s written consent:

 

(i) a material reduction in the Executive’s Base Salary;

 

(ii) any material breach by the Company of any material provision of this Agreement, which breach, if curable, remains uncured for a period of thirty (30) days after receipt by the Company of written notice from the Executive of such breach, which notice shall contain the specific reasonable cure requested by the Executive;

 

(iii) a material, adverse change in the Executive’s title, authority, duties or responsibilities (other than temporarily while the Executive is physically or mentally incapacitated or as required by applicable law) taking into account the Company’s size, status as a public company and capitalization as of the date of this Agreement; or

 

(iv) a Change in Control of the Company in which this Agreement is not assumed.

 

(d)  “ Change in Control ” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the effective date of any following events:

 

(i) Acquisition of Stock by Third Party . Any Person is or becomes the Beneficial Owner (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and any rules and regulations promulgated thereunder), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company’s then outstanding shares of capital stock;

 

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(ii) Change in Board . During any period of one year (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board of Directors of Company (the “ Board ”), and any new director (other than a director designated by a person who has effected a transaction described in subparagraph (i) of this definition without the consent of the Board) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a least a majority of the members of the Board;

 

(iii) Corporate Transactions . The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than a majority of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation which such shares give the holder(s) thereof the power to elect at least a majority of the board or other governing body of such surviving entity;

 

(iv) Liquidation . The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; or

 

(v) Other Events . There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirement.

 

The Executive cannot terminate his employment for Good Reason unless he has provided written notice to the Company of the existence of the circumstances providing grounds for termination for Good Reason within sixty (60) days of the initial existence of such grounds and the Company has had at least thirty (30) days from the date on which such notice is provided to cure such circumstances. If the Executive does not terminate his employment for Good Reason within one hundred twenty (120) days after the first occurrence of the applicable grounds, then the Executive will be deemed to have waived his right to terminate for Good Reason with respect to such grounds.

 

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4.2   Termination Without Cause or for Good Reason . The Employment Term and the Executive’s employment hereunder may be terminated by the Executive for Good Reason or by the Company without Cause. In the event of such termination, the Executive shall be entitled to receive the Accrued Amounts and subject to the Executive’s compliance with Sections 5 , 6 , 7 , and 8 of this Agreement and his execution of a release of claims in favor of the Company, its affiliates and their respective officers and directors in a form provided by the Company (the “ Release ”) and such Release becoming effective within thirty (30) days following the Termination Date (such 30- day period, the “ Release Execution Period ”), the Executive shall be entitled to receive the following:

 

(a)  continued Base Salary for one year following the Termination Date payable in equal installments in accordance with the Company’s normal payroll practices, but no less frequently than monthly, which shall commence within thirty (30) days following the Termination Date;

 

(b)  any Annual Bonus earned for a previously completed fiscal year but unpaid as of the Termination Date;

 

(c)  a payment equal to the product of (i) the Annual Bonus, if any, that the Executive would have earned for the fiscal year in which the Date of Termination occurs based on achievement of the applicable performance goals for such year and (ii) a fraction, the numerator of which is the number of days the Executive was employed by the Company during the year of termination and the denominator of which is the number of days in such year (the “ Pro-Rata Bonus ”). This amount shall be paid on the date that annual bonuses are paid to similarly situated executives;

 

(d)  such employee benefits (including equity compensation), if any, as to which the Executive may be entitled under the Company’s employee benefit plans as of the Termination Date.

 

4.3   Death or Disability .

 

(a)  The Executive’s employment hereunder shall terminate automatically upon the Executive’s death during the Employment Term, and the Company may terminate the Executive’s employment on account of the Executive’s Disability.

 

(b)  If the Executive’s employment is terminated during the Employment Term on account of the Executive’s death or Disability, the Executive (or the Executive’s estate and/or beneficiaries, as the case may be) shall be entitled to receive the following:

 

(i) the Accrued Amounts; and

 

(ii) a lump sum payment equal to the Pro-Rata Bonus/Annual Bonus, if any, that the Executive would have earned for the fiscal year in which the Termination Date occurs based on the achievement of applicable performance goals for such year, which shall be payable on the date that annual bonuses are paid to the Company’s similarly situated executives, but in no event later than two-and-a- half (2 1/2) months following the end of the fiscal year in which the Termination Date occurs.

 

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Notwithstanding any other provision contained herein, all payments made in connection with the Executive’s Disability shall be provided in a manner which is consistent with federal and state law.

 

(c)  For purposes of this Agreement, Disability shall mean the Executive’s inability, due to physical or mental incapacity, to substantially perform his duties and responsibilities under this Agreement for one hundred eighty (180) days out of any three hundred sixty-five (365) day period or one hundred twenty (120) consecutive days. Any question as to the existence of the Executive’s Disability as to which the Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to the Executive and the Company. If the Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and the Executive shall be final and conclusive for all purposes of this Agreement.

 

4.4   Notice of Termination . Any termination of the Executive’s employment hereunder by the Company or by the Executive during the Employment Term (other than termination pursuant to Section 4.3(a) on account of the Executive’s death) shall be communicated by written notice of termination (“ Notice of Termination ”) to the other party hereto in accordance with Section 25 . The Notice of Termination shall specify:

 

(a)  The termination provision of this Agreement relied upon;

 

(b)  To the extent applicable, the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated; and

 

(c)  The applicable Termination Date.

 

4.5   Termination Date . The Executive’s Termination Date shall be:

 

(a)  If the Executive’s employment hereunder terminates on account of the Executive’s death, the date of the Executive’s death;

 

(b)  If the Executive’s employment hereunder is terminated on account of the Executive’s Disability, the date that it is determined that the Executive has a Disability;

 

(c)  If the Company terminates the Executive’s employment hereunder for Cause, the date the Notice of Termination is delivered to the Executive;

 

(d)  If the Company terminates the Executive’s employment hereunder without Cause, the date specified in the Notice of Termination, which shall be no less than fifteen (15) days following the date on which the Notice of Termination is delivered; provided that, the Company shall have the option to provide the Executive with a lump sum payment equal to fifteen (15) days’ Base Salary in lieu of such notice, which shall be paid in a lump sum on the Executive’s Termination Date and for all purposes of this Agreement, the Executive’s Termination Date shall be the date on which such Notice of Termination is delivered;

 

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(e)  If the Executive terminates his employment hereunder with or without Good Reason, the date specified in the Executive’s Notice of Termination, which shall be no less than fifteen (15) days following the date on which the Notice of Termination is delivered; provided that, the Company may waive all or any part of the fifteen (15) day notice period for no consideration by giving written notice to the Executive and for all purposes of this Agreement, the Executive’s Termination Date shall be the date determined by the Company; and

 

(f)  If the Executive’s employment hereunder terminates because either party provides notice of non-renewal pursuant to Section 1 , the Renewal Date immediately following the date on which the applicable party delivers notice of non-renewal.

 

Notwithstanding anything contained herein, the Termination Date shall not occur until the date on which the Executive incurs a “separation from service” within the meaning of Section 409A.

 

4.6   Resignation of All Other Positions . Upon termination of the Executive’s employment hereunder for any reason, the Executive shall be deemed to have resigned from all positions that the Executive holds as an officer or member of the board of directors (or a committee thereof) of the Company or any of its affiliates or any position that Executive holds with any other entity at the request or designation of the Company. To the extent appropriate, Executive shall execute and deliver such notices or other instruments as shall be required by give effect to the foregoing as may reasonably be requested by the Company.

 

4.7   Section 280G .

 

(a)  If any of the payments or benefits received or to be received by the Executive (including, without limitation, any payment or benefits received in connection with the Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement, or otherwise) (all such payments collectively referred to herein as the “280G Payments” ) constitute “parachute payments” within the meaning of Section 280G of the Code and will be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax” ), the Company shall pay to the Executive, no later than the time such Excise Tax is required to be paid by the Executive or withheld by the Company, an additional amount (the “280G Gross- Up Payment” ) equal to the sum of the Excise Tax payable by the Executive, plus the amount necessary to put the Executive in the same after-tax position (taking into account any and all applicable federal, state and local excise, income or other taxes at the highest applicable rates on such 280G Payments and on any payments under this Section 5.7 or otherwise as if no Excise Tax had been imposed).

 

(b)  All calculations and determinations under this Section 5.7 shall be made by an independent accounting firm or independent tax counsel appointed by the Company (the “Tax Counsel” ) whose determinations shall be conclusive and binding on the Company and the Executive for all purposes. For purposes of making the calculations and determinations required by this Section 5.7 , the Tax Counsel may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Company and the Executive shall furnish the Tax Counsel with such information and documents as the Tax Counsel may reasonably request in order to make its determinations under this Section 5.7 . The Company shall bear all costs the Tax Counsel may reasonably incur in connection with its services.

 

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5.   Cooperation . To facilitate the orderly conduct of the Company, the Executive agrees to cooperate, at no charge, with the Company’s reasonable requests for information or assistance related to (i) the time of his employment, (ii) any investigations (including internal investigations) and audits of the Company’s management’s current and past conduct and business and accounting practices and (iii) the Company’s defence of, or other participation in, any administrative, judicial, or other proceeding arising from any charge, complaint or other action which has been or may be filed relating to the period during which Executive was employed by the Company. The Company will promptly reimburse Executive for his reasonable, customary and documented out-of-pocket business expenses in connection with the performance of his duties under this Section 5 .

 

6.   Confidential Information . The Executive understands and acknowledges that during the Employment Term, he will have access to and learn about Confidential Information, as defined below.

 

6.1   Confidential Information Defined .

 

(a) Definition .

 

For purposes of this Agreement, “ Confidential Information ” includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or indirectly to: business processes, practices, methods, policies, plans, publications, documents, research, operations, services, strategies, techniques, agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade secrets, work-in-process, databases, manuals, records, articles, systems, material, sources of material, supplier information, vendor information, financial information, results, accounting information, accounting records, legal information, marketing information, advertising information, pricing information, credit information, design information, payroll information, staffing information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, graphics, drawings, sketches, market studies, sales information, revenue, costs, formulae, notes, communications, algorithms, product plans, designs, styles, models, ideas, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, customer lists, client information, client lists, manufacturing information, factory lists, distributor lists, and buyer lists of the Company or its businesses or any existing or prospective customer, supplier, investor or other associated third party, or of any other person or entity that has entrusted information to the Company in confidence.

 

The Executive understands that the above list is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used.

 

The Executive understands and agrees that Confidential Information includes information developed by him in the course of his employment by the Company as if the Company furnished the same Confidential Information to the Executive in the first instance. Confidential Information shall not include information that is generally available to and known by the public at the time of disclosure to the Executive; provided that, such disclosure is through no direct or indirect fault of the Executive or person(s) acting on the Executive’s behalf.

 

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(b) Company Creation and Use of Confidential Information .

 

The Executive understands and acknowledges that the Company has invested, and continues to invest, substantial time, money and specialized knowledge into developing its resources, creating a customer base, generating customer and potential customer lists, training its employees, and improving its offerings in the pharmaceutical industry. The Executive understands and acknowledges that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential Information provides the Company with a competitive advantage over others in the marketplace.

 

(c) Disclosure and Use Restrictions .

 

The Executive agrees and covenants: (i) to treat all Confidential Information as strictly confidential; (ii) not to directly or indirectly disclose, publish, communicate or make available Confidential Information, or allow it to be disclosed, published, communicated or made available, in whole or part, to any entity or person whatsoever (including other employees of the Company) not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company and, in any event, not to anyone outside of the direct employ of the Company except as required in the performance of the Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent); and (iii) not to access or use any Confidential Information, and not to copy any documents, records, files, media or other resources containing any Confidential Information, or remove any such documents, records, files, media or other resources from the premises or control of the Company, except as required in the performance of the Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent). Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency. The Executive shall, to the extent permitted by applicable law, promptly provide written notice of any such order to the Board.

 

The Executive understands and acknowledges that his obligations under this Agreement with regard to any particular Confidential Information shall commence immediately upon the Executive first having access to such Confidential Information (whether before or after he begins employment by the Company) and shall continue during and after his employment by the Company until such time as such Confidential Information has become public knowledge other than as a result of the Executive’s breach of this Agreement or breach by those acting in concert with the Executive or on the Executive’s behalf.

 

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7.   Restrictive Covenants .

 

7.1   Acknowledgment . The Executive understands that the nature of the Executive’s position gives him access to and knowledge of Confidential Information and places him in a position of trust and confidence with the Company. The Executive understands and acknowledges that the intellectual or artistic services he provides to the Company are unique, special or extraordinary.

 

The Executive further understands and acknowledges that the Company’s ability to reserve these for the exclusive knowledge and use of the Company is of great competitive importance and commercial value to the Company, and that improper use or disclosure by the Executive is likely to result in unfair or unlawful competitive activity.

 

7.2   Non-competition . Because of the Company’s legitimate business interest as described herein and the good and valuable consideration offered to the Executive, during the Employment Term and for one (1) year, to run consecutively, beginning on the last day of the Executive’s employment with the Company, for any reason or no reason and whether employment is terminated at the option of the Executive or the Company, the Executive agrees and covenants not to engage in Prohibited Activity.

 

For purposes of this Section 7 , “ Prohibited Activity ” is activity in which the Executive participates, directly or indirectly, as an employee, employer, owner, operator, manager, advisor, consultant, agent, employee, partner, director, or officer, or any other similar capacity to an entity providing goods or services competitive with those offered by the Company.

 

Nothing herein shall prohibit the Executive from purchasing or owning less than five percent (5%) of the publicly traded securities of any corporation, provided that such ownership represents a passive investment and that the Executive is not a controlling person of, or a member of a group that controls, such corporation.

 

This Section 7 does not, in any way, restrict or impede the Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation or order. The Executive shall, to the extent permitted by applicable law, promptly provide written notice of any such order to the Board.

 

7.3   Non-solicitation of Employees . The Executive agrees and covenants not to directly or indirectly solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of any employee of the Company during two (2) years, to run consecutively, beginning on the last day of the Executive’s employment with the Company.

 

7.4   Non-solicitation of Customers . The Executive understands and acknowledges that because of the Executive’s experience with and relationship to the Company, he will have access to and learn about much or all of the Company’s customer information. “ Customer Information ” includes, but is not limited to, names, phone numbers, addresses, e-mail addresses, order history, order preferences, chain of command, pricing information and other information identifying facts and circumstances specific to the customer and relevant to sales.

 

The Executive understands and acknowledges that loss of this customer relationship and/or goodwill will cause significant and irreparable harm.

 

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The Executive agrees and covenants, during two (2) years, to run consecutively, beginning on the last day of the Executive’s employment with the Company, not to directly or indirectly solicit, contact (including but not limited to e-mail, regular mail, express mail, telephone, fax, and instant message), attempt to contact or meet with the Company’s current, former or prospective customers for purposes of offering or accepting goods or services competitive with those offered by the Company.

 

8.   Non-disparagement . The Executive agrees and covenants that he will not at any time make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments or statements concerning the Company or its businesses, or any of its employees, officers, and existing and prospective customers, suppliers, investors and other associated third parties.

 

This Section 8 does not, in any way, restrict or impede the Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation or order. The Executive shall, to the extent permitted by applicable law, promptly provide written notice of any such order to the Board.

 

9.   Acknowledgement . The Executive acknowledges and agrees that the services to be rendered by him to the Company are of a special and unique character; that the Executive will obtain knowledge and skill relevant to the Company’s industry, methods of doing business and marketing strategies by virtue of the Executive’s employment; and that the restrictive covenants and other terms and conditions of this Agreement are reasonable and reasonably necessary to protect the legitimate business interest of the Company.

 

The Executive further acknowledges that the amount of his compensation reflects, in part, his obligations and the Company’s rights under Sections 6 , 7 , and 8 of this Agreement; that he has no expectation of any additional compensation, royalties or other payment of any kind not otherwise referenced herein in connection herewith; that he will not be subject to undue hardship by reason of his full compliance with the terms and conditions of Sections 6 , 7 , and 8 of this Agreement or the Company’s enforcement thereof.

 

10.   Remedies . In the event of a breach or threatened breach by the Executive of Sections 6 , 7 , and 8 of this Agreement, the Executive hereby consents and agrees that the Company shall be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages or other available forms of relief.

