|
Delaware
|
| |
3841
|
| |
26-4042544
|
|
|
(State or other jurisdiction of
incorporation or organization) |
| |
(Primary Standard Industrial
Classification Code Number) |
| |
(I.R.S. Employer
Identification Number) |
|
|
Rick A. Werner, Esq.
Haynes & Boone, LLP 30 Rockefeller Plaza, 26 th Floor New York, NY 10112 (212) 659-7300 |
| |
Neil M. Kaufman
Kaufman & Associates, LLC 190 Motor Parkway, Suite 202 Hauppauge, NY 11788 (631) 972-0042 |
|
| Large accelerated filer ☐ | | | Accelerated filer ☐ | | | Non-accelerated filer ☒ | | |
Smaller reporting company ☒
|
|
| | | | | | | | | |
Emerging growth company ☒
|
|
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| | | | | 140 | | | |
| | | | | 141 | | | |
| | | | | 141 | | | |
| | | | | 141 | | | |
| | | | | F-1 | | |
| | |
As of or for the years ended
|
| |||||||||
| | |
December 31,
2018 |
| |
December 31,
2017 |
| ||||||
(in millions)
|
| |
Historical
|
| |||||||||
Combined Statement of Operations data: | | | | | | | | | | | | | |
Revenue
|
| | | $ | 2,213 | | | | | $ | 1,992 | | |
Loss from operations before tax
|
| | | | (1,888 ) | | | | | | (969 ) | | |
Net loss
|
| | | | (1,888 ) | | | | | | (953 ) | | |
Combined Balance Sheet Data: | | | | | | | | | | | | | |
Total assets
|
| | | $ | 739 | | | | | $ | 894 | | |
Total current liabilities
|
| | | | 407 | | | | | | 210 | | |
Other long-term liabilities
|
| | | | 51 | | | | | | 59 | | |
Total liabilities
|
| | | | 458 | | | | | | 269 | | |
Combined Statements of Cash Flows data: | | | | | | | | | | | | | |
Cash flows (used in) operating activities
|
| | | $ | (1,544 ) | | | | | $ | (777 ) | | |
Cash flows (used in) investing activities
|
| | | | — | | | | | | (7 ) | | |
Cash flows provided by financing activities
|
| | | | 1,544 | | | | | | 784 | | |
Advances from Parent
|
| | | | 1,544 | | | | | | 784 | | |
| | |
As of or for the years ended
|
| |||||||||
| | |
December 31,
2018 |
| |
December 31,
2017 |
| ||||||
| | |
Historical
|
| |||||||||
Consolidated Statement of Operations data: | | | | | | | | | | | | | |
Operating Expenses
|
| | | $ | 1,171,494 | | | | | $ | 737,670 | | |
Net loss
|
| | | | (1,171,494 ) | | | | | | (737,670 ) | | |
Consolidated Balance Sheet Data: | | | | | | | | | | | | | |
Total assets
|
| | | $ | 909,252 | | | | | $ | 471,500 | | |
Total current liabilities
|
| | | | 2,842,455 | | | | | | 2,269,465 | | |
Total liabilities
|
| | | | 2,842,455 | | | | | | 2,269,465 | | |
Members’ deficit
|
| | | $ | (1,933,203 ) | | | | | $ | (1,797,965 ) | | |
Consolidated Statements of Cash Flows data: | | | | | | | | | | | | | |
Cash flows (used in) operating activities
|
| | | $ | (621,899 ) | | | | | $ | (625,393 ) | | |
Cash flows provided by financing activities
|
| | | | 981,088 | | | | | | 625,393 | | |
Advances from TOG
|
| | | | 481,088 | | | | | | 625,393 | | |
(in thousands)
|
| |
Historical
TOP for the Year Ended December 31, 2018 |
| |
Historical
AquaMed for the Year Ended December 31, 2018 |
| |
Transaction
Adjustments |
| |
Pro Forma
Combined |
| ||||||||||||
Revenue
|
| | | $ | — | | | | | $ | 2,213 | | | | | $ | — | | | | | $ | 2,213 | | |
Loss before income taxes
|
| | | | (1,171 ) | | | | | | (1,888 ) | | | | | | (138 ) | | | | | | (2,921 ) | | |
Income tax provision
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Net loss
|
| | | $ | (1,171 ) | | | | | $ | (1,888 ) | | | | | $ | (138 ) | | | | | $ | (2,921 ) | | |
Total assets
|
| | | $ | 909 | | | | | $ | 739 | | | | | $ | 10,000 | | | | | $ | 11,648 | | |
Total liabilities
|
| | | $ | 2,842 | | | | | $ | 458 | | | | | $ | (500 ) | | | | | $ | 2,800 | | |