 

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11.   Arbitration . Any dispute, controversy or claim arising out of or related to this Agreement or any breach of this Agreement shall be submitted to and decided by binding arbitration. Arbitration shall be administered exclusively by American Arbitration Association and shall be conducted consistent with the rules, regulations and requirements thereof as well as any requirements imposed by state law. The arbitration shall be held in the City of Houston, Texas, or such other place as may be agreed upon at the time by the parties to the arbitration. The arbitrator(s) shall, in their award, allocate between the parties the costs of arbitration, which shall include reasonable attorneys’ fees of the parties, as well as the arbitrators’ fees and expenses, in such proportions as the arbitrator(s) deem just. Any arbitral award determination shall be final and binding upon the Parties.

 

12.   Proprietary Rights .

 

12.1   Work Product . The Executive acknowledges and agrees that all writings, works of authorship, technology, inventions, discoveries, ideas and other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived or reduced to practice by the Executive individually or jointly with others during the period of, and related to, his employment by the Company (regardless of when or where the Work Product is prepared or whose equipment or other resources is used in preparing the same) and all printed, physical and electronic copies, all improvements, rights and claims related to the foregoing, and other tangible embodiments thereof (collectively, “ Work Product ”), as well as any and all rights in and to copyrights, trade secrets, trademarks (and related goodwill), patents and other intellectual property rights therein arising in any jurisdiction throughout the world and all related rights of priority under international conventions with respect thereto, including all pending and future applications and registrations therefor, and continuations, divisions, continuations-in-part, reissues, extensions and renewals thereof (collectively, “ Intellectual Property Rights ”), shall be the sole and exclusive property of the Company.

 

For purposes of this Agreement, Work Product includes, but is not limited to, Company information, including plans, publications, research, strategies, techniques, agreements, documents, contracts, terms of agreements, negotiations, know-how, work in process, databases, manuals, results, developments, reports, graphics, drawings, sketches, market studies, formulae, notes, communications, algorithms, product plans, product designs, styles, models, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, client information, customer lists, client lists, manufacturing information, marketing information, advertising information and sales information.

 

12.2   Work Made for Hire; Assignment . The Executive acknowledges that, by reason of being employed by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, the Executive hereby irrevocably assigns to the Company, for no additional consideration, the Executive’s entire right, title and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim and recover for all past, present and future infringement, misappropriation or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company’s rights, title or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company would have had in the absence of this Agreement.

 

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12.3   Further Assurances; Power of Attorney . During and after his employment, the Executive agrees to reasonably cooperate with the Company to (a) apply for, obtain, perfect and transfer to the Company the Work Product as well as an Intellectual Property Right in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, executing and delivering to the Company any and all applications, oaths, declarations, affidavits, waivers, assignments and other documents and instruments as shall be requested by the Company. The Executive hereby irrevocably grants the Company power of attorney to execute and deliver any such documents on the Executive’s behalf in his name and to do all other lawfully permitted acts to transfer the Work Product to the Company and further the transfer, issuance, prosecution and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if the Executive does not promptly cooperate with the Company’s request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be effected by the Executive’s subsequent incapacity.

 

12.4   No License . The Executive understands that this Agreement does not, and shall not be construed to, grant the Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software or other tools made available to him by the Company.

 

13.   Security .

 

13.1   Security and Access . The Executive agrees and covenants (a) to comply with all Company security policies and procedures as in force from time to time including without limitation those regarding computer equipment, telephone systems, voicemail systems, facilities access, monitoring, key cards, access codes, Company intranet, internet, social media and instant messaging systems, computer systems, e-mail systems, computer networks, document storage systems, software, data security, encryption, firewalls, passwords and any and all other Company facilities, IT resources and communication technologies (“ Facilities Information Technology and Access Resources ”); (b) not to access or use any Facilities and Information Technology Resources except as authorized by the Company; and (iii) not to access or use any Facilities and Information Technology Resources in any manner after the termination of the Executive’s employment by the Company, whether termination is voluntary or involuntary. The Executive agrees to notify the Company promptly in the event he learns of any violation of the foregoing by others, or of any other misappropriation or unauthorized access, use, reproduction or reverse engineering of, or tampering with any Facilities and Information Technology Access Resources or other Company property or materials by others.

 

13.2   Exit Obligations . Upon (a) voluntary or involuntary termination of the Executive’s employment or (b) the Company’s request at any time during the Executive’s employment, the Executive shall (i) provide or return to the Company any and all Company property, including keys, key cards, access cards, identification cards, security devices, employer credit cards, network access devices, computers, cell phones, smartphones, PDAs, fax machines, equipment, speakers, webcams, manuals, reports, files, books, compilations, work product, e-mail messages, recordings, thumb drives or other removable information storage devices, hard drives, and data and all Company documents and materials belonging to the Company and stored in any fashion, including but not limited to those that constitute or contain any Confidential Information or Work Product, that are in the possession or control of the Executive, whether they were provided to the Executive by the Company or any of its business associates or created by the Executive in connection with his employment by the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in the Executive’s possession or control, including those stored on any non-Company devices, networks, storage locations and media in the Executive’s possession or control.

 

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14.   Publicity . The Executive hereby irrevocably consents to any and all uses and displays, by the Company and its agents, representatives and licensees, of the Executive’s name, voice, likeness, image, appearance and biographical information in, on or in connection with any pictures, photographs, audio and video recordings, digital images, websites, television programs and advertising, other advertising and publicity, sales and marketing brochures, books, magazines, other publications, CDs, DVDs, tapes and all other printed and electronic forms and media throughout the world, at any time during or after the period of his employment by the Company, for all legitimate commercial and business purposes of the Company (“ Permitted Uses ”). without further consent from or royalty, payment or other compensation to the Executive. The Executive hereby forever waives and releases the Company and its directors, officers, employees and agents from any and all claims, actions, damages, losses, costs, expenses and liability of any kind, arising under any legal or equitable theory whatsoever at any time during or after the period of his employment by the Company, arising directly or indirectly from the Company’s and its agents’, representatives’ and licensees’ exercise of their rights in connection with any Permitted Uses.

 

15.   Governing Law: Jurisdiction and Venue . This Agreement, for all purposes, shall be construed in accordance with the laws of the state of Texas without regard to conflicts of law principles. Any action or proceeding by either of the parties to enforce this Agreement shall be brought only in a state or federal court located in the City of Houston, Texas. The parties hereby irrevocably submit to the exclusive jurisdiction of such courts and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.

 

16.   Entire Agreement . Unless specifically provided herein, this Agreement contains all of the understandings and representations between the Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter. The parties mutually agree that the Agreement can be specifically enforced in court and can be cited as evidence in legal proceedings alleging breach of the Agreement.

 

17.   Modification and Waiver . No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by the Executive and the Company. No waiver by either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the other party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either of the parties in exercising any right, power or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.

 

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18.   Severability . Should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified, or if any portion of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth in this Agreement.

 

The parties further agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law.

 

The parties expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had not been set forth herein.

 

19.   Captions . Captions and headings of the sections and paragraphs of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any section or paragraph.

 

20.   Counterparts . This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.

 

21.   Tolling . Should the Executive violate any of the terms of the restrictive covenant obligations articulated herein, the obligation at issue will run from the first date on which the Executive ceases to be in violation of such obligation.

 

22.   Section 409A . This Agreement is intended to comply with Section 409A or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A.

 

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Notwithstanding any other provision of this Agreement, if any payment or benefit provided to the Executive in connection with his termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and the Executive is determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the Termination Date (the “ Specified Employee Payment Date ”). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date shall be paid to the Executive in a lump sum on the Specified Employee Payment Date and thereafer, any remaining payments shall be paid without delay in accordance with their original schedule.

 

23.   Notification to Subsequent Employer . When the Executive’s employment with the Company terminates, the Executive agrees to notify any subsequent employer of the restrictive covenants section contained in this Agreement. In addition, the Executive authorizes the Company to provide a copy of the restrictive covenants section of this Agreement to third parties, including but not limited to, the Executive’s subsequent, anticipated or possible future employer.

 

24.   Successors and Assigns . This Agreement is personal to the Executive and shall not be assigned by the Executive. Any purported assignment by the Executive shall be null and void from the initial date of the purported assignment. The Company may assign this Agreement to any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company. This Agreement shall inure to the benefit of the Company and permitted successors and assigns.

 

25.   Notice . Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight carrier to the parties at the addresses set forth below (or such other addresses as specified by the parties by like notice):

 

If to the Company:

 

PLx Pharma Inc.

8285 El Rio, Suite 130

Houston, TX 77054

 

If to the Executive:

 

Michael J. Valentino

35 Watergate Dr., Unit 1803

Sarasota, FL 34236

 

26.   Representations of the Executive . The Executive represents and warrants to the Company that:

 

26.1  The Executive’s acceptance of employment with the Company and the performance of his duties hereunder will not conflict with or result in a violation of, a breach of, or a default under any contract, agreement or understanding to which he is a party or is otherwise bound.

 

26.2  The Executive’s acceptance of employment with the Company and the performance of his duties hereunder will not violate any non-solicitation, non-competition or other similar covenant or agreement of a prior employer.

 

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27.   Withholding . The Company shall have the right to withhold from any amount payable hereunder any Federal, state and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.

 

28.   Survival . Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.

 

29.   Acknowledgment of Full Understanding . THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF HIS CHOICE BEFORE SIGNING THIS AGREEMENT.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

  PLX PHARMA INC.
     
  By:  
    Natasha Giordano, President

 

  EXECUTIVE  
       
  Signature:    
  Print Name: Michael J. Valentino  

 

 

 

 

EXHIBIT A

 

AWARD AGREEMENT

 

 

 

Exhibit 10.5

 

PLX PHARMA INC.

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (“ Agreement ”), dated as of [DATE], is by and between PLx Pharma Inc., a Delaware corporation (the “ Company ”) and [NAME OF DIRECTOR/OFFICER] (the “ Indemnitee ”).

 

WHEREAS, [Indemnitee is [a director/an officer] of the Company/the Company expects Indemnitee to join the Company as [a director/an officer]] ; and

 

WHEREAS, the board of directors of the Company (the “ Board ”) has determined that enhancing the ability of the Company to retain and attract as directors and officers the most capable persons is in the best interests of the Company and that the Company therefore should seek to assure such persons that indemnification and insurance coverage is available.

 

NOW, THEREFORE, in consideration of the foregoing and the Indemnitee's agreement to [continue to] provide services to the Company, the parties agree as follows:

 

1.           Definitions . For purposes of this Agreement, the following terms shall have the following meanings:

 

(a)          “ Beneficial Owner ” has the meaning given to the term “beneficial owner” in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”).

 

(b)          “ Change in Control ” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the effective date of any following events:

 

(i)           Acquisition of Stock by Third Party . Any Person is or becomes the Beneficial Owner (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and any rules and regulations promulgated thereunder), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company’s then outstanding shares of capital stock;

 

(ii)          Change in Board . During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board of Directors of Company (the “ Board ”), and any new director (other than a director designated by a person who has effected a transaction described in subparagraph (i) of this definition without the consent of the Board) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a least a majority of the members of the Board;

 

 

 

 

(iii)         Corporate Transactions . The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than a majority of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation which such shares give the holder(s) thereof the power to elect at least a majority of the board or other governing body of such surviving entity;

 

(iv)         Liquidation . The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; or

 

(v)          Other Events . There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirement.

 

(c)          “ Claim ” means:

 

(i)          any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, arbitrative, investigative or other, and whether made pursuant to federal, state or other law; or

 

(ii)         any inquiry, hearing or investigation that the Indemnitee determines might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism.

 

(d)          “ Delaware Court ” shall have the meaning ascribed to it in Section 9(e) below.

 

(e)          “ Disinterested Director ” means a director of the Company who is not and was not a party to the Claim in respect of which indemnification is sought by Indemnitee.

 

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(f)          “ Expenses ” means any and all expenses, including attorneys' and experts' fees, court costs, transcript costs, travel expenses, duplicating, printing and binding costs, telephone charges, and all other costs and expenses incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Claim, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 5 only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee's rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee. The parties agree that for the purposes of any advancement of Expenses for which Indemnitee has made written demand to the Company in accordance with this Agreement, all Expenses included in such demand that are certified by affidavit of Indemnitee's counsel as being reasonable shall be presumed conclusively to be reasonable.

 

(g)          “ Expense Advance ” means any payment of Expenses advanced to Indemnitee by the Company pursuant to Section 4 or Section 5 hereof.

 

(h)          “ Indemnifiable Event ” means any event or occurrence, whether occurring before, on or after the date of this Agreement, related to the fact that Indemnitee is or was a director, officer, employee or agent of the Company or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent of any other corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise (collectively with the Company, “ Enterprise ”) or by reason of an action or inaction by Indemnitee in any such capacity (whether or not serving in such capacity at the time any Loss is incurred for which indemnification can be provided under this Agreement).

 

(i)          “ Independent Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently performs, nor in the past five years has performed, services for either: (i) the Company or Indemnitee (other than in connection with matters concerning Indemnitee under this Agreement or of other indemnitees under similar agreements) or (ii) any other party to the Claim giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement.

 

(j)          “ Losses ” means any and all Expenses, damages, losses, liabilities, judgments, fines, penalties (whether civil, criminal or other), ERISA excise taxes, amounts paid or payable in settlement, including any interest, assessments, any federal, state, local or foreign taxes imposed as a result of the actual or deemed receipt of any payments under this Agreement and all other charges paid or payable in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim.

 

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(k)          “ Person ” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity and includes the meaning set forth in Sections 13(d) and 14(d) of the Exchange Act.

 

(l)          “ Standard of Conduct Determination ” shall have the meaning ascribed to it in Section 9(b) below.

 

(m)          “ Voting Securities ” means any securities of the Company that vote generally in the election of directors.

 

2.           Services to the Company . Indemnitee agrees to [serve/continue to serve] as a director or officer of the Company for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders their resignation or is no longer serving in such capacity. This Agreement shall not be deemed an employment agreement between the Company (or any of its subsidiaries or Enterprise) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee’s service to the Company or any of its subsidiaries or Enterprise is at will and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment agreement between Indemnitee and the Company (or any of its subsidiaries or Enterprise), other applicable formal severance policies duly adopted by the Board or, with respect to service as a director or officer of the Company, by the Company's Constituent Documents or Delaware law. This Agreement shall continue in force after Indemnitee has ceased to serve as a director or officer of the Company or, at the request of the Company, of any of its subsidiaries or Enterprise, as provided in Section 12 hereof.

 

3.           Indemnification . Subject to Section 9 and Section 10 of this Agreement, the Company shall indemnify Indemnitee, to the fullest extent permitted by the laws of the State of Delaware in effect on the date hereof, or as such laws may from time to time hereafter be amended to increase the scope of such permitted indemnification, against any and all Losses if Indemnitee was or is or becomes a party to or participant in, or is threatened to be made a party to or participant in, any Claim by reason of or arising in part out of an Indemnifiable Event, including, without limitation, Claims brought by or in the right of the Company, Claims brought by third parties, and Claims in which the Indemnitee is solely a witness.

 

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4.           Advancement of Expenses . Indemnitee shall have the right to advancement by the Company, prior to the final disposition of any Claim by final adjudication to which there are no further rights of appeal, of any and all Expenses actually and reasonably paid or incurred by Indemnitee in connection with any Claim arising out of an Indemnifiable Event. Indemnitee's right to such advancement is not subject to the satisfaction of any standard of conduct. Without limiting the generality or effect of the foregoing, within thirty (30) days after any request by Indemnitee, the Company shall, in accordance with such request, (a) pay such Expenses on behalf of Indemnitee, (b) advance to Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimburse Indemnitee for such Expenses. In connection with any request for Expense Advances, Indemnitee shall not be required to provide any documentation or information to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. In connection with any request for Expense Advances, Indemnitee shall execute and deliver to the Company an undertaking (which shall be accepted without reference to Indemnitee's ability to repay the Expense Advances) to repay any amounts paid, advanced, or reimbursed by the Company for such Expenses to the extent that it is ultimately determined, following the final disposition of such Claim, that Indemnitee is not entitled to indemnification hereunder. Indemnitee's obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon.

 

5.           Indemnification for Expenses in Enforcing Rights . To the fullest extent allowable under applicable law, the Company shall also indemnify against, and, if requested by Indemnitee, shall advance to Indemnitee subject to and in accordance with Section 4 , any Expenses actually and reasonably paid or incurred by Indemnitee in connection with any action or proceeding by Indemnitee for (a) indemnification or reimbursement or advance payment of Expenses by the Company under any provision of this Agreement, or under any other agreement or provision of the Constituent Documents now or hereafter in effect relating to Claims relating to Indemnifiable Events, or (b) recovery under any directors' and officers' liability insurance policies maintained by the Company; however, in the event that Indemnitee is ultimately determined not to be entitled to such indemnification or insurance recovery, as the case may be, then all amounts advanced under this Section 5 shall be repaid. Indemnitee shall be required to reimburse the Company in the event that a final judicial determination is made that such action brought by Indemnitee was frivolous or not made in good faith.

 

6.           Partial Indemnity . If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of any Losses in respect of a Claim related to an Indemnifiable Event but not for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

 

7.           Notification and Defense of Claims .

 

(a)           Notification of Claims . Indemnitee shall notify the Company in writing as soon as practicable of any Claim which could relate to an Indemnifiable Event or for which Indemnitee could seek Expense Advances, including a brief description (based upon information then available to Indemnitee) of the nature of, and the facts underlying, such Claim. The failure by Indemnitee to timely notify the Company hereunder shall not relieve the Company from any liability hereunder unless the Company's ability to participate in the defense of such claim was materially and adversely affected by such failure.

 

  5  

 

 

(b)           Defense of Claims . The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event at its own expense and, except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to Indemnitee. After notice from the Company to Indemnitee of its election to assume the defense of any such Claim, the Company shall not be liable to Indemnitee under this Agreement or otherwise for any Expenses subsequently directly incurred by Indemnitee in connection with Indemnitee's defense of such Claim other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ its own legal counsel in such Claim, but all Expenses related to such counsel incurred after notice from the Company of its assumption of the defense shall be at Indemnitee's own expense; provided, however, that if (i) Indemnitee's employment of its own legal counsel has been authorized by the Company, (ii) Indemnitee has reasonably determined that there may be a conflict of interest between Indemnitee and the Company in the defense of such Claim, (iii) after a Change in Control, Indemnitee's employment of its own counsel has been approved by the Independent Counsel or (iv) the Company shall not in fact have employed counsel to assume the defense of such Claim, then Indemnitee shall be entitled to retain its own separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any such Claim) and all Expenses related to such separate counsel shall be borne by the Company.

 

8.           Procedure upon Application for Indemnification . In order to obtain indemnification pursuant to this Agreement, Indemnitee shall submit to the Company a written request therefor, including in such request such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of the Claim.. Indemnification shall be made insofar as the Company determines Indemnitee is entitled to indemnification in accordance with Section 9 below.

 

9.           Determination of Right to Indemnification .

 

(a)           Mandatory Indemnification; Indemnification as a Witness .

 

(i)          To the extent that Indemnitee shall have been successful on the merits or otherwise in defense of any Claim relating to an Indemnifiable Event or any portion thereof or in defense of any issue or matter therein, including without limitation dismissal without prejudice, Indemnitee shall be indemnified against all Losses relating to such Claim in accordance with Section 3 to the fullest extent allowable by law.

 

(ii)         To the extent that Indemnitee's involvement in a Claim relating to an Indemnifiable Event is to prepare to serve and serve as a witness, and not as a party, the Indemnitee shall be indemnified against all Losses incurred in connection therewith to the fullest extent allowable by law.

 

  6  

 

 

(b)           Standard of Conduct . To the extent that the provisions of Section 9(a) are inapplicable to a Claim related to an Indemnifiable Event that shall have been finally disposed of, any determination of whether Indemnitee has satisfied any applicable standard of conduct under Delaware law that is a legally required condition to indemnification of Indemnitee hereunder against Losses relating to such Claim and any determination that Expense Advances must be repaid to the Company (a “ Standard of Conduct Determination ”) shall be made as follows:

 

(i)          if no Change in Control has occurred, (A) by a majority vote of the Disinterested Directors, even if less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum or (C) if there are no such Disinterested Directors, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee; and

 

(ii)         if a Change in Control shall have occurred, (A) if the Indemnitee so requests in writing, by a majority vote of the Disinterested Directors, even if less than a quorum of the Board or (B) otherwise, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee.

 

The Company shall indemnify and hold harmless Indemnitee against and, if requested by Indemnitee, shall reimburse Indemnitee for, or advance to Indemnitee, within thirty (30) days of such request, any and all Expenses incurred by Indemnitee in cooperating with the person or persons making such Standard of Conduct Determination.

 

(c)           Making the Standard of Conduct Determination . The Company shall use its reasonable best efforts to cause any Standard of Conduct Determination required under Section 9(b) to be made as promptly as practicable. If the person or persons designated to make the Standard of Conduct Determination under Section 9(b) shall not have made a determination within thirty (30) days after the later of (A) receipt by the Company of a written request from Indemnitee for indemnification pursuant to Section 8 (the date of such receipt being the “ Notification Date ”) and (B) the selection of an Independent Counsel, if such determination is to be made by Independent Counsel, then Indemnitee shall be deemed to have satisfied the applicable standard of conduct; provided that such 30-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person or persons making such determination in good faith requires such additional time to obtain or evaluate information relating thereto. Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of any Claim.

 

  7  

 

 

(d)           Payment of Indemnification . If, in regard to any Losses:

 

(i)          Indemnitee shall be entitled to indemnification pursuant to Section 9(a) ;

 

(ii)         no Standard Conduct Determination is legally required as a condition to indemnification of Indemnitee hereunder; or

 

(iii)        Indemnitee has been determined or deemed pursuant to Section 9(b) or Section 9(c) to have satisfied the Standard of Conduct Determination,

 

then the Company shall pay to Indemnitee, within five days after the later of (A) the Notification Date or (B) the earliest date on which the applicable criterion specified in clause (i), (ii) or (iii) is satisfied, an amount equal to such Losses.

 

(e)           Selection of Independent Counsel for Standard of Conduct Determination . If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9(b)(i) , the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising of the identity of the Independent Counsel so selected. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9(b)(ii) , the Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either case, Indemnitee or the Company, as applicable, may, within five days after receiving written notice of selection from the other, deliver to the other a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not satisfy the criteria set forth in the definition of “Independent Counsel” in Section 1(i) , and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person or firm so selected shall act as Independent Counsel. If such written objection is properly and timely made and substantiated, (i) the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit; and (ii) the non-objecting party may, at its option, select an alternative Independent Counsel and give written notice to the other party advising such other party of the identity of the alternative Independent Counsel so selected, in which case the provisions of the two immediately preceding sentences, the introductory clause of this sentence and numbered clause (i) of this sentence shall apply to such subsequent selection and notice. If applicable, the provisions of clause (ii) of the immediately preceding sentence shall apply to successive alternative selections. If no Independent Counsel that is permitted under the foregoing provisions of this Section 9(e) to make the Standard of Conduct Determination shall have been selected within 20 days after the Company gives its initial notice pursuant to the first sentence of this Section 9(e) or Indemnitee gives its initial notice pursuant to the second sentence of this Section 9(e) , as the case may be, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware (“ Delaware Court ”) to resolve any objection which shall have been made by the Company or Indemnitee to the other's selection of Independent Counsel and/or to appoint as Independent Counsel a person to be selected by the Court or such other person as the Court shall designate, and the person or firm with respect to whom all objections are so resolved or the person or firm so appointed will act as Independent Counsel. In all events, the Company shall pay all of the reasonable fees and expenses of the Independent Counsel incurred in connection with the Independent Counsel’s determination pursuant to Section 9(b) .

 

  8  

 

 

(f)           Presumptions and Defenses .

 

(i)           Indemnitee's Entitlement to Indemnification . In making any Standard of Conduct Determination, the person or persons making such determination shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the Company shall have the burden of proof to overcome that presumption and establish that Indemnitee is not so entitled. Any Standard of Conduct Determination that is adverse to Indemnitee may be challenged by the Indemnitee in the Delaware Court. No determination by the Company (including by its directors or any Independent Counsel) that Indemnitee has not satisfied any applicable standard of conduct may be used as a defense to any legal proceedings brought by Indemnitee to secure indemnification or reimbursement or advance payment of Expenses by the Company hereunder or create a presumption that Indemnitee has not met any applicable standard of conduct.

 

(ii)          Reliance as a Safe Harbor . For purposes of this Agreement, and without creating any presumption as to a lack of good faith if the following circumstances do not exist, Indemnitee shall be deemed to have acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company if Indemnitee's actions or omissions to act are taken in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board or by any other Person (including legal counsel, accountants and financial advisors) as to matters Indemnitee reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of the Company shall not be imputed to Indemnitee for purposes of determining the right to indemnity hereunder.

 

(iii)         No Other Presumptions . For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, will not create a presumption that Indemnitee did not meet any applicable standard of conduct or have any particular belief, or that indemnification hereunder is otherwise not permitted.

 

  9  

 

 

(iv)         Defense to Indemnification and Burden of Proof . It shall be a defense to any action brought by Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for Losses incurred in defending against a Claim related to an Indemnifiable Event in advance of its final disposition) that it is not permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed. In connection with any such action or any related Standard of Conduct Determination, the burden of proving such a defense or that the Indemnitee did not satisfy the applicable standard of conduct shall be on the Company.

 

(v)          Resolution of Claims . The Company acknowledges that a settlement or other disposition short of final judgment may be successful on the merits or otherwise for purposes of Section 9(a)(i) if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any Claim relating to an Indemnifiable Event to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with our without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise for purposes of Section 9(a)(i) . The Company shall have the burden of proof to overcome this presumption.

 

10.          Exclusions from Indemnification . Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to:

 

(a)          indemnify or advance funds to Indemnitee for Expenses or Losses with respect to proceedings initiated by Indemnitee, including any proceedings against the Company or its directors, officers, employees or other indemnitees and not by way of defense, except:

 

(i)          proceedings referenced in Section 5 above (unless a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous); or

 

(ii)         where the Company has joined in or the Board has consented to the initiation of such proceedings.

 

(b)          indemnify Indemnitee if a final decision by a court of competent jurisdiction determines that such indemnification is prohibited by applicable law.

 

(c)          indemnify Indemnitee for the disgorgement of profits arising from the purchase or sale by Indemnitee of securities of the Company in violation of Section 16(b) of the Exchange Act, or any similar successor statute.

 

  10  

 

 

(d)          indemnify or advance funds to Indemnitee for Indemnitee's reimbursement to the Company of any bonus or other incentive-based or equity-based compensation previously received by Indemnitee or payment of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements under Section 304 of the Sarbanes-Oxley Act of 2002 in connection with an accounting restatement of the Company or the payment to the Company of profits arising from the purchase or sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act).

 

11.          Settlement of Claims . The Company shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending Claim related to an Indemnifiable Event effected without the Company's prior written consent, which shall not be unreasonably withheld; provided, however, that if a Change in Control has occurred, the Company shall be liable for indemnification of the Indemnitee for amounts paid in settlement if an Independent Counsel has approved the settlement. The Company shall not settle any Claim related to an Indemnifiable Event in any manner that would impose any Losses on the Indemnitee without the Indemnitee's prior written consent.

 

12.          Duration . All agreements and obligations of the Company contained herein shall continue during the period that Indemnitee is a director or officer of the Company (or is serving at the request of the Company as a director, officer, employee, member, trustee or agent of another Enterprise) and shall continue thereafter (i) so long as Indemnitee may be subject to any possible Claim relating to an Indemnifiable Event (including any rights of appeal thereto) and (ii) throughout the pendency of any proceeding (including any rights of appeal thereto) commenced by Indemnitee to enforce or interpret his or her rights under this Agreement, even if, in either case, he or she may have ceased to serve in such capacity at the time of any such Claim or proceeding.

 

13.          Non-Exclusivity . The rights of Indemnitee hereunder will be in addition to any other rights Indemnitee may have under the Constituent Documents, the General Corporation Law of the State of Delaware, any other contract or otherwise (collectively, “ Other Indemnity Provisions ”); provided, however, that (a) to the extent that Indemnitee otherwise would have any greater right to indemnification under any Other Indemnity Provision, Indemnitee will be deemed to have such greater right hereunder and (b) to the extent that any change is made to any Other Indemnity Provision which permits any greater right to indemnification than that provided under this Agreement as of the date hereof, Indemnitee will be deemed to have such greater right hereunder. The Company will not adopt any amendment to any of the Constituent Documents the effect of which would be to deny, diminish or encumber Indemnitee's right to indemnification under this Agreement or any Other Indemnity Provision.

 

  11  

 

 

14.          Liability Insurance . For the duration of Indemnitee's service to the Company, and thereafter for so long as Indemnitee shall be subject to any pending Claim relating to an Indemnifiable Event, the Company shall use commercially reasonable efforts (taking into account the scope and amount of coverage available relative to the cost thereof) to continue to maintain in effect policies of directors' and officers' liability insurance providing coverage that is at least substantially comparable in scope and amount to that provided by the Company's current policies of directors' and officers' liability insurance. In all policies of directors' and officers' liability insurance maintained by the Company, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company's directors, if Indemnitee is a director, or of the Company's officers, if Indemnitee is an officer (and not a director) by such policy. Upon request, the Company will provide to Indemnitee copies of all directors' and officers' liability insurance applications, binders, policies, declarations, endorsements and other related materials.

 

15.          No Duplication of Payments . The Company shall not be liable under this Agreement to make any payment to Indemnitee in respect of any Losses to the extent Indemnitee has otherwise received payment under any insurance policy, the Constituent Documents, Other Indemnity Provisions or otherwise of the amounts otherwise indemnifiable by the Company hereunder.

 

16.          Subrogation . In the event of payment to Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee. Indemnitee shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

 

17.          Amendments . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be binding unless in the form of a writing signed by the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.

 

18.          Binding Effect . This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part of the business and/or assets of the Company, by written agreement in form and substances satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

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19.          Severability . The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any portion thereof) are held by a court of competent jurisdiction to be invalid, illegal, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law.

 

20.          Notices . All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed, by postage prepaid, certified or registered mail.

 

21.          Governing Law and Forum . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to its principles of conflicts of laws. The Company and Indemnitee hereby irrevocably and unconditionally: (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court and not in any other state or federal court in the United States, (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, and (c) waive, and agree not to plead or make, any claim that the Delaware Court lacks venue or that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

 

22.          Headings . The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.

 

23.          Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original, but all of which together shall constitute one and the same Agreement.

 

[SIGNATURE PAGE FOLLOWS]

  13  

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

  PLX PHARMA INC.  
       
  By:    
       
  Name:  
  Title:  

 

  INDEMNITEE  
       
     
       
  Name:    
  Address:    
     
     

 

 

 

Exhibit 16.1

 

April 19, 2017

 

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549-7561

 

Dear Sirs/Madams:

 

We have read the statements made by PLx Pharma Inc. (formerly Dipexium Pharmaceuticals, Inc.), which we understand will be filed with the Securities and Exchange Commission, pursuant to Item 4.01 of Form 8-K, as part of the Form 8-K of PLx Pharma Inc. (formerly Dipexium Pharmaceuticals, Inc.) dated April 19, 2017. We agree with the statements concerning our Firm in such Form 8-K.

 

Very truly yours,

 

/s/ CohnReznick LLP

 

 

 

Exhibit 23.1

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

We hereby consent to the incorporation by reference in Dipexium Pharmaceuticals, Inc.’s Registration Statements on Form S-3 (No. 333-204830) and Form S-8 (No. 333-196824 and 333-212421) of our report dated January 17, 2017 relating to the consolidated financial statements of PLx Pharma, Inc. as of December 31, 2016 and 2015 and the years then ended included in this Current Report on Form 8-K.

 

 

/s/ GBH CPAs, PC

 

 

GBH CPAs, PC

www.gbhcpas.com

Houston, Texas

 

April 19, 2017

 

 

 

 

 

Exhibit 99.1

 

 

PLx Pharma and Dipexium Pharmaceuticals Complete Merger

— PLx to focus on commercialization of Aspertec —

 

HOUSTON, TX – April 19, 2017 – PLx Pharma Inc. (NASDAQ: PLXP) (“PLx”), a late-stage specialty pharmaceutical company focused on commercializing two patent-protected products: Aspertec 325 mg and Aspertec 81 mg (referred to together as “Aspertec”™), has completed its previously announced merger with Dipexium Pharmaceuticals, Inc. (“Dipexium”), effective as of April 19, 2017. The combined company—which changed its name to PLx Pharma Inc. immediately following the merger—will begin trading on the NASDAQ Capital Market under the symbol “PLXP” on April 20, 2017.