(in thousands)
|
| |
TO
Pharmaceuticals as of December 31, 2018 |
| |
AquaMed
Technologies, Inc. as of December 31, 2018 |
| |
Effect of
Mergers |
| |
Pro Forma
Combined |
| ||||||||||||
Cash
|
| | | $ | 359 | | | | | | — | | | | | $ | 10,000 | | | | | $ | 10,359 | | |
Short-term obligations: | | | | | | | | | | | | | | | | | | | | | | | | | |
Current maturities of long-term debt
|
| | | $ | 500 | | | | | | | | | | | $ | (500 ) | | | | | | — | | |
Current maturities of capitalized lease obligations
|
| | | | — | | | | | | | | | | | | | | | | | | — | | |
Total short-term debt and current obligations of long-term debt
|
| | | $ | 500 | | | | | | — | | | | | $ | (500 ) | | | | | | — | | |
Long-term obligations: | | | | | | | | | | | | | | | | | | | | | | | | | |
Total long-term debt
|
| | | $ | — | | | | | | | | | | | | | | | | | | — | | |
Less: current maturities of long-term debt
|
| | | | — | | | | | | | | | | | | | | | | | | — | | |
Total long-term debt, net of current maturities
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Stockholders’ equity: | | | | | | | | | | | | | | | | | | | | | | | | | |
Member’s Deficit
|
| | | $ | (1,933 ) | | | | | $ | — | | | | | $ | 1,933 | | | | | | — | | |
Parent’s Net Investment
|
| | | | — | | | | | | 281 | | | | | | (281 ) | | | | | | — | | |
Preferred stock
|
| | | | | | | | | | | | | | | | | | | | | | — | | |
Common stock
|
| | | | | | | | | | | | | | | | 17 | | | | | | 17 | | |
Additional paid in capital
|
| | | | | | | | | | | | | | | | 8,831 | | | | | | 8,831 | | |
Accumulated deficit
|
| | | | | | | | | | | | | | | | | | | | | | — | | |
Accumulated other comprehensive (loss) income
|
| | | | | | | | | | | | | | | | | | | | | | — | | |
Total equity
|
| | | | (1,933 ) | | | | | | 281 | | | | | | 10,500 | | | | | | 8,848 | | |
Total capitalization
|
| | | $ | (1,933 ) | | | | | $ | 281 | | | | | | 10,000 | | | | | $ | 8,848 | | |
|
| | |
Year Ended
December 31, |
| |||||||||
(in thousands)
|
| |
2018
|
| |
2017
|
| ||||||
REVENUES: | | | | | | | | | | | | | |
Revenue, net of returns, allowances and discounts
|
| | | $ | 2,213 | | | | | $ | 1,992 | | |
Cost of revenues
|
| | | | (1,699 ) | | | | | | (1,845 ) | | |
Gross profit
|
| | | | 514 | | | | | | 147 | | |
OPERATING EXPENSES: | | | | | | | | | | | | | |
Selling, general and administrative
|
| | | | (2,402 ) | | | | | | (1,116 ) | | |
Total operating expenses
|
| | | | (2,402 ) | | | | | | (1,116 ) | | |
Loss from operations
|
| | | | (1,888 ) | | | | | | (969 ) | | |
OTHER INCOME: | | | | | | | | | | | | | |
Sundry
|
| | | | — | | | | | | — | | |
Total other income
|
| | | | — | | | | | | — | | |
LOSS FROM OPERATIONS BEFORE TAX
|
| | | | (1,888 ) | | | | | | (969 ) | | |
INCOME TAX BENEFIT
|
| | | | — | | | | | | 16 | | |
NET LOSS
|
| | | $ | (1,888 ) | | | | | $ | (953 ) | | |
|
(in thousands)
|
| |
December 31,
2018 |
| |
December 31,
2017 |
| ||||||
Consolidated Balance Sheet Data: | | | | | | | | | | | | | |
Accounts receivable, net
|
| | | $ | 34 | | | | | $ | 99 | | |
Inventory, net
|
| | | | 101 | | | | | | 93 | | |
Prepaid expenses and other current assets
|
| | | | 226 | | | | | | 7 | | |
Total assets
|
| | | | 739 | | | | | | 894 | | |
Total liabilities
|
| | | | 458 | | | | | | 269 | | |
Total Parent Net Investment
|
| | | | 281 | | | | | | 625 | | |
Total liabilities and Parent net investment
|
| | | $ | 739 | | | | | $ | 894 | | |
| | |
Year Ended
December 31, |
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
OPERATING EXPENSES: | | | | | | | | | | | | | |
Selling, general and administrative