 

“With the successful completion of this merger, we have strengthened the foundation of PLx and are now well positioned to advance our development efforts for Aspertec and prepare for commercialization of this important cardiovascular product,” stated Natasha Giordano, President and Chief Executive Officer of PLx.

 

PLx will initially focus on completion of manufacturing scale-up and label finalization for its FDA approved Aspertec 325 mg aspirin dosage form, and filing of a supplemental new drug application (“sNDA”) for Aspertec 81 mg maintenance dose form. Aspertec is being developed to provide high-risk cardiovascular and stroke patients with more reliable and predictable antiplatelet efficacy as compared to enteric coated aspirin, while also reducing the adverse gastric events common in an acute setting.

 

In connection with the completion of the merger, Dipexium effected a reverse stock split of its issued and outstanding shares of common stock at a ratio of 1-for-8. The holders of shares of PLx common stock outstanding immediately prior to the merger received, as merger consideration, shares of common stock in the combined company representing 76.75% of the outstanding shares of the combined company. Immediately following the merger, there were 6,037,824 shares of common stock of the combined company outstanding.

 

The combined company will continue to operate under the leadership of the PLx management team with Michael Valentino serving as Executive Chairman of the Board of Directors and Natasha Giordano serving as President and Chief Executive Officer.

 

About Aspertec

Aspertec is an approved aspirin product developed to provide reliable and predictable antiplatelet activity. PLx is focused on completing manufacturing scale-up and label finalization for Aspertec 325 mg aspirin dosage form and preparing an sNDA for Aspertec 81 mg maintenance dose form. 

 

About PLx Pharma Inc.

PLx Pharma Inc. is a late-stage specialty pharmaceutical company focused on developing its clinically validated and patent-protected PLxGuard™ delivery system to provide safe and effective aspirin products. The PLxGuard delivery system works by targeting delivery of active pharmaceutical ingredients (API) to various portions of the gastrointestinal (GI) tract. PLx believes this has the potential to improve the absorption of many drugs currently on the market or in development, and to reduce acute GI side effects—including erosions, ulcers and bleeding—associated with aspirin and ibuprofen, and potentially other drugs.

 

 

 

 

To learn more about PLx Pharma Inc. and its pipeline, please visit www.plxpharma.com .

 

Forward Looking Statements

Any statements made in this press release relating to future financial or business performance, conditions, plans, prospects, trends, or strategies and other financial and business matters, including without limitation, the prospects for commercializing or selling any products or drug candidates, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, when or if used in this press release, the words “may,” “could,” “should,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “predict” and similar expressions and their variants, as they relate to PLx may identify forward-looking statements. PLx cautions that these forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Important factors that may cause actual results to differ materially from the results discussed in the forward-looking statements or historical experience include risks and uncertainties, including the failure by PLx to secure and maintain relationships with collaborators; risks relating to clinical trials; risks related to any litigation or post-closing disputes arising out of matters related to PLx’s merger with Dipexium; risks relating to the commercialization, if any, of PLx’s proposed product candidates (such as marketing, regulatory, product liability, supply, competition, and other risks); dependence on the efforts of third parties; dependence on intellectual property and risks that PLx may lack the financial resources and access to capital to fund proposed operations. Further information on the factors and risks that could affect PLx’s business, financial conditions and results of operations are contained in PLx’s filings with the U.S. Securities and Exchange Commission (SEC), which are available at www.sec.gov. Other risks and uncertainties are more fully described in Dipexium’s Registration Statement on Form S-4 filed with the SEC, and in other filings that PLx will make going forward. The forward-looking statements represent PLx’s estimate as of the date hereof only, and PLx specifically disclaims any duty or obligation to update forward-looking statements.

 

Contact:

Investor Relations

Lisa M. Wilson

T: 212-452-2793

E : lwilson@insitecony.com

 

Media:

Ann Smith

Coyne Public Relations

T: 973-588-2385

E: asmith@coynepr.com

 

# # #

 

 

Exhibit 99.2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
PLx Pharma Inc.
Houston, TX

We have audited the accompanying consolidated balance sheets of PLx Pharma Inc. as of December 31, 2016 and 2015, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for each of the years then ended. PLx Pharma Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PLx Pharma Inc. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that PLx Pharma Inc. will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, PLx Pharma Inc. has suffered recurring losses from operations and has insufficient working capital that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ GBH CPAs, PC
 
GBH CPAs, PC
www.gbhcpas.com
Houston, Texas
January 17, 2017

1

 
 

PLx Pharma Inc.
 
CONSOLIDATED BALANCE SHEETS

   
  December 31,
2016 		  December 31,
2015
ASSETS
                 
CURRENT ASSETS
                 
Cash and cash equivalents   $ 59,335     $ 91,657  
Accounts receivable     5,077       —  
Inventory     116,726       —  
Prepaid expenses     4,652       18,446  
Security deposit     4,064       4,064  
TOTAL CURRENT ASSETS     189,854       114,167  
NON-CURRENT ASSETS
                 
Property and equipment, net     426,634       429,959  
TOTAL ASSETS   $ 616,488     $ 544,126  
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
                 
CURRENT LIABILITIES
                 
Accounts payable and accrued liabilities   $ 862,995     $ 229,969  
Accrued interest     64,781       —  
Accrued interest – related parties     30,344       —  
Convertible notes payable     1,297,700       —  
Convertible notes payable – related parties     480,000       —  
TOTAL CURRENT LIABILITIES     2,735,820       229,969  
NON-CURRENT LIABILITIES
                 
Deferred revenue     200,000       200,000  
TOTAL LIABILITIES     2,935,820       429,969  
Commitments and contingencies
                 
STOCKHOLDERS’ EQUITY (DEFICIT)
                 
Preferred stock; $0.001 par value; 10,000,000 shares authorized; none issued and outstanding     —       —  
Common stock; $0.001 par value; 100,000,000 shares authorized; 5,565,823 shares issued and outstanding     5,566       5,566  
Additional paid-in capital     49,660,619       47,188,830  
Accumulated deficit     (51,985,517 )       (47,080,239 )  
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)     (2,319,332 )       114,157  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)   $ 616,488     $ 544,126  

 
 
The accompanying notes are an integral part of these financial statements.

2

 
 

PLx Pharma Inc.
 
CONSOLIDATED STATEMENTS OF OPERATIONS

   
  For the Year Ended December 31,
     2016   2015
REVENUES:
                 
Federal grant   $ —     $ 171,592  
License revenue     20,000       —  
TOTAL REVENUES     20,000       171,592  
OPERATING EXPENSES:
                 
Research and development     78,656       166,726  
General and administrative     4,752,068       1,626,001  
TOTAL OPERATING EXPENSES     4,830,724       1,792,727  
OPERATING LOSS     (4,810,724 )       (1,621,135 )  
OTHER INCOME (EXPENSE):
                 
Interest income     571       1,349  
Interest expense     (95,125 )       (441,411 )  
Loss on debt extinguishment     —       (1,588,937 )  
TOTAL OTHER INCOME (EXPENSE)     (94,554 )       (2,028,999 )  
NET LOSS   $ (4,905,278 )     $ (3,650,134 )  
Net loss per common share – basic and diluted   $ (0.88 )     $ (0.67 )  
Weighted average shares of common stock – basic and diluted     5,565,823       5,428,595  

 
 
The accompanying notes are an integral part of these financial statements.

3

 
 

PLx Pharma Inc.
 
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

         
  Common   Additional
paid-in
capital 		  Accumulated
deficit 		  Total
stockholders’
equity
(deficit)
  Shares   Amount
Balance at December 31, 2014     5,316,627     $ 5,317     $ 43,944,043     $ (43,430,105 )     $ 519,255  
Debt discount from incentive units issued to note holders     —       —       388,224       —       388,224  
Issuance of common stock for conversion of convertible bridge notes and accrued interest     249,196       249       2,441,875       —       2,442,124  
Equity-based compensation     —       —       414,688       —       414,688  
Net loss     —       —       —       (3,650,134 )       (3,650,134 )  
Balance at December 31, 2015     5,565,823       5,566       47,188,830       (47,080,239 )       114,157  
Equity-based compensation     —       —       2,471,789       —       2,471,789  
Net loss     —       —       —       (4,905,278 )       (4,905,278 )  
Balance at December 31, 2016     5,565,823     $ 5,566     $ 49,660,619     $ (51,985,517 )     $ (2,319,332 )  

 
 
The accompanying notes are an integral part of these financial statements.

4

 
 

PLx Pharma Inc.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS

   
  For the Year Ended December 31,
     2016   2015
CASH FLOWS FROM OPERATING ACTIVITIES
                 
Net loss   $ (4,905,278 )     $ (3,650,134 )  
Adjustments to reconcile net loss to net cash used in operating activities:
                 
Depreciation     3,325       7,380  
Equity-based compensation     2,471,789       414,688  
Amortization of debt discount     —       388,224  
Loss on extinguishment of debt     —       1,588,937  
Change in operating assets and liabilities:
                 
Accounts receivable     (5,077 )       82,599  
Inventory     (116,726 )       —  
Prepaid expenses     13,794       (14,562 )  
Accounts payable and accrued liabilities     633,026       27,426  
Accrued interest     64,781       —  
Accrued interest – related parties     30,344       —  
Deferred revenue     —       200,000  
Net cash used in operating activities     (1,810,022 )       (955,442 )  
CASH FLOWS FROM FINANCING ACTIVITIES
                 
Proceeds from issuance of short-term notes payable     1,297,700       620,000  
Proceeds from issuance of short-term notes payable – related parties     480,000       180,000  
Net cash provided by financing activities     1,777,700       800,000  
NET DECREASE IN CASH AND CASH EQUIVALENTS     (32,322 )       (155,442 )  
Cash and cash equivalents, beginning of year     91,657       247,099  
Cash and cash equivalents, end of year   $ 59,335     $ 91,657  
SUPPLEMENTAL INFORMATION
                 
Cash paid during the year for:
                 
Income taxes   $ —     $ —  
Interest   $ —     $ —  
NON-CASH FINANCING TRANSACTIONS
                 
Debt discount from incentive units issued to note holders   $ —     $ 388,224  
Debt and accrued interest converted to common stock   $ —     $ 853,187  

 
 
The accompanying notes are an integral part of these financial statements.

5

 
 

PLx Pharma Inc.
 
Notes to Consolidated Financial Statements

NOTE 1 — BACKGROUND AND ORGANIZATION

Business Operations

PLx Pharma Inc. and its subsidiary (the “Company”) is a late stage startup specialty pharmaceutical company focusing initially on commercializing two patent-protected lead products: Aspertec TM 325 mg and Aspertec TM 81 mg (referred to together as “Aspertec”). Aspertec 325 mg is approved by the U.S. Food and Drug Administration for over-the-counter distribution and is the first ever liquid fill aspirin capsule.

PLx Pharma Inc. participates in the U.S. Department of Health and Human Services, National Institutes of Health (“NIH”) and the U.S. Department of the Army Research and Development Programs.

PLX Chile SpA was formed on September 12, 2011 as a wholly-owned subsidiary of the Company and engages in the development and research of pharmaceutical formulations in Chile.

Initial Organization and Conversion to Limited Liability Company

PLx Pharma Inc. (Texas), the predecessor to PLx Pharma LLC, was incorporated in the State of Texas on November 12, 2002 under the name of ZT MediTech, Inc. (“ZTM”). In December 2002, ZTM changed its name to GrassRoots Pharmaceuticals, Inc. (“GrassRoots”). Business commenced upon initial capitalization on December 4, 2002. In March 2003, GrassRoots changed its name to PLx Pharma Inc.

On December 31, 2013, PLx Pharma Inc. (Texas) elected a plan of conversion from a corporation to a Texas limited liability company and changed its name to PLx Pharma LLC. Concurrently, PLx Pharma LLC changed its taxing structure for U.S. federal and state income tax from a C Corporation to a partnership, and adopted a new Limited Liability Company Agreement for operations of the entity.

Pursuant to the conversion, shares of common and preferred stock of PLx Pharma Inc. (Texas) were exchanged for an equivalent number of common and preferred member units in PLx Pharma LLC. As further discussed in Notes 4 and 8, the various classes of preferred stock and their associated rights, principally relating to distributions and liquidation values but excluding conversion features, were retained in each of the preferred member units in the exchange.

Reincorporation

On July 21, 2015, PLx Pharma LLC’s shareholders voted to approve a Plan of Conversion whereby PLx Pharma LLC re-incorporated into a Delaware based corporation, PLx Pharma Inc. (Delaware) (the “Reincorporation”) effective July 27, 2015. In conjunction with the conversion, each Preferred Unit was converted on a one for two-sevenths basis into 5,013,690 shares of common stock. Additionally, each Common Unit was converted on a one for one-fourteenth basis into 302,937 shares of common stock.

In connection with the conversion, the $800,000 of notes executed in early 2015 plus accrued interest of $53,187 and the 1,313,840 Incentive Units issued in conjunction with the notes were exchanged for 249,196 shares of common stock. The note exchange was accounted for as an extinguishment of debt with the fair market value of the common stock issued treated as an increase to common equity and an associated loss on extinguishment of debt of $1,588,937 recorded in July 2015. Finally, all the remaining Incentive Units outstanding were cancelled in conjunction with the conversion.

The presentation of the Company’s financial statements gives effect to the Reincorporation.

NOTE 2 — GOING CONCERN

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has suffered recurring losses from operations and has insufficient working capital as of December 31, 2016. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders, the Company’s ability to obtain necessary equity or debt financing to

6

 
 

PLx Pharma Inc.
 
Notes to Consolidated Financial Statements

NOTE 2 — GOING CONCERN  – (continued)

continue operations, and ultimately the Company’s ability to commercialize Aspertec. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company has announced an Agreement and Plan of Merger and Reorganization dated December 22, 2016 among PLx Pharma Inc., Dipexium Pharmaceuticals, Inc. (“Dipexium”) and Dipexium Acquisition Corp. whereby the Company will survive as the public reporting company and the Company’s shareholders will control the combined company. The closing of the merger is conditioned upon the effectiveness of a registration statement to be filed with the Securities and Exchange Commission covering the Dipexium shares issued to the Company’s shareholders and the approval of both the Company’s and Dipexium’s shareholders.

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of PLx Pharma Inc. and its wholly-owned subsidiary, PLx Chile SpA. All significant intercompany balances and transactions have been eliminated within the consolidated financial statements.

Basis of Accounting

The Company’s consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Foreign Currency Remeasurement

The functional currency of PLx Chile SpA has been designated as the U.S. dollar as its debt financing is repayable in the same currency. All statement of balance sheet accounts of PLx Chile SpA are remeasured to U.S. dollars using rates of exchange in effect at the balance sheet date or by historical exchange rates in the case of nonmonetary assets and liabilities. The statement of operations is remeasured at average exchange rates during the period or, for amounts in the statement of operations related to nonmonetary assets and liabilities, at the same rate as used for the related balance sheet transaction. Adjustments, if any, arising from the remeasurement to U.S. dollars are included in the consolidated statement of operations.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains cash and cash equivalents in a financial institution that at times exceeds federally insured limits. Management believes that the Company’s credit risk exposure is mitigated by the financial strength of the banking institution in which the deposits are held. As of December 31, 2016, the Company’s U.S. deposits of $44,407 were fully insured by the Federal Deposit Insurance Corporation.

7

 
 

PLx Pharma Inc.
 
Notes to Consolidated Financial Statements

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

Allowance for Accounts Receivable

An allowance for uncollectible accounts receivables is estimated based on historical experience, credit quality, age of the accounts receivable balances, and economic conditions that may affect a customer’s ability to pay.

Inventories

Inventories are stated at the lower of cost or market, using the average cost method. Inventory as of December 31, 2016 is raw materials for the manufacture of Aspertec. We regularly review inventory quantities on hand and the estimated utility of our inventory. If our review indicates a reduction in utility below carrying value, we reduce our inventory to a new cost basis.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company has categorized all investments recorded at fair value based upon the level of judgment associated with the inputs used to measure their fair value.

Hierarchical levels, directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

• Level 1:  Quoted prices in active markets for identical assets or liabilities that the organization has the ability to access at the reporting date.
• Level 2:  Inputs other than quoted prices included in Level 1, which are either observable or that can be derived from or corroborated by observable data as of the reporting date.
• Level 3:  Inputs include those that are significant to the fair value of the asset or liability and are generally less observable from objective resources and reflect the reporting entity’s assumptions about the assumptions market participants would use in pricing the asset or liability.