|
| | | $ | 740,481 | | | | | $ | 502,574 | | |
Research and development
|
| | | | 431,013 | | | | | | 235,096 | | |
Total operating expenses
|
| | | | 1,171,494 | | | | | | 737,670 | | |
Loss from operations
|
| | | | (1,171,494 ) | | | | | | (737,670 ) | | |
NET LOSS
|
| | | $ | (1,171,494 ) | | | | | $ | (737,670 ) | | |
|
| | |
December 31,
2018 |
| |
December 31,
2017 |
| ||||||
Consolidated Balance Sheet Data: | | | | | | | | | | | | | |
Licenses, net of accumulated amortization
|
| | | | 429,250 | | | | | | 454,500 | | |
Total assets
|
| | | | 909,252 | | | | | | 471,500 | | |
Total liabilities
|
| | | | 2,842,455 | | | | | | 2,269,465 | | |
Members’ deficit
|
| | | $ | (1,933,203 ) | | | | | $ | (1,797,965 ) | | |
| | |
TO
Pharmaceuticals (1) |
| |
AquaMed
Technologies, Inc. (1) |
| |
Transaction
Adjustments |
| |
Footnote
Reference |
| |
Pro Forma
Consolidation |
| ||||||||||||
ASSETS: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents
|
| | | $ | 359 | | | | | $ | — | | | | | $ | 10,000 | | | |
3(c)
|
| | | $ | 10,359 | | |
Accounts receivable
|
| | | | — | | | | | | 34 | | | | | | — | | | | | | | | | 34 | | |
Inventory, net
|
| | | | — | | | | | | 101 | | | | | | — | | | | | | | | | 101 | | |
Prepaid expenses and other current assets
|
| | | | 121 | | | | | | 226 | | | | | | — | | | | | | | | | 347 | | |
Total current assets
|
| | | | 480 | | | | | | 361 | | | | | | 10,000 | | | | | | | | | 10,841 | | |
Improvements and equipment, net
|
| | | | — | | | | | | 200 | | | | | | — | | | | | | | | | 200 | | |
Intangible assets, net
|
| | | | 429 | | | | | | — | | | | | | — | | | | | | | | | 429 | | |
Goodwill
|
| | | | — | | | | | | — | | | | | | — | | | | | | | | | — | | |
Other assets
|
| | | | — | | | | | | 178 | | | | | | — | | | | | | | | | 178 | | |
Total assets
|
| | | $ | 909 | | | | | $ | 739 | | | | | $ | 10,000 | | | | | | | | $ | 11,648 | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accounts payable
|
| | | $ | 294 | | | | | $ | 157 | | | | | $ | — | | | | | | | | $ | 451 | | |
Accrued expenses and other current
liabilities |
| | | | 449 | | | | | | 250 | | | | | | — | | | | | | | | | 699 | | |
Convertible promissory notes payable
|
| | | | 500 | | | | | | — | | | | | | (500 ) | | | |
3(e)
|
| | | | — | | |
Due to parent
|
| | | | 1,599 | | | | | | — | | | | | | — | | | | | | | | | 1,599 | | |
Total current liabilities
|
| | | | 2,842 | | | | | | 407 | | | | | | — | | | | | | | | | 3,249 | | |
Long-term debt
|
| | | | | | | | | | | | | | | | — | | | | | | | | | — | | |
Other long-term liabilities
|
| | | | — | | | | | | 51 | | | | | | — | | | | | | | | | 51 | | |
Total liabilities
|
| | | | 2,842 | | | | | | 458 | | | | | | (500 ) | | | | | | | | | 2,800 | | |
Commitments and Contingencies | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stockholders’ Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Member Deficit
|
| | | | (1,933 ) | | | | | | | | | | | | 1,933 | | | |
3(b)
|
| | | | — | | |
Parent’s Net Investment
|
| | | | — | | | | | | 281 | | | | | | (281 ) | | | |
2(a), 3(a)
|
| | | | — | | |
Preferred Stock
|
| | | | — | | | | | | — | | | | | | — | | | | | | | | | — | | |
Common Stock
|
| | | | — | | | | | | — | | | | | | 17 | | | |
3(d)
|
| | | | 17 | | |
Additional paid-in capital
|
| | | | — | | | | | | — | | | | | | 8,831 | | | |
3(a), 3(b)
|
| | | | 8,331 | | |
Accumulated deficit
|
| | | | — | | | | | | — | | | | | | — | | | |
2(a), 3(c), 3(d)
|
| | | | — | | |
Total stockholders’ equity
|
| | | | (1,933 ) | | | | | | 281 | | | | | | 10,500 | | | | | | | | | 8,848 | | |
Total liabilities and stockholders’ equity
|
| | | $ | 909 | | | | | $ | 739 | | | | | $ | 10,000 | | | | | | | | $ | 11,648 | | |
|
| | |
TO
Pharmaceuticals (1) |
| |
AquaMed
Technologies, Inc. (1) |
| |
Transaction
Adjustments |
| |
Footnote
Reference |
| |
Pro Forma
Combined |
| ||||||||||||
Revenue, net of returns, allowances and discounts
|
| | | $ | — | | | | | $ | 2,213 | | | | | $ | — | | | | | | | | $ | 2,213 | | |
Cost of revenues
|
| | | | — | | | | | | 1,699 | | | | | | — | | | | | | | | | 1,699 | | |
Gross profit
|
| | | | — | | | | | | 514 | | | | | | — | | | | | | | | | 514 | | |
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Selling, general and administrative
|
| | | | 740 | | | | | | 2,402 | | | | | | (138 ) | | | |
3(f)
|
| | | | 3,004 | | |
Research and product development
|
| | | | 431 | | | | | | — | | | | | | — | | | | | | | | | 431 | | |
Total operating expenses
|
| | | | 1,171 | | | | | | 2,402 | | | | | | (138 ) | | | | | | | | | 3,435 | | |
Loss from operations
|
| | | | (1,171 ) | | | | | | (1,888 ) | | | | | | 138 | | | | | | | | | (2,921 ) | | |
Other income (expense) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total other expense
|
| | | | — | | | | | | — | | | | | | — | | | | | | | | | — | | |
Loss before income tax provision
|
| | | | (1,171 ) | | | | | | (1,888 ) | | | | | | — | | | | | | | | | (3,059 ) | | |
Income tax benefit
|
| | | | — | | | | | | — | | | | | | 138 | | | | | | | | | 138 | | |
Net loss
|
| | | $ | (1,171 ) | | | | | $ | (1,888 ) | | | | | $ | 138 | | | | | | | | $ | (2,921 ) | | |
Net loss per common share
|
| | | | — | | | | | | — | | | | | | — | | | |
3(g)
|
| | | $ | (0.18 ) | | |
Weighted average common shares outstanding
|
| | | | — | | | | | | — | | | | | | 16,278 | | | |
3(g)
|
| | | | 16,278 | | |
|
Receivables and other current assets
|
| | | | 260 | | |
|
Property and equipment
|
| | | | 200 | | |
|
Inventory
|
| | | | 101 | | |
|
Goodwill
|
| | | | 0 | | |
|
Other noncurrent assets
|
| | | | 178 | | |
|
Other liabilities assumed
|
| | | | (458 ) | | |
|
Preliminary valuation of common shares to be issued
|
| | | $ | 281 | | |
Name
|
| |
Aggregate
Number of Shares |
||
Former Alliqua Shareholders
|
| | | | 1,750,000 |
Former TOP Members (excluding conversion of $500,000 of principal amount of convertible notes)
|
| | | | 11,974,112 |
Shares sold to investors in the Private Placement
|
| | | | 2,333,333 |
Shares issuable upon the assumed conversion of $500,000 of principal amount of TOP convertible notes
|
| | | | 221,889 |
Shares issued to consultant
|
| | | | 758,182 |
Shares issued to advisor
|
| | | | 134,167 |
Total shares outstanding:
|
| | | | 17,171,682 |
Application number
|
| |
Description of Provisional Patent
|
| |
Filing Date
|
|
62/610,589 | | | Use of cannabinoid compositions for the treatment of inflammatory skin disorders* | | |
December 12, 2017
|
|
62/632,021 | | | Use of cannabinoid compositions and methods for the treatment of protein energy wasting | | |
February 19, 2018
|
|
62/674,235 | | | Use of cannabinoid compositions for the treatment of inflammatory skin disorders | | |
May 21, 2018
|
|
62/676,093 | | | Use of cannabis-based compositions for the treatment of autistic spectrum disorders | | |
May 24, 2018
|
|
62/776,076 | | | Use of cannabis-based compositions for the treatment of Alzheimer’s disease and dementia | | |
December 6, 2018
|
|
62/776,084 | | | Use of cannabis-based compositions for the treatment of Migraine and headache | | |
December 6, 2018
|
|
|
DATA
|
| |
RESEARCH
|
| |
CLINICAL DEVELOPMENT
|
| | | | | ||||||||
|
•