The Company’s financial instruments (cash and cash equivalents, receivables, accounts payable and accrued liabilities) are carried in the consolidated balance sheet at amounts which reasonably approximate their fair values based on their short-term nature.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. The Company capitalizes additions that have a tangible future economic life. Maintenance and repairs that do not improve or extend the lives of property and equipment are charged to operations as incurred. Depreciation expense is computed using the straight-line method over the estimated useful lives of each class of depreciable assets.

Impairment of Long-Lived Assets

Management reviews property and equipment for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable. If there is an indication of impairment, management prepares an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value.

Revenue Recognition

The Company recognizes revenues when persuasive evidence of an arrangement exists, delivery has occurred or services have been provided, the purchase price is fixed or determinable and collectability is reasonably assured.

8

 
 

PLx Pharma Inc.
 
Notes to Consolidated Financial Statements

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

The Company generally receives cost reimbursement-based federal grants. For these grants, revenues are based on internal and subcontractor costs incurred that are specifically covered under reimbursement arrangements, and where applicable, an additional facilities and administrative rate that provides funding for overhead expenses. These revenues are recognized as grant-related expenses are incurred by the Company or its subcontractors. The grant agreements with federal government agencies generally provide that, upon completion of a technology development program, the funding agency is granted a royalty-free license to use any technology developed during the course of the program for its own purposes, but not any preexisting technology that the Company use in connection with the program. The Company retains all other rights to use, develop, and commercialize the technology.

Joint development revenue is recognized when the related expenditure is made under the reimbursement provisions of the sponsored research agreement or activities under a patent license agreement. License revenue is recognized over straight-line basis during the license period.

Research and Development Expenses

Costs incurred in connection with research and development activities are expensed as incurred. Research and development expenses consist of direct and indirect costs associated with specific projects and include fees paid to various entities that perform research related services for the Company.

Equity-Based Compensation

The Company recognizes expense in the consolidated statements of operations for the fair value of all stock-based/incentive unit-based compensation to key employees, nonemployee directors and advisors in the form of stock options/incentive units. The Company uses the Black-Scholes option valuation model to estimate the fair value of these awards. Compensation cost is amortized on a straight-line basis over the vesting period for each respective award. The Company estimates forfeitures and adjusts this estimate periodically based on actual forfeitures.

Income Taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred income taxes are recognized for the future tax consequences attributed to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date.

Effective December 31, 2013 and prior to the Reincorporation, the Company, with the consent of its stockholders, elected to be taxed as a partnership under the Internal Revenue Code. In lieu of corporate income taxes, the Company’s members were taxed on their proportionate share of the Company’s taxable income.

As of the effective date of the partnership election and prior to the Reincorporation, future taxable income or deductions arising from differences between financial and tax bases of the Company’s assets and liabilities were recognized in the tax returns of the individual shareholders; as such, any deferred income taxes prior to the partnership election recorded by the Company were eliminated at December 31, 2013. However, as the Company had provided an allowance against its net deferred tax assets, there was no effect on the accompanying consolidated financial statements. The Company has determined that it is unlikely that any tax will arise from “built-in gains” and, accordingly, no provision has been made for any income tax liability associated with “built-in gains” at the date of the partnership election.

9

 
 

PLx Pharma Inc.
 
Notes to Consolidated Financial Statements

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

The Company has adopted generally accepted accounting principles’ guidance on how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing tax benefits. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, and changes in tax law and new authoritative rulings.

Prior to December 31, 2013, the Company filed income tax returns in the U.S. Federal jurisdiction and the state of Texas. The Company is subject to the Texas franchise tax, commonly referred to as the Texas margin tax. The Texas margin tax has been determined to be an income tax for accounting purposes. The computation of the tax liability is based on Company revenues reduced by certain deductions. Management has determined this tax to be immaterial and accordingly, there is no provision for state income tax included in the accompanying consolidated financial statements.

The Company is no longer subject to U.S. Federal or state examinations by tax authorities for years before 2011.

Subsequent Events

The Company’s management reviewed all material events through January 17, 2017 (the date that the consolidated financial statements were available to be issued) for subsequent event disclosure consideration.

Recent Accounting Developments

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The guidance requires a company to recognize revenue when it transfers promised services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those services and requires enhanced disclosures. The new guidance is effective for annual and interim periods beginning after December 15, 2016, and early adoption is not permitted. On July 9, 2015, the FASB approved the deferral of the effective date of the new revenue guidance by one year to annual reporting periods beginning after December 15, 2017, with early adoption being permitted for annual periods beginning after December 15, 2016. The Company is currently evaluating the new guidance.

The Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.

NOTE 4 — ACCOUNTS RECEIVABLE

As of December 31, 2016, the Company had receivables owed from its joint development partner/licensee for reimbursements of related costs and a sublease tenant of its leased office space. All balances are considered fully collectible and therefore no allowance for doubtful accounts is considered necessary.

NOTE 5 — PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2016 and 2015 consisted of the following:

     
Asset Descriptions   Useful Lives   December 31,
2016 		  December 31,
2015
Computer equipment     4 years     $ 41,839     $ 41,839  
Lab equipment     5 years       8,655       8,655  
Office equipment, furniture and fixtures     5 years       18,302       18,302  
Manufacturing equipment     7 years       783,075       783,075  
Subtotal              851,871       851,871  
Less: Accumulated depreciation              (67,237 )       (63,912 )  
Less: Impairment           (358,000 )       (358,000 )  
Total property and equipment, net         $ 426,634     $ 429,959  

10

 
 

PLx Pharma Inc.
 
Notes to Consolidated Financial Statements

NOTE 5 — PROPERTY AND EQUIPMENT  – (continued)

Depreciation for the years ended December 31, 2016 and 2015 was $3,325 and $7,380, respectively.

In early 2014, management decided to sell certain manufacturing equipment that had not been placed in service. The equipment had an aggregate historical cost of $783,075. Based on estimated cash flows from the potential sale of the equipment, an impairment loss of $358,000 was recorded during the year ended December 31, 2013. Management withdrew the equipment from sale and plans to start using and depreciating the equipment during the initiation of pre-commercialization manufacturing activities in 2017.

NOTE 6 — NOTES PAYABLE AND NOTES PAYABLE — RELATED PARTIES

During January and February 2015, the Company borrowed $800,000 from 24 different noteholders in increments ranging from $10,000 to $100,000 including $180,000 from related parties. All notes accrued interest at 14% per annum with a maturity date of September 30, 2015. Total Incentive Units of 1,313,840 were issued to the lenders along with the notes as a part of the debt offering. Proceeds of $301,900 from third parties and proceeds of $86,324 from related parties were allocated to the incentive units and recorded as initial debt discount based on the relative fair values of the incentive units. For the year ended December 31, 2015, the Company recorded the entire debt discount of $388,224 as interest expense for the amortization of debt discount as the notes were extinguished in exchange for common stock in July 2015.

During 2016, the Company borrowed $1,777,700 from 32 different noteholders in increments ranging from $5,000 to $250,000 including $480,000 from related parties. All notes accrue interest at 8% per annum with a current maturity date of May 31, 2017. The notes provide for the conversion of principal and accrued interest at a fixed conversion price of $7.84 per share immediately prior to the proposed reverse merger with Dipexium Pharmaceuticals. At any time on or after May 31, 2017, or when certain events occur, such as a merger with another company, the noteholders can convert the notes to the Company’s common stock at $7.84 per share.

NOTE 7 — STOCK OPTIONS/INCENTIVE UNITS

Stock Options

On July 21, 2015, the Company adopted an Omnibus Stock Option Plan with an initial pool of 1,000,000 shares. As of December 31, 2016, 122,135 shares remained available for grant.

Following is a summary of options activities for the years ended December 31, 2016 and 2015:

     
  Number of
Underling Shares 		  Exercise Price   Weighted
Average
Remaining
Contractual Term
(Years)
Outstanding, December 31, 2014     —     $ —       —  
Granted     877,865              
Outstanding, December 31, 2015     877,865       9.80       9.62  
Granted     —              
Outstanding, December 31, 2016     877,865       9.80       8.62  
Exercisable, December 31, 2016     613,650                    

On July 22, 2015, in connection with the Reincorporation, the Company granted options to purchase 499,290 shares of the Company’s common stock to certain employees, members of scientific advisory board and consultants as a replacement of 1,972,500 incentive units previously issued. These options are exercisable at $9.80 per share and have a term of 10 years. Options to purchase 201,427 common shares have a vesting period of 2 to 3 years and options to purchase 142,587 common shares vested on January 1, 2016. Options to purchase 155,006 common shares originally vesting upon the effectiveness of the registration statement for a proposed initial public offering were amended and have vested in 2016. These options had an aggregate fair

11

 
 

PLx Pharma Inc.
 
Notes to Consolidated Financial Statements

NOTE 7 — STOCK OPTIONS/INCENTIVE UNITS  – (continued)

value of $3,440,890 calculated using the Black-Scholes model. Variables used in the Black-Scholes model include: (1) discount rate of 1.69% (2) expected life range from 5.2 – 6.5 years, (3) expected volatility of 83.85%, and (4) zero expected dividends. The fair value of these options was $603,895 greater than the fair value of the replaced incentive units at July 22, 2015. As such, the $603,895 incremental cost and $297,310 of unamortized incentive unit cost at July 22, 2015 are being amortized over the vesting period of these options.

In July and September 2015, the Company issued options to purchase 317,857 shares of the Company’s common stock to its employees. These options have an exercise price of $9.80 per share and a term of 10 years. Options to purchase 296,428 common shares have a vesting period of 1 to 3 years. Options to purchase 21,429 common shares originally vesting upon the effectiveness of the registration statement for a proposed initial public offering were amended and vested on July 22, 2016. The options had an aggregate fair value of $2,104,960 that was calculated using the Black-Scholes model. Variables used in the Black-Scholes model include: (1) discount rate range from 1.53% – 1.89% (2) expected life range from 5.2 – 6.5 years, (3) expected volatility of 83.85%, and (4) zero expected dividends.

In July, August and September 2015, the Company also issued options to purchase 60,718 shares of the Company’s common stock to its then current board members, board member nominees and consultants. These options have an exercise price of $9.80 per share and a term of 10 years. Options to purchase 4,287 common shares vested immediately and options to purchase 6,428 have a vesting period of 1 to 3 years. Options to purchase 50,003 common shares originally vesting upon the effectiveness of the registration statement for a proposed initial public offering were amended and have vested in 2016. The options had an aggregate fair value of $399,806 that was calculated using the Black-Scholes model. Variables used in the Black-Scholes model include: (1) discount rate range from 1.37 – 1.75% (2) expected life range from 5.1 – 6.4 years, (3) expected volatility of 83.85%, and (4) zero expected dividends.

On May 12, 2016, the Company modified certain options previously issued to its executives. After the modification, options to purchase 150,000 common shares originally vesting on the closing date of an initial public offering instead vested on July 22, 2016. The modified options had an aggregate fair value of $948,117 that was calculated using the Black-Scholes model on the modification day. Variables used in the Black-Scholes model include: (1) discount rate of 1.24%; (2) expected life of 4.69 years; (3) expected volatility of 83.52%, and (4) zero expected dividends. The Company amortized the entire value during 2016.

On December 22, 2016, the Company modified certain options previously issued to its board members and other advisors and consultants. After the modification, options to purchase 76,438 common shares originally vesting on the closing date of an initial public offering vested immediately. The modified options had an aggregate fair value of $477,065 that was calculated using the Black-Scholes model on the modification day. Variables used in the Black-Scholes model include: (1) discount rate of 2.04%; (2) expected life of 4.29 years; (3) expected volatility of 84.84%, and (4) zero expected dividends. The Company expensed the value at the time of the modification.

As of December 31, 2016, the Company has $1,382,804 unamortized expense related to unvested options.

Incentive Units

Prior to the Reincorporation, the Company granted Incentive Units to certain of the Company’s employees and consultants. During the year ended December 31, 2015, the Company issued 1,313,840 Incentive Units to 24 noteholders. See Note 6. Upon the Reincorporation discussed in Note 1, the Incentive Units issued to the noteholders were exchanged for 75,077 common shares upon the conversion of the notes.

During the years ended December 31, 2016 and 2015, the Company recorded $2,471,789 and $414,688, respectively, in compensation expense related to the stock options and incentive units.

12

 
 

PLx Pharma Inc.
 
Notes to Consolidated Financial Statements

NOTE 8 — COMMITMENTS AND CONTINGENCIES

Lease Agreement

The Company presently leases office space under an operating lease agreement, expiring on December 31, 2017. The office lease requires the Company to pay for its portion of taxes, maintenance and insurance. Rental expense under this agreement was $62,349 and $47,478 for the years ended December 31, 2016 and 2015, respectively.

Future minimum lease payments under non-cancelable operating leases with terms expiring in 2017 are $42,174.

Patent License Agreement with the Board of Regents of the University of Texas (NSAIDs)

On January 8, 2003, the Company entered into a patent license agreement with the Board of Regents of The University of Texas System, under which it acquired an exclusive license for several patents and patent applications both inside and outside of the United States relating to gastrointestinal safer formulations of nonsteroidal anti-inflammatory drug (“NSAIDs”). Additionally, the Company acquired worldwide rights to commercialize licensed products and allow for the Company to grant sublicenses subject to royalty payments.

Under terms of the agreement, the Company is responsible for conducting clinical trials involving investigational use of a licensed product for the determination of metabolic and pharmacologic actions in humans, the side effects associated with increasing doses, examination of suspected indications, determination of the potential short-term side effects in humans and for establishing the safety, efficacy, labeled indications and risk-benefit profile in humans. The patent license agreement also requires the Company to provide reimbursement for all expenses incurred by The University of Texas Health Science Center at Houston for filing, prosecuting, enforcing and maintaining patent rights and requires an annual nonrefundable license management fee. In addition, the Company is obligated to pay certain milestone payments in future years relating to royalties resulting from the approval to sell licensed products and the resulting sales of such licensed products.

Development and Commercialization Agreement with Lee’s Pharmaceutical Holdings Limited

In March 2012, the Company entered into a development and commercialization license agreement with Lee’s Pharmaceutical Holdings Limited, Zhaoke Pharmaceutical (Heifei) Co. Ltd., and Zhaoke Pharmaceutical (Guangzhou) Co. Ltd. (collectively, “Lee’s Pharmaceutical”). The Company granted to Lee’s Pharmaceutical an exclusive royalty bearing license under licensed subject matter to commercialize marketed products using PL 2200 Aspirin technology within the People’s Republic of China.

On June 19, 2015, the Company and Lee’s Pharmaceutical entered into an amendment to the Development and Commercialization Agreement. Pursuant to the agreement, Lee’s Pharmaceutical paid the Company a $200,000 non-refundable advance payment of royalties in July 2015, which is being deferred until minimum or commercial royalties are expected to begin. This amount is included as deferred revenue as of December 31, 2016 and 2015.

NOTE 9 — RELATED PARTIES TRANSACTIONS

Since its inception in 2002, the Company has entered into sponsored research agreements with a stockholder that is the holder of various patents and patent applications for which the Company has exclusive royalty bearing patent licenses as disclosed in Note 8. The Company paid $0 and approximately $134,000, respectively, to the related party in research and development activities as part of sponsored research agreements for federal programs during the years ended December 31, 2016 and 2015.

13

 
 

PLx Pharma Inc.
 
Notes to Consolidated Financial Statements

NOTE 10 — CONCENTRATIONS

For the year ended December 31, 2016, the Company’s revenues are all from one joint development partner. Federal grant funds amounted 100% of total revenue for the year ended December 31, 2015. For the year ended December 31, 2015, 18% of total expenses were paid to a service provider for legal services.

NOTE 11 — SUBSEQUENT EVENTS

In January 2017, the Company borrowed an additional $423,300 (including $108,300 from related parties) under its existing convertible note authority of up to $3 million.

On January 6, 2017, pursuant to the Merger Agreement with Dipexium, the Company borrowed $2 million from Dipexium. The loan accrues interest on all outstanding principal at a rate of 8% per annum and has a maturity date that is the later of (a) October 15, 2017, or (b) the date that is 270 days following the termination of the Merger Agreement, subject to acceleration in the event that (i) the Merger Agreement is terminated by Dipexium if PLx has breached any terms in the Merger Agreement such that the conditions to the closing of the merger would not be satisfied; and (ii) PLx thereafter consummates a financing of at least $10.0 million or conducts a reorganization, consolidation, or merger of PLx pursuant to which the holders of PLx’s securities prior to such transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction or the consummation of the sale, lease, transfer, conveyance or other disposition in one or a series of transactions, of all or substantially all of PLx’s assets, or PLx and its subsidiaries, taken as a whole, to any person or entity.