TOL has amassed one of the largest medical cannabis treatment databases in the world, with over 20,000 patient records.
•
Patients have reported on the strain used, dosage prescribed and outcomes across a wide variety of diseases.
•
TOP has leveraged TOL’s data to selectively apply for 7 patents.
|
| |
•
TOP and TOL scientists have been researching cannabinoids for over 40 years.
•
At least ten published peer-reviewed journal articles have been published by the TOP and TOL team.
•
TOP and TOL regularly conduct retrospective analyses on its patient dataset to identify optimal strains/disease states for clinical investigation.
|
| |
•
Two completed Phase II double-blind trials related to Crohn’s disease and colitis in two different treatment platforms.
•
Currently recruiting accruing patients for two additional Phase II trials.
•
By early 2019, TOP anticipates that three additional Phase II trials will have commenced.
|
| | | | | ||||||||
| | | | | | | | | | | | | | | | | | | | |
| | |
Year Ended December 31,
|
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
Cost of revenues | | | | | | | | | | | | | |
Materials and finished products
|
| | | $ | 620 | | | | | $ | 674 | | |
Stock-based compensation
|
| | | | 33 | | | | | | 45 | | |
Compensation and benefits
|
| | | | 387 | | | | | | 481 | | |
Depreciation and amortization
|
| | | | 289 | | | | | | 288 | | |
Equipment, production and other expenses
|
| | | | 370 | | | | | | 357 | | |
Total cost of revenues
|
| | | $ | 1,699 | | | | | $ | 1,845 | | |
|
| | |
Year Ended December 31,
|
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
Selling, general and administrative expenses | | | | | | | | | | | | | |
Compensation and benefits
|
| | | $ | 464 | | | | | $ | 184 | | |
Stock-based compensation
|
| | | | 173 | | | | | | 198 | | |
Other expenses and professional fees
|
| | | | 1,765 | | | | | | 734 | | |
Total selling, general and administrative expenses
|
| | | $ | 2,402 | | | | | $ | 1,116 | | |
|
Name
|
| |
Age
|
| |
Position
|
|
Executive Officers | | | | | | | |
Seth Yakatan | | |
48
|
| | Chief Executive Officer | |
Joseph Warusz | | |
62
|
| | Chief Financial Officer | |
Mitchell Glass | | |
67
|
| | Chief Medical Officer | |
Sidney Taubenfeld | | |
58
|
| | Vice President | |
Directors | | | | | | | |
David Johnson | | |
60
|
| | Chairman of the Board of Directors | |
Berel Farkas | | |
30
|
| | Director | |
Bernard Sucher | | |
58
|
| | Director | |
Tsachi Cohen | | |
41
|
| | Director | |
George Kegler | | |
63
|
| | Director | |
Name and principal position
|
| |
Salary
|
| |
Annual
Incentive Target (1) |
| |
Long Term
Incentive Target (1) |
| |
Target Total Direct
Compensation (1) |
| ||||||||||||
Seth Yakatan
|
| | | $ | 150,000 | | | | | | — | | | | | | — | | | | | | — | | |
Joseph Warusz
|
| | | $ | 225,000 | | | | | | — | | | | | | — | | | | | | — | | |
Dr. Mitchell Glass
|
| | | $ | 120,000 | | | | | | — | | | | | | — | | | | | | — | | |
Sidney Taubenfeld
|
| | | $ | 168,000 | | | | | | — | | | | | | — | | | | | | — | | |
Position
|
| |
Cash retainer
amount* |
| |||
Member of Board of Directors
|
| | | $ | 35,000 | | |
Chairman of the Board of Directors
|
| | | $ | 25,000 | | |
Audit Committee Chair
|
| | | $ | 10,000 | | |
Compensation Committee Chair
|
| | | $ | 7,500 | | |
Nominating and Governance Committee Chair
|
| | | $ | 7,500 | | |
Committee Member
|
| | | $ | 2,500 | | |
Name and Address of Beneficial Owner
(1)
|
| |
Number of
Shares Beneficially Owned (2) |
| |
Percentage
Beneficially Owned (2) |
| ||||||
5% Owners | | | | | | | | | | | | | |
Tikun Olam Ltd.