The loan is secured by a first priority perfected security interest in and lien on all right, title and interest of PLx in and to substantially all of its assets. Upon the occurrence of any of the following events that results in a termination of the Merger Agreement, any security interest created by the promissory note shall immediately cease to be effective:

• if the closing shall not have occurred on or before April 30, 2017 (or such later date as agreed to by the parties to the Merger Agreement) (the “outside date”), except that the right to so terminate the Merger Agreement will not be available to Dipexium or PLx if its failure to fulfill any obligation under the Merger Agreement has been a principal cause of, or resulted in the failure of the closing to occur by such date; and provided, further, however, that, in the event that a registration statement filed by Dipexium is still being reviewed or commented on by the SEC after March 15, 2017, either party shall be entitled to extend the outside date by an additional 60 days;
• if the Dipexium board of directors changes its recommendation to approve the issuance of shares of Dipexium common stock necessary to complete the merger;
• if Dipexium materially breaches its non-solicitation covenants in the Merger Agreement, or if Dipexium breaches any of its representations, warranties, covenants or other agreements contained in the Merger Agreement, which breach or failure would render the conditions precedent to PLx’s obligations under the Merger Agreement not to be satisfied and which breach is not cured within 30 days following written notice of such breach or by its nature or timing cannot be cured within that time; or
• if Dipexium enters into an agreement providing for a “superior proposal” as defined in the Merger Agreement.

14

 

Exhibit 99.3

 

PLX PHARMA Inc.

 

INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

  Page
Unaudited Consolidated Financial Statements  
   
Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016 F-1
   
Consolidated Statements of Operations for the Three Months Ended March 31, 2017 and 2016 F-2
   
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016 F-3
   
Notes to Consolidated Financial Statements F-4

 

 

 

 

PLx Pharma Inc.

UNAUDITED CONSOLIDATED balance sheets

 

    March 31,     December 31,  
    2017     2016  
ASSETS                
                 
CURRENT ASSETS                
Cash and cash equivalents   $ 425,785     $ 59,335  
Accounts receivable     3,827       5,077  
Inventory     290,061       116,726  
Contract manufacturing deposit     670,000       -  
Prepaid expenses     20,117       4,652  
Security deposit     4,064       4,064  
TOTAL CURRENT ASSETS     1,413,854       189,854  
                 
Property and equipment, net     498,731       426,634  
TOTAL ASSETS   $ 1,912,585     $ 616,488  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
                 
CURRENT LIABILITIES                
Accounts payable and accrued liabilities   $ 748,293     $ 862,995  
Accrued interest     135,041       64,781  
Accrued interest – related parties     41,641       30,344  
Convertible notes payable     1,757,700       1,297,700  
Convertible notes payable – related parties     588,300       480,000  
Note payable     2,000,000       -  
TOTAL CURRENT LIABILITIES     5,270,975       2,735,820  
                 
NON-CURRENT LIABILITIES                
Deferred revenue     200,000       200,000  
TOTAL LIABILITIES     5,470,975       2,935,820  
                 
Commitments and contingencies                
                 
STOCKHOLDERS' DEFICIT                
Preferred stock; $0.001 par value; 10,000,000 shares authorized; none issued and outstanding     -       -  
Common stock; $0.001 par value; 100,000,000 shares authorized; 5,565,823 shares issued and outstanding     5,566       5,566  
Additional paid-in capital     49,848,528       49,660,619  
Accumulated deficit     (53,412,484 )     (51,985,517 )
TOTAL STOCKHOLDERS' DEFICIT     (3,558,390 )     (2,319,332 )
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT   $ 1,912,585     $ 616,488  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

F- 1

 

 

PLx Pharma Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

 

    For the Three Months Ended March 31,  
    2017     2016  
             
OPERATING EXPENSES:                
Research and development   $ 128,339     $ 39,960  
General and administrative     1,217,071       851,569  
TOTAL OPERATING EXPENSES     1,345,410       891,529  
                 
OPERATING LOSS     (1,345,410 )     (891,529 )
                 
OTHER INCOME (EXPENSE):                
Interest income     -       69  
Interest expense     (81,557 )     (9,433 )
TOTAL OTHER INCOME (EXPENSE)     (81,557 )     (9,364 )
                 
NET LOSS   $ (1,426,967 )   $ (900,893 )
                 
Net loss per common share – basic and diluted   $ (0.26 )   $ (0.16 )
Weighted average shares of common stock - basic and diluted     5,565,823       5,565,823  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

F- 2

 

 

PLx Pharma Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    For the Three Months Ended March 31,  
    2017     2016  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net loss   $ (1,426,967 )   $ (900,893 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation     314       1,243  
Equity-based compensation     187,909       320,430  
Change in operating assets and liabilities:                
Accounts receivable     1,250       (5,879 )
Inventory     (173,335 )     -  
Contract manufacturing deposit     (670,000 )     -  
Prepaid expenses     (15,465 )     13,794  
Accounts payable and accrued liabilities     (114,702 )     (34,762 )
Accrued interest     70,260       5,887  
Accrued interest – related parties     11,297       3,546  
Net cash used in operating activities     (2,129,439 )     (596,634 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchases of property and equipment     (72,411 )     -  
Net cash used in investing activities     (72,411 )     -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from issuance of convertible notes payable     460,000       708,850  
Proceeds from issuance of convertible notes payable - related parties     108,300       387,500  
Proceeds from note payable     2,000,000       -  
Net cash provided by financing activities     2,568,300       1,096,350  
                 
NET INCREASE IN CASH AND CASH EQUIVALENTS     366,450       499,716  
Cash and cash equivalents, beginning of period     59,335       91,657  
Cash and cash equivalents, end of period   $ 425,785     $ 591,373  
                 
SUPPLEMENTAL INFORMATION                
Cash paid during the period for:                
Income taxes   $ -     $ -  
Interest   $ -     $ -  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

F- 3

 

 

PLx Pharma Inc.

Notes to Unaudited Consolidated Financial Statements

 

NOTE 1 – BACKGROUND AND ORGANIZATION

 

Business Operations

 

PLx Pharma Inc. and its subsidiary PLx Chile SpA (together the “Company”) is a late stage startup specialty pharmaceutical company focusing initially on commercializing two patent-protected lead products: Aspertec TM 325 mg and Aspertec TM 81 mg (referred to together as “Aspertec”). Aspertec 325 mg is approved by the U.S. Food and Drug Administration for over-the-counter distribution and is the first ever liquid fill aspirin capsule.

 

PLx Chile SpA was formed on September 12, 2011 as a wholly-owned subsidiary of the Company and engages in the development and research of pharmaceutical formulations in Chile.

 

Organization, Reincorporation, and Merger with Dipexium Pharmaceuticals, Inc.

 

PLx Pharma Inc. (Texas), the predecessor to PLx Pharma LLC, was incorporated in the State of Texas on November 12, 2002 under the name of ZT MediTech, Inc. (“ZTM”). In December 2002, ZTM changed its name to GrassRoots Pharmaceuticals, Inc. (“GrassRoots”). Business commenced upon initial capitalization on December 4, 2002. In March 2003, GrassRoots changed its name to PLx Pharma Inc.

 

On December 31, 2013, PLx Pharma Inc. (Texas) elected a plan of conversion from a corporation to a Texas limited liability company and changed its name to PLx Pharma LLC. Concurrently, PLx Pharma LLC changed its taxing structure for U.S. federal and state income tax from a C Corporation to a partnership, and adopted a new Limited Liability Company Agreement for operations of the entity. Pursuant to the conversion, shares of common and preferred stock of PLx Pharma Inc. (Texas) were exchanged for an equivalent number of common and preferred member units in PLx Pharma LLC. The various classes of preferred stock and their associated rights, principally relating to distributions and liquidation values but excluding conversion features, were retained in each of the preferred member units in the exchange.

 

On July 21, 2015, PLx Pharma LLC’s shareholders voted to approve a Plan of Conversion whereby PLx Pharma LLC re-incorporated into a Delaware based corporation, PLx Pharma Inc. (Delaware) (the “Reincorporation”) effective July 27, 2015. In conjunction with the conversion, each Preferred Unit was converted on a one for two-sevenths basis into 5,013,690 shares of common stock. Additionally, each Common Unit was converted on a one for one-fourteenth basis into 302,937 shares of common stock. In connection with the conversion, the $800,000 of notes executed in early 2015 plus accrued interest of $53,187 and the 1,313,840 Incentive Units issued in conjunction with the notes were exchanged for 249,196 shares of common stock. The note exchange was accounted for as an extinguishment of debt with the fair market value of the common stock issued treated as an increase to common equity and an associated loss on extinguishment of debt of $1,588,937 recorded in July 2015. Finally, all the remaining Incentive Units outstanding were cancelled in conjunction with the conversion.

 

On December 22, 2016, the Company announced an Agreement and Plan of Merger and Reorganization among PLx Pharma Inc., Dipexium Pharmaceuticals, Inc. (“Dipexium”) and Dipexium Acquisition Corp. (the “Merger”). The Merger closed on April 19, 2017. Pursuant to the terms of the Merger, after the consummation of the Merger, the Company is a wholly-owned subsidiary of Dipexium, and Dipexium (renamed PLx Pharma Inc.) is the continuing registrant and reporting company. Immediately after the Merger, the Company’s former shareholders own a majority of the voting common stock of the combined company and control the combined company’s board of directors, and the Company’s officers are now the officers of the combined company. The Merger will be accounted for as a reverse acquisition and the Company’s historical financial statements will replace Dipexium’s historical financial statements in future filings with the U.S. Securities and Exchange Commission (“SEC”). The Company has not finalized the accounting for the reverse acquisition.

 

F- 4

 

 

PLx Pharma Inc.

Notes to Unaudited Consolidated Financial Statements

 

NOTE 2 – LIQUIDITY AND GOING CONCERN

 

The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the ordinary course of business. The propriety of using the going-concern basis is dependent upon, among other things, the achievement of future profitable operations, the ability to generate sufficient cash from operations, and potential other funding sources, including cash on hand, to meet our obligations as they become due. The Company has suffered recurring losses from operations and has insufficient working capital as of March 31, 2017. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders, the Company’s ability to obtain necessary equity or debt financing to continue operations, and ultimately the Company’s ability to commercialize Aspertec. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. If adequate capital cannot be obtained on a timely basis and on satisfactory terms, the Company’s operations could be materially negatively impacted.

 

We believe, based on the operating cash requirements and capital expenditures expected for 2017, the Company's cash on hand at March 31, 2017 and the cash resources from the Dipexium merger, is adequate to fund operations for at least twelve months from the date that these financial statements were issued.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying interim consolidated financial statements are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC for interim financial information. Accordingly, they do not include all the information and footnotes required by U.S. Generally Accepted Accounting Principles (“GAAP”) for complete financial statements. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2016 previously filed with the SEC. In the opinion of management, the unaudited interim consolidated financial statements reflect all the adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of March 31, 2017 and the results of operations for the three months ended March 31, 2017 and 2016. The interim consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. The December 31, 2016 consolidated balance sheet was derived from the audited consolidated financial statements, but do not include all disclosures including notes required by GAAP for complete financial statements.

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of PLx Pharma Inc. and its wholly-owned subsidiary, PLx Chile SpA. All significant intercompany balances and transactions have been eliminated within the consolidated financial statements.

 

F- 5

 

 

PLx Pharma Inc.

Notes to Unaudited Consolidated Financial Statements

 

Basis of Accounting

 

The Company's condensed consolidated financial statements have been prepared on the accrual basis of accounting in accordance with GAAP. The Company operates in one business segment.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. In the accompanying consolidated financial statements, estimates are used for, but not limited to, equity-based compensation, allowance for inventory obsolescence, allowance for doubtful accounts, contingent liabilities, fair value and depreciable lives of long-lived assets, deferred taxes and associated valuation allowance and the classification of debt. Actual results could differ from those estimates.

 

Foreign Currency Remeasurement

 

The functional currency of PLx Chile SpA has been designated as the U.S. dollar as its debt financing is repayable in the same currency. All balance sheet accounts of PLx Chile SpA are remeasured to U.S. dollars using rates of exchange in effect at the balance sheet date or by historical exchange rates in the case of nonmonetary assets and liabilities. The statement of operations is remeasured at average exchange rates during the period or, for amounts in the statement of operations related to nonmonetary assets and liabilities, at the same rate as used for the related balance sheet transaction. Adjustments, if any, arising from the remeasurement to U.S. dollars are included in the consolidated statement of operations.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains cash and cash equivalents in a financial institution that at times exceeds federally insured limits. Management believes that the Company's credit risk exposure is mitigated by the financial strength of the banking institution in which the deposits are held. As of March 31, 2017, the Company had cash and cash equivalent balance of $162,136 in U.S. bank accounts that were not insured by the Federal Deposit Insurance Corporation.

 

Allowance for Accounts Receivable

 

An allowance for uncollectible accounts receivables is estimated based on historical experience, credit quality, age of the accounts receivable balances, and economic conditions that may affect a customer’s ability to pay. The allowance for uncollectible accounts was zero as of March 31, 2017 and December 31, 2016.

 

F- 6

 

 

PLx Pharma Inc.

Notes to Unaudited Consolidated Financial Statements

 

Inventories

 

Inventories are stated at the lower of cost or market, using the average cost method. Inventory as of March 31, 2017 and December 31, 2016 is raw materials for the manufacture of Aspertec. We regularly review inventory quantities on hand and the estimated utility of our inventory. If our review indicates a reduction in utility below carrying value, we reduce our inventory to a new cost basis.

 

Fair Value Measurements

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company has categorized all investments recorded at fair value based upon the level of judgment associated with the inputs used to measure their fair value.

 

Hierarchical levels, directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

 

· Level 1: Quoted prices in active markets for identical assets or liabilities that the organization has the ability to access at the reporting date.

 

· Level 2: Inputs other than quoted prices included in Level 1, which are either observable or that can be derived from or corroborated by observable data as of the reporting date.

 

· Level 3: Inputs include those that are significant to the fair value of the asset or liability and are generally less observable from objective resources and reflect the reporting entity's assumptions about the assumptions market participants would use in pricing the asset or liability.

 

The Company's financial instruments (cash and cash equivalents, receivables, accounts payable and accrued liabilities) are carried in the consolidated balance sheet at cost, which reasonably approximates fair value based on their short-term nature.

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation. The Company capitalizes additions that have a tangible future economic life. Maintenance and repairs that do not improve or extend the lives of property and equipment are charged to operations as incurred. Depreciation expense is computed using the straight-line method over the estimated useful lives of each class of depreciable assets.

 

Impairment of Long-Lived Assets

 

Management reviews property and equipment for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable. If there is an indication of impairment, management prepares an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value.

 

F- 7

 

 

PLx Pharma Inc.

Notes to Unaudited Consolidated Financial Statements

 

Revenue Recognition

 

The Company recognizes revenues when persuasive evidence of an arrangement exists, delivery has occurred or services have been provided, the purchase price is fixed or determinable and collectability is reasonably assured.

 

Research and Development Expenses

 

Costs incurred in connection with research and development activities are expensed as incurred. Research and development expenses consist of direct and indirect costs associated with specific projects and include fees paid to various entities that perform research related services for the Company.

 

Equity-Based Compensation

 

The Company recognizes expense in the consolidated statements of operations for the fair value of all stock-based/ incentive unit-based compensation to key employees, nonemployee directors and advisors in the form of stock options/ incentive units. The Company uses the Black-Scholes option valuation model to estimate the fair value of these awards. Compensation cost is amortized on a straight-line basis over the vesting period for each respective award. The Company estimates forfeitures and adjusts this estimate periodically based on actual forfeitures. The Company adopted new accounting guidance, effective January 1, 2017, with respect to equity-based compensation and related income tax aspects; such adoption did not have a material impact to the consolidated financial statements.

 

Income Taxes

 

Income taxes are accounted for under the asset and liability method. Under this method, deferred income taxes are recognized for the future tax consequences attributed to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date.

 

Effective December 31, 2013 and prior to the Reincorporation, the Company, with the consent of its stockholders, elected to be taxed as a partnership under the Internal Revenue Code. In lieu of corporate income taxes, the Company's members were taxed on their proportionate share of the Company's taxable income.