183 Ibn Gabirol Street Tel Aviv, 6200715, Israel |
| | | | 2,112,568 (3) | | | | | | 12.3 % | | |
Tsachi Cohen
183 Ibn Gabirol Street Tel Aviv, 6200715, Israel |
| | | | 2,112,568 (3) | | | | | | 12.3 % | | |
Menachem Silber
77 Water Street, 8 th Floor New York, NY 10005 |
| | | | 1,171,941 | | | | | | 6.8 % | | |
Eric Lerner
77 Water Street, 8 th Floor New York, NY 10005 |
| | | | 910,126 | | | | | | 5.3 % | | |
Officers and Directors | | | | | | | | | | | | | |
Berel Farkas
|
| | | | 1,633,119 (4) | | | | | | 9.5 % | | |
Tsachi Cohen
|
| | | | 2,112,568 (3) | | | | | | 12.3 % | | |
Bernard Sucher
|
| | | | 611,180 (5) | | | | | | 3.6 % | | |
Name and Address of Beneficial Owner
(1)
|
| |
Number of
Shares Beneficially Owned (2) |
| |
Percentage
Beneficially Owned (2) |
| ||||||
Joseph Warusz
|
| | | | — | | | | | | — | | |
George Kegler
|
| | | | — | | | | | | — | | |
David I. Johnson
|
| | | | 119,847 (6) | | | | | | * | | |
Seth Yakatan
(7)
|
| | | | — | | | | | | — | | |
Mitchell Glass
|
| | | | 4,667 | | | | | | * | | |
Sidney Taubenfeld
|
| | | | 525,026 (8) | | | | | | 3.0 % | | |
All executive officers and directors of the Company, as a group
|
| | | | 5,006,407 | | | | | | 29.1 % | | |
| AUDITED FINANCIAL STATEMENTS OF AQUAMED: | | | | | | | |
| | | | | F-2 | | | |
| | | | | F-3 | | | |
| | | | | F-4 | | | |
| | | | | F-5 | | | |
| | | | | F-6 | | | |
| | | | | F-7 | | | |
| AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF TOP: | | | | | | | |
| | | | | F-20 | | | |
| | | | | F-21 | | | |
| | | | | F-22 | | | |
| | | | | F-23 | | | |
| | | | | F-24 | | | |
| | | | | F-25 | | |
| | |
December 31,
2018 |
| |
December 31,
2017 |
| ||||||
ASSETS: | | | | | | | | | | | | | |
Current Assets: | | | | | | | | | | | | | |
Accounts receivable, net
|
| | | $ | 34 | | | | | $ | 99 | | |
Inventory, net
|
| | | | 101 | | | | | | 93 | | |
Prepaid expenses and other current assets
|
| | | | 226 | | | | | | 7 | | |
Total current assets
|
| | | | 361 | | | | | | 199 | | |
Improvements and equipment, net
|
| | | | 200 | | | | | | 522 | | |
Other assets
|
| | | | 178 | | | | | | 173 | | |
Total assets
|
| | | $ | 739 | | | | | $ | 894 | | |
LIABILITIES AND PARENT’S NET INVESTMENT | | | | | | | | | | | | | |
Current Liabilities: | | | | | | | | | | | | | |
Accounts payable
|
| | | $ | 157 | | | | | $ | 63 | | |
Accrued expenses and other current liabilities
|
| | | | 250 | | | | | | 147 | | |
Total current liabilities
|
| | | | 407 | | | | | | 210 | | |
Other long-term liabilities
|
| | | | 51 | | | | | | 59 | | |
Total liabilities
|
| | | | 458 | | | | | | 269 | | |
Commitments and Contingencies | | | | | | | | | | | | | |
Parent’s net investment
|
| | | | 281 | | | | | | 625 | | |
Total Parent’s net investment
|
| | | | 281 | | | | | | 625 | | |
Total liabilities and Parent’s net investment
|
| | | $ | 739 | | | | | $ | 894 | | |
|
| | |