 

As of the effective date of the partnership election and prior to the Reincorporation, future taxable income or deductions arising from differences between financial and tax bases of the Company's assets and liabilities were recognized in the tax returns of the individual shareholders; as such, any deferred income taxes prior to the partnership election recorded by the Company were eliminated at December 31, 2013. However, as the Company had provided an allowance against its net deferred tax assets, there was no effect on the accompanying consolidated financial statements. The Company has determined that it is unlikely that any tax will arise from "built-in gains" and, accordingly, no provision has been made for any income tax liability associated with "built-in gains" at the date of the partnership election.

 

Prior to December 31, 2013, the Company filed income tax returns in the U.S. Federal jurisdiction and the state of Texas. The Company is subject to the Texas franchise tax, commonly referred to as the Texas margin tax. The Texas margin tax has been determined to be an income tax for accounting purposes. The computation of the tax liability is based on Company revenues reduced by certain deductions. Management has determined this tax to be immaterial and accordingly, there is no provision for state income tax included in the accompanying consolidated financial statements.

 

F- 8

 

 

PLx Pharma Inc.

Notes to Unaudited Consolidated Financial Statements

 

The Company is no longer subject to U.S. Federal or state examinations by tax authorities for years before 2011.

 

Subsequent Events

 

The Company’s management reviewed all material events through the date that the consolidated financial statements were available to be issued for subsequent event disclosure consideration. See Note 1 for discussion of the Merger.

 

Recent Accounting Developments

 

Recently Adopted Guidance

 

In August 2014, the FASB issued guidance for the disclosure of uncertainties about an entity’s ability to continue as a going concern. Under U.S. GAAP, continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. Previously, there was no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. This was issued to provide guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company adopted this pronouncement effective for the year ended December 31, 2016; the adoption did not have a material impact to the consolidated financial statements.

 

In March 2016, the FASB issued guidance simplifying the accounting for, and financial statement disclosure of, stock-based compensation awards. Under the guidance, all excess tax benefits and tax deficiencies related to stock-based compensation awards are to be recognized as income tax expenses or benefits in the income statement, and excess tax benefits should be classified along with other income tax cash flows in the operating activities section of the statement of cash flows. Under the guidance, companies can also elect to either estimate the number of awards that are expected to vest, or account for forfeitures as they occur. In addition, the guidance amends some of the other stock-based compensation awards guidance to more clearly articulate the requirements and cash flow presentation for withholding shares for tax-withholding purposes. The guidance is effective for reporting periods beginning after December 15, 2016, and early adoption is permitted, though all amendments of the guidance must be adopted in the same period. The adoption of certain amendments of the guidance must be applied prospectively, and adoption of the remaining amendments must be applied either on a modified retrospective basis or retrospectively to all periods presented. The Company adopted this guidance effective January 1, 2017 and it did not have a material impact on the consolidated financial statements.

 

In July 2015, the FASB issued guidance for the accounting for inventory. The main provisions are that an entity should measure inventory within the scope of this update at the lower of cost and net realizable value, except when inventory is measured using LIFO or the retail inventory method. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. In addition, the Board has amended some of the other guidance in Topic 330 to more clearly articulate the requirements for the measurement and disclosure of inventory. The amendments in this update for public business entities are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The amendments in this update should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company adopted this guidance effective January 1, 2017 and it did not have a material impact on the condensed consolidated financial statements.

 

F- 9

 

 

PLx Pharma Inc.

Notes to Unaudited Consolidated Financial Statements

 

In November 2015, the FASB issued accounting guidance to simplify the presentation of deferred taxes. Previously, U.S. GAAP required an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts. Under this guidance, deferred tax liabilities and assets will be classified as noncurrent amounts. The standard is effective for reporting periods beginning after December 15, 2016. The Company adopted this guidance effective January 1, 2017 and it did not have a material impact on the condensed consolidated financial statements.

 

Unadopted Guidance

 

In May 2014, the FASB issued guidance for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts in five steps: 1) identify the contract, 2) identify performance obligations, 3) determine the transaction price, 4) allocate the transaction price, and 5) recognize revenue. The new standard will result in enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue arising from contracts with customers. In August 2015, the FASB issued guidance approving a one-year deferral, making the standard effective for reporting periods beginning after December 15, 2017, with early adoption permitted only for reporting periods beginning after December 15, 2016. In March 2016, the FASB issued guidance to clarify the implementation guidance on principal versus agent considerations for reporting revenue gross rather than net, with the same deferred effective date. In April 2016, the FASB issued guidance to clarify the implementation guidance on identifying performance obligations and the accounting for licenses of intellectual property, with the same deferred effective date. In May 2016, the FASB issued guidance rescinding SEC paragraphs related to revenue recognition, pursuant to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force meeting. In May 2016, the FASB also issued guidance to clarify the implementation guidance on assessing collectability, presentation of sales tax, noncash consideration, and contracts and contract modifications at transition, with the same effective date. The Company is currently evaluating the impact, if any, that this guidance will have on the consolidated financial statements.

 

In February 2016, the FASB issued guidance for accounting for leases. The guidance requires lessees to recognize assets and liabilities related to long-term leases on the balance sheet, and expands disclosure requirements regarding leasing arrangements. The guidance is effective for reporting periods beginning after December 15, 2018, and early adoption is permitted. The guidance must be adopted on a modified retrospective basis, and provides for certain practical expedients. The Company is currently evaluating the impact, if any, that this guidance will have on the consolidated financial statements.

 

In June 2016, the FASB issued guidance with respect to measuring credit losses on financial instruments, including trade receivables. The guidance eliminates the probable initial recognition threshold that was previously required prior to recognizing a credit loss on financial instruments. The credit loss estimate can now reflect an entity's current estimate of all future expected credit losses. Under the previous guidance, an entity only considered past events and current conditions. The guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact, if any, that this guidance will have on the consolidated financial statements.

 

F- 10

 

 

PLx Pharma Inc.

Notes to Unaudited Consolidated Financial Statements

 

In August 2016, the FASB issued guidance on the classification of certain cash receipts and cash payments in the statement of cash flows, including those related to debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance, and distributions received from equity method investees. The guidance is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. The guidance must be adopted on a retrospective basis and must be applied to all periods presented, but may be applied prospectively if retrospective application would be impracticable. The Company is currently evaluating the impact, if any, that this guidance will have on the consolidated financial statements.

 

The Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying condensed consolidated financial statements.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

In early 2014, management decided to sell certain manufacturing equipment that had not been placed in service. The equipment had an aggregate historical cost of $783,075. Based on estimated cash flows from the potential sale of the equipment, an impairment loss of $358,000 was recorded during the year ended December 31, 2013. Management withdrew the equipment from sale and plans to start using and depreciating the equipment during the initiation of pre-commercialization manufacturing activities in 2017.

 

NOTE 5 – DEBT

 

Convertible Notes Payable and Convertible Notes Payable – Related Parties

 

During 2016 and the three months ended March 31, 2017, the Company borrowed $2,346,000 from 37 different lenders in increments ranging from $5,000 to $250,000, including $588,300 from related parties. All notes accrue interest at 8% per annum with a current maturity date of May 31, 2017. The notes provide for the conversion of principal and accrued interest at a fixed conversion price of $7.84 per share immediately prior to the proposed reverse merger with Dipexium. At any time on or after May 31, 2017, or when certain events occur, such as a merger with another company, the noteholders can convert the notes to the Company’s common stock at $7.84 per share.

 

Note Payable

 

On January 6, 2017, pursuant to the Merger Agreement with Dipexium, the Company borrowed $2 million from Dipexium. The loan accrues interest on all outstanding principal at a rate of 8% per annum and has a maturity date that is the later of (a) October 15, 2017, or (b) the date that is 270 days following the termination of the Merger Agreement, subject to acceleration in the event that (i) the Merger Agreement is terminated by Dipexium if PLx has breached any terms in the Merger Agreement such that the conditions to the closing of the merger would not be satisfied; and (ii) PLx thereafter consummates a financing of at least $10.0 million or conducts a reorganization, consolidation, or merger of PLx pursuant to which the holders of PLx’s securities prior to such transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction or the consummation of the sale, lease, transfer, conveyance or other disposition in one or a series of transactions, of all or substantially all of PLx’s assets, or PLx and its subsidiaries, taken as a whole, to any person or entity.

 

F- 11

 

 

PLx Pharma Inc.

Notes to Unaudited Consolidated Financial Statements

 

The loan is secured by a first priority perfected security interest in and lien on all right, title and interest of PLx in and to substantially all of its assets. Upon the occurrence of certain events that would have resulted in a termination of the Merger Agreement, any security interest created by the promissory note would have ceased to be effective. However, as the merger closed on April 19, 2017, those provisions are no longer applicable.

 

Total interest expense for the three months ended March 31, 2017 and 2016 was $81,557 and $9,433, respectively.

 

NOTE 6 – STOCK OPTIONS/ INCENTIVE UNITS

 

Stock Options

 

On July 21, 2015, the Company adopted an Omnibus Stock Option Plan with an initial pool of 1,000,000 shares. As of March 31, 2017 and December 31, 2016, options to acquire 877,865 shares of common stock remain outstanding, 642,091 of which are exercisable at March 31, 2017. At March 31, 2017, 122,135 shares remained available for grant.

 

On May 12, 2016, the Company modified certain options previously issued to its executives. After the modification, options to purchase 150,000 common shares originally vesting on the closing date of an initial public offering instead vested on July 22, 2016. The modified options had an aggregate fair value of $948,117 that was calculated using the Black-Scholes model on the modification day. Variables used in the Black-Scholes model include: (1) discount rate of 1.24%; (2) expected life of 4.69 years; (3) expected volatility of 83.52%, and (4) zero expected dividends. The Company amortized the entire value during the second and third quarters of 2016.

 

On December 22, 2016, the Company modified certain options previously issued to its board members and other advisors and consultants. After the modification, options to purchase 76,438 common shares originally vesting on the closing date of an initial public offering vested immediately. The modified options had an aggregate fair value of $477,065 that was calculated using the Black-Scholes model on the modification day. Variables used in the Black-Scholes model include: (1) discount rate of 2.04%; (2) expected life of 4.29 years; (3) expected volatility of 84.84%, and (4) zero expected dividends. The Company expensed the value at the time of the modification.

 

As of March 31, 2017, the Company has $1,194,896 unamortized expense related to unvested options.

 

During the quarters ended March 31, 2017 and 2016, the Company recorded $187,909 and $320,430, respectively, in compensation expense related to the stock options.

 

NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

Lease Agreement

 

The Company presently leases office space under an operating lease agreement, expiring on December 31, 2017. The office lease requires the Company to pay for its portion of taxes, maintenance and insurance. Rental expense under this agreement was $10,971 and $13,957 for the quarters ended March 31, 2017 and 2016, respectively.

 

Future minimum lease payments under non-cancelable operating leases with terms expiring in 2017 are $43,430.

 

F- 12

 

 

PLx Pharma Inc.

Notes to Unaudited Consolidated Financial Statements

 

Patent License Agreement with the Board of Regents of the University of Texas (NSAIDs)

 

On January 8, 2003, the Company entered into a patent license agreement with the Board of Regents of The University of Texas System, under which it acquired an exclusive license for several patents and patent applications both inside and outside of the United States relating to gastrointestinal safer formulations of nonsteroidal anti-inflammatory drug (“NSAIDs”). Additionally, the Company acquired worldwide rights to commercialize licensed products and allow for the Company to grant sublicenses subject to royalty payments.

 

Under terms of the agreement, the Company is responsible for conducting clinical trials involving investigational use of a licensed product for the determination of metabolic and pharmacologic actions in humans, the side effects associated with increasing doses, examination of suspected indications, determination of the potential short-term side effects in humans and for establishing the safety, efficacy, labeled indications and risk-benefit profile in humans. The patent license agreement also requires the Company to provide reimbursement for all expenses incurred by The University of Texas Health Science Center at Houston for filing, prosecuting, enforcing and maintaining patent rights and requires an annual nonrefundable license management fee. In addition, the Company is obligated to pay certain milestone payments in future years relating to royalties resulting from the approval to sell licensed products and the resulting sales of such licensed products.

 

Development and Commercialization Agreement with Lee’s Pharmaceutical Holdings Limited

 

In March 2012, the Company entered into a development and commercialization license agreement with Lee's Pharmaceutical Holdings Limited, Zhaoke Pharmaceutical (Heifei) Co. Ltd., and Zhaoke Pharmaceutical (Guangzhou) Co. Ltd. (collectively, “Lee’s Pharmaceutical”). The Company granted to Lee’s Pharmaceutical an exclusive royalty bearing license under licensed subject matter to commercialize marketed products using PL 2200 Aspirin technology within the People’s Republic of China.

 

On June 19, 2015, the Company and Lee’s Pharmaceutical entered into an amendment to the Development and Commercialization Agreement. Pursuant to the agreement, Lee’s Pharmaceutical paid the Company a $200,000 non-refundable advance payment of royalties in July 2015, which is being deferred until minimum or commercial royalties are expected to begin. This amount is included as deferred revenue as of March 31, 2017 and December 31, 2016.

 

Master Services Agreement with Pharmaceutical Manufacturing Research Services, Inc.

 

In February 2017, the Company entered into a master services agreement with Pharmaceutical Manufacturing Research Services, Inc. (“PMRS”). Pursuant to the agreement, PMRS agreed to provide manufacturing and project management services related to Aspertec. The agreement has a term of five years and allows the Company and PMRS to contract multiple projects. The first project is estimated to cost $1.8 million. In February 2017, the Company paid $750,000 deposit to initiate the first project. As of March 31, 2017, the remaining unused deposit was $670,000.

 

Investor Relations Agreement

 

On March 21, 2017, the Company entered into an agreement with a service provider offering investor relations services. The agreement has a term of 15 months and the Company agreed to pay a fee of $11,250 in cash for the period from March 15, 2017 through April 30, 2017 and a monthly fee of $15,000 starting May 1, 2017. The $15,000 monthly fee is $7,500 payable in cash and $7,500 payable in the Company’s common shares.

 

F- 13

 

 

Exhibit 99.4

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

 

On December 22, 2016, Dipexium Pharmaceuticals, Inc. (“Dipexium” or the “Company”), a Delaware corporation, through a wholly owned acquisition subsidiary, Dipexium Acquisition Corp. (“AcquireCo”), a Delaware corporation, agreed to acquire 100% of the outstanding capital stock of PLx Pharma Inc. (“PLx”), a Delaware corporation, in a reverse triangular merger and tax-free reorganization pursuant to section 368(a) of the Internal Revenue Code (the “Merger”), pursuant to the Agreement and Plan of Merger and Reorganization (the "Merger Agreement") by and between Dipexium, AcquireCo and PLx. The Merger closed on April 19, 2017.

 

The following unaudited pro forma condensed combined balance sheet as of March 31, 2017 and the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2017 and for the year ended December 31, 2016 are based on the historical audited financial statements of Dipexium and PLx after giving the pro forma effects of the Merger. The Merger will be accounted for as a reverse acquisition business combination, using the acquisition method of accounting.

  

The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2017 gives effect to the Merger as if it had occurred on January 1, 2017, and the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2016 gives effect to the Merger as if it had occurred on January 1, 2016. The unaudited pro forma condensed combined balance sheet as of March 31, 2017 assumes that the Merger took place on that date.

  

These unaudited pro forma condensed combined financial statements (the “ Pro Forma Financial Statements”) are provided for informational purposes only and are subject to a number of uncertainties and assumptions and do not purport to represent what the companies’ actual performance or financial position would have been had the Merger occurred on the dates indicated and does not purport to indicate the financial position or results of operations as of any future date or for any future period. With respect to the Pro Forma Financial Statements:

 

· the unaudited pro forma condensed combined balance sheet and statement of operations as of and for the three months ended March 31, 2017 were derived from (i) the Company’s unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2017, as included in its Periodic Report on Form 10-Q as filed with the Securities and Exchange Commission on April 17, 2017, and (ii) PLx’s unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2017 filed as an exhibit to the Form 8-K to which this unaudited pro forma condensed combined financial information is attached.
· the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2016 was derived from (i) the Company’s audited consolidated financial statements as of and for the year ended December 31, 2016, as included in its Annual Report on Form 10-K as filed with the Securities and Exchange Commission on January 20, 2017, and (ii) PLx’s audited consolidated financial statements as of and for the year ended December 31, 2016 filed as an exhibit to the Form 8-K to which this unaudited pro forma condensed combined financial information is attached.

 

The unaudited pro forma condensed combined financial statements reflect management’s best estimate of the fair value of the tangible and intangible assets acquired and liabilities assumed in the Merger based on a preliminary valuation study performed by an independent third-party valuation firm based on information currently available. Certain valuations and studies necessary to finalize the determination of estimated fair values and estimated useful lives, including with respect to in-process research and development and trademarks, among other things, are incomplete as of the date of this filing. As final valuations are performed, increases or decreases in the unaudited pro forma condensed combined fair value of assets acquired and liabilities assumed may result in adjustments, which may be material, to the balance sheet and/or statements of operations.

 

The unaudited pro forma condensed combined financial statements include adjustments which give effect to the events that are directly attributable to the Merger, are expected to have a continuing impact and are factually supportable.

 

1  

 

 

Dipexium Pharmaceuticals, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

as of March 31, 2017

 

    Dipexium
Pharmaceuticals,
Inc. 		    PLx Pharma
Inc. 		    Pro Forma
Adjustments 		    Pro Forma  
ASSETS                                
                                 
CURRENT ASSETS                                
Cash and equivalents   $ 12,414,004     $ 425,785             $ 12,839,789  
Inventory     -       290,061               290,061  
Accrued interest receivable from PLx Pharma Inc.     36,822       -       (36,822 )(j)     -  
Contract manufacturing deposit     -       670,000               670,000  
Prepaid expenses and other     83,018       28,008               111,026  
TOTAL CURRENT ASSETS     12,533,844       1,413,854       (36,822 )     13,910,876  
                                 
Property and equipment, net     -       498,731               498,731  
Intangible assets     -       -       2,300,000 (e)     2,300,000  
Goodwill     -       -       1,802,759 (e)     1,802,759  
Note receivable from PLx Pharma Inc.     2,000,000       -       (2,000,000 )(j)     -  
Security Deposit     56,630       -               56,630  
                                 
TOTAL ASSETS   $ 14,590,474     $ 1,912,585     $ 2,065,937     $ 18,568,996  
                                 
LIABILITIES AND SHAREHOLDERS' EQUITY                                
                                 
CURRENT LIABILITIES                                
Accounts Payable and Accrued Expenses   $ 462,136     $ 748,293     $ 2,523,439 (d), (i)   $ 3,733,868  
Accrued interest     -       135,041       (135,041 )(a), (j)     -  
Accrued interest - related parties     -       41,641       (41,641 )(a)     -  
Convertible notes payable     -       1,757,700       (1,757,700 )(a)     -  
Convertible notes payable - related parties     -       588,300       (588,300 )(a)     -  
TOTAL CURRENT LIABILITIES     462,136       3,270,975       757       3,733,868  
                                 
Note payable - Dipexium     -       2,000,000       (2,000,000 )(j)     -  
Deferred revenue     -       200,000               200,000  
                                 
TOTAL LIABILITIES     462,136       5,470,975       (1,999,243 )     3,933,868  
                                 
COMMITMENTS AND CONTINGENCIES                                
                                 
SHAREHOLDERS' EQUITY                                
Common Stock, $.001 par value     11,130       5,566       (10,712 )(a), (b), (c), (k)     5,984  
                         (a), (b), (c), (e),        
Additional paid-in capital     78,029,657       49,848,528       (60,519,057 )(f), (g), (i), (k)     67,359,128  
Accumulated deficit     (63,912,449 )     (53,412,484 )     64,594,949 (d), (f), (g)     (52,729,984 )
TOTAL SHAREHOLDERS' EQUITY     14,128,338       (3,558,390 )     4,065,180       14,635,128  
                                 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 14,590,474     $ 1,912,585     $ 2,065,937     $ 18,568,996  

 

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

 

2  

 

 

Dipexium Pharmaceuticals, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

for the three months ended March 31, 2017

 

    Dipexium 
Pharmaceuticls, 
Inc. 		    PLx Pharma 
Inc. 		    Pro Forma 
Adjustments 		    Pro Forma  
                         
Revenue   $ -     $ -     $ -     $ -  
                                 
Expenses:                                
                                 
Research and development expenses     14,688       128,339               143,027  
Selling, general and administrative expenses     1,552,329       1,217,071       (513,271 )(d), (h)     2,256,129  
Operating loss     (1,567,017 )     (1,345,410 )     513,271       (2,399,156 )
                                 
Other income (expense):                                
Interest income (expense)     37,152       (81,557 )     44,735 (a), (j)     330  
Total other income (expense), net     37,152       (81,557 )     44,735       330  
                                 
Net loss   $ (1,529,865 )   $ (1,426,967 )   $ 558,006     $ (2,398,826 )
                                 
Basic and diluted loss per common share   $ (0.14 )                   $ (0.40 )
Basic and diluted weighted-average shares outstanding     11,123,991               (5,162,687 )(b), (k)     5,961,304  

 

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

 

3  

 

 

Dipexium Pharmaceuticals, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

for the year ended December 31, 2016

 

    Dipexium
Pharmaceuticls,
Inc. 		    PLx Pharma
Inc. 		    Pro Forma
Adjustments 		    Pro Forma  
                         
Revenue   $ -     $ 20,000     $ -     $ 20,000  
                                 
Expenses:                                
                                 
Research and development expenses     12,753,917       78,656       -       12,832,573  
Selling, general and administrative expenses     8,613,981       4,752,068       (1,167,027 )(d), (h)     12,199,022  
Operating loss     (21,367,898 )     (4,810,724 )     1,167,027       (25,011,595 )
                                 
Other income (expense):                                
Interest income (expense)     46,769       (94,554 )     95,125 (a)     47,340  
Total other income (expense), net     46,769       (94,554 )     95,125       47,340  
                                 
Net loss   $ (21,321,129 )   $ (4,905,278 )   $ 1,262,152     $ (24,964,255 )
                                 
Basic and diluted loss per common share   $ (2.06 )                   $ (4.33 )
Basic and diluted weighted-average shares outstanding     10,365,840               (4,607,043 )(b), (k)     5,758,797  

 

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

 

 

4  

 

 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

1. Description of Transaction

On December 22, 2016, Dipexium Pharmaceuticals, Inc. (“Dipexium” or the “Company”), a Delaware corporation, through a wholly owned acquisition subsidiary, Dipexium Acquisition Corp. (“AcquireCo”), a Delaware corporation, agreed to acquire 100% of the outstanding capital stock of PLx Pharma Inc. (“PLx”), a Delaware corporation, in a reverse triangular merger and tax-free reorganization pursuant to section 368(a) of the Internal Revenue Code (the “Merger”), pursuant to the Agreement and Plan of Merger and Reorganization (the "Merger Agreement") by and between Dipexium, AcquireCo and PLx. The Merger closed on April 19, 2017.

 

Pursuant to the terms of the Merger Agreement, and in connection with the closing of the Merger:

 

· the Company amended its certificate of incorporation to (i) increase the number of authorized shares of its Common Stock, (ii) change its name to PLx Pharma Inc. and (iii) effect a 1 for 8 reverse stock split;
· the combined company’s Board of Directors will consist of 7 directors, 6 of whom will be designated by PLx and 1 of whom will be designated by Dipexium;
· the combined company’s officers and senior management will be solely comprised of PLx’s officers and senior management;
· 100% of PLx’s common stock outstanding immediately prior to closing was exchanged for shares of the Company’s Common Stock at an exchange ratio of 6.25 (0.78 after giving effect to the reverse stock split) Company shares for each PLx share (the “Exchange Ratio”);
· Based on the Exchange Ratio and the exchange of shares, former PLx shareholders will own 76.75% of the outstanding shares of the Company, and former Company shareholders will own 23.25% of such outstanding shares;
· outstanding stock options to purchase PLx common stock held by PLx’s employees and directors will be exchanged for similar options to purchase the Company’s common stock, at the Exchange Ratio; and
· PLx’s outstanding convertible notes will be converted into shares of PLx’s common stock pursuant to their original terms, and such common stock will subsequently receive Merger consideration.

 

On January 6, 2017, pursuant to the Merger Agreement, Dipexium provided to PLx $2.0 million of bridge financing in the form of a secured promissory note (the “Note”). The Note will survive the Merger as an intercompany loan agreement which will be eliminated, along with associated interest, in the combined company’s post-Merger consolidated financial statements.

 

2. Basis of Presentation

The unaudited pro forma condensed combined financial statements were prepared in accordance with the regulations of the U.S. Securities and Exchange Commission (the “SEC”) and are intended to show how the Merger might have affected the historical financial statements if the Merger had been completed on January 1, 2017 for the purpose of the statement of operations for the three months ended March 31, 2017, on January 1, 2016 for the purpose of the statement of operations for the year ended December 31, 2016, and on March 31, 2017 for the purpose of the balance sheet.

 

Certain disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted in these unaudited pro forma condensed combined financial statements as permitted by SEC rules and regulations.

 

The pro forma adjustments reflect the Merger as a reverse acquisition business combination, using the purchase method of accounting. The 1-for-8 reverse stock split effective April 19, 2017 has been reflected in the unaudited pro forma condensed combined financial statements as a pro forma adjustment (see Note 4(k)).

 

3. Accounting for the Merger

The Company has concluded that PLx is the accounting acquirer in the Merger and, accordingly, the Merger will be accounted for as a reverse acquisition business combination. The unaudited pro forma condensed combined financial statements reflect accounting for the Merger in accordance with the purchase method of accounting. Under the acquisition method, the purchase consideration is allocated to the assets acquired and the liabilities assumed based on their estimated fair values, with any excess of the purchase consideration over the estimated fair values of the identifiable net assets acquired being recorded as goodwill. PLx’s accounting policies and practices did not materially differ from the Company’s accounting policies and practices.

 

5  

 

 

Purchase Consideration

The Merger consideration is estimated to be $15.0 million:

 

Common stock outstanding as of March 31, 2017 (prior to the reverse stock split)     11,129,747  
         
Estimated fair value of common stock outstanding   $ 15,025,158  
Less note payable and accured interest     (2,036,822 )
         
Adjusted consideration paid   $ 12,988,336  

 

The fair value of the Company’s common stock was calculated using the Company’s closing quoted stock price on April 13, 2017.

 

Allocation of Purchase Consideration

The following table summarizes the allocation of the purchase consideration to the assets acquired and liabilities assumed on March 31, 2017 based on their preliminary estimated fair values:

 

Purchase Consideration   $ 12,988,336  
         
Tangible Assets Acquired:        
Cash   $ 12,414,004  
Prepaid expenses and other current assets     139,648  
         
Identifiable Intangible Assets Acquired:        
IPR&D     2,200,000  
Trademarks     100,000  
         
Liabilities Assumed:        
Accounts payable and accrued expenses     (2,748,075 )
Deferred tax liabilities     (920,000 )
         
Goodwill     1,802,759  
         
Net Assets Acquired   $ 12,988,336  

 

The identifiable intangible asset associated with trademarks will be amortized on a straight-line basis over its preliminary estimated useful life of 7 years. In-process research and development (“IPR&D”) and goodwill are considered indefinite lived assets. The Merger was structured as a tax-free reorganization and therefore the Company received carryover basis in the assets acquired and liabilities assumed; accordingly, the Company recognized net deferred tax liabilities associated with the Merger with a preliminary estimated fair value of approximately $0.9 million. The net deferred tax liabilities result in a reduction of PLx’s existing valuation allowance; such reduction will be recognized by PLx in its post-merger statement of operations, but is not reflected in the unaudited pro forma condensed combined statement of operations because it is non-recurring.

 

6  

 

 

The pro forma adjustments reflect the Merger as a reverse acquisition business combination using the acquisition method of accounting. The pro forma condensed combined financial statements reflect management’s best estimate of the fair value of the tangible and intangible assets acquired and liabilities assumed in the Merger based on a preliminary valuation study performed by an independent third-party valuation firm based on information currently available. Certain valuations and studies necessary to finalize the determination of estimated fair values and estimated useful lives, including with respect to IPR&D and trademarks, among other things, are incomplete as of the date of this filing. As final valuations are performed, increases or decreases in the fair value of assets acquired and liabilities assumed may result in adjustments, which may be material, to the unaudited pro forma condensed combined balance sheet and/or statements of operations.

 

The Company’s legal capital structure (i.e., its outstanding shares of capital stock) is reflected as the combined company’s common stock outstanding. After consummation of the Merger, the combined company’s statements of operations will include PLx’s and the Company’s activities; historical financial statements will solely reflect PLx’s activities, as predecessor entity.

 

4. Pro Forma Adjustments

The following assumptions and adjustments apply to the unaudited pro forma condensed combined financial statements related to the Merger:

 

(a) With respect to the pro forma condensed combined balance sheet as of March 31, 2017, represents the pro forma conversion of approximately $2.3 million of PLx’s outstanding convertible notes (and accrued interest thereon of approximately $0.1 million) into approximately 317,000 shares (approximately 40,000 shares after giving effect to the reverse stock split) of PLx’s common stock pursuant to their original terms.

 

With respect to the pro forma condensed combined statements of operations, represents the pro forma elimination of $45,000 and $0.1 million in interest expense for the three months ended March 31, 2017 and for year ended December 31, 2016, respectively.

 

(b) Represents the pro forma issuance of 36,740,133 shares (4,592,517 shares after giving effect to the reverse stock split) of the Company’s common stock in exchange for 100% of PLx’s common stock outstanding (including those shares issued upon conversion of PLx’s convertible notes), pursuant to the Exchange Ratio.

 

(c) Represents the pro forma elimination of PLx’s common stock.

 

(d) Represents the pro forma impact to the balance sheet of accruing approximately $0.2 million of transaction expenses incurred subsequent to March 31, 2017, and the pro forma impact to the statement of operations of eliminating approximately $0.5 million and $1.2 million of transaction expenses incurred during the three months ended March 31, 2017 and during the year ended December 31, 2016, respectively.

 

(e) Represents the pro forma impact of the allocation of purchase consideration to the identifiable intangible assets acquired, including IPR&D and trademarks, and to goodwill.

 

(f) Represents the pro forma accumulated deficit impact of the reduction of PLx’s existing valuation allowance against net deferred tax assets of approximately $0.9 million as a result of the acquired net deferred tax liabilities.

 

(g) Represents the pro forma impact of eliminating the Company’s historical accumulated deficit of $63.9 million.

 

(h) Represents the pro forma straight-line annual amortization of $4,000 and $14,000 for the three months ended March 31, 2017 and for the year ended December 31, 2016, respectively, for the acquired intangible asset related to trademarks, over its preliminary estimated useful life of 7 years.

 

(i) Represents the pro forma impact of accruing for approximately $2.3 million of cash severance payments to former members of Dipexium executive management, expected to be paid at closing or shortly thereafter.

 

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(j) With respect to the pro forma condensed combined balance sheet, represents the pro forma elimination of the $2.0 million bridge note payable from PLx to Dipexium executed on January 6, 2017, along with the pro forma elimination of approximately $37,000 of accrued interest. With respect to the pro forma condensed combined statement of operations, represents the pro forma elimination of approximately $37,000 of interest income and interest expense for the three months ended March 31, 2017 (none in 2016).

 

(k) Represents the pro forma effect of the 1-for-8 reverse stock split on outstanding shares and weighted average shares outstanding for purposes of calculating pro forma loss per share.

 

5. Pro Forma Loss per Share

Pro forma loss per share, basic and diluted, including pro forma impacts of the Merger, is calculated as follows:

 

    For the Three
Months Ended
March 31,
2017 		    For the Year
Ended
December 31,
2016 		 
Basic and Diluted                
                 
Net loss , as originally reported   $ (1,529,865 )   $ (21,321,129 )
Pro forma net loss   $ (2,398,826 )   $ (24,964,255 )
                 
Weighted average outstanding shares for the year, as orginally reported     11,123,991       10,365,840  
Pro forma adjustment - weighted average common shares issued as consideration     36,566,427       35,704,533  
Effect of 1 for 8 reverse stock split     (41,729,114 )     (40,311,576 )
Pro forma weighted average outstanding shares for the year     5,961,304       5,758,797  
                 
Basic and diluted loss per share, as originally reported   $ (0.14 )   $ (2.06 )
Pro forma basic and diliuted loss per share   $ (0.40 )   $ (4.33 )

 

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