Years Ended December 31,
|
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
Revenue, net of returns, allowances and discounts
|
| | | $ | 2,213 | | | | | $ | 1,992 | | |
Cost of revenues
|
| | | | 1,699 | | | | | | 1,845 | | |
Gross profit
|
| | | | 514 | | | | | | 147 | | |
Operating expenses | | | | | | | | | | | | | |
Selling, general and administrative
|
| | | | 2,402 | | | | | | 1,116 | | |
Total operating expenses
|
| | | | 2,402 | | | | | | 1,116 | | |
Loss from operations before tax
|
| | | | (1,888 ) | | | | | | (969 ) | | |
Income tax benefit
|
| | | | — | | | | | | 16 | | |
Net loss
|
| | | $ | (1,888 ) | | | | | $ | (953 ) | | |
|
| | |
Years Ended December 31,
|
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
Parent’s net investment, beginning of year
|
| | | $ | 625 | | | | | $ | 794 | | |
Net Loss
|
| | | | (1,888 ) | | | | | | (953 ) | | |
Advances from Parent
|
| | | | 1,544 | | | | | $ | 784 | | |
Parent’s net investment, end of year
|
| | | $ | 281 | | | | | $ | 625 | | |
|
| | |
Years Ended December 31,
|
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
Operating Activities | | | | | | | | | | | | | |
Net loss
|
| | | $ | (1,888 ) | | | | | $ | (953 ) | | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | | | | | |
Depreciation and amortization
|
| | | | 322 | | | | | | 316 | | |
Amortization of deferred lease incentive
|
| | | | (8 ) | | | | | | (8 ) | | |
Deferred income tax expense
|
| | | | — | | | | | | (16 ) | | |
Provision for doubtful accounts
|
| | | | (1 ) | | | | | | 2 | | |
Provision for excess and slow moving inventory
|
| | | | (5 ) | | | | | | 5 | | |
Changes in operating assets and liabilities: | | | | | | | | | | | | | |
Accounts receivable
|
| | | | 66 | | | | | | (27 ) | | |
Inventory
|
| | | | (3 ) | | | | | | 60 | | |
Prepaid expenses and other assets
|
| | | | (224 ) | | | | | | 18 | | |
Accounts payable
|
| | | | 94 | | | | | | (84 ) | | |
Accrued expenses and other liabilities
|
| | | | 103 | | | | | | (90 ) | | |
Net Cash Used in Operating Activities
|
| | | | (1,544 ) | | | | | | (777 ) | | |
Investing Activities | | | | | | | | | | | | | |
Purchase of improvements and equipment
|
| | | | — | | | | | | (7 ) | | |
Net Cash Used in Investing Activities
|
| | | | — | | | | | | (7 ) | | |
Financing Activities | | | | | | | | | | | | | |
Advances from parent
|
| | | | 1,544 | | | | | | 784 | | |
Net Cash Provided by Financing Activities
|
| | | | 1,544 | | | | | | 784 | | |
Net Increase (Decrease) in Cash and Cash Equivalents
|
| | | | — | | | | | | — | | |
Cash and Cash Equivalents – Beginning of year
|
| | | | — | | | | | | — | | |
Cash and Cash Equivalents – End of year
|
| | | $ | — | | | | | $ | — | | |
Supplemental Disclosure of Cash Flows Information | | | | | | | | | | | | | |
Cash paid during the year for: | | | | | | | | | | | | | |
Interest
|
| | | $ | — | | | | | $ | — | | |
Taxes
|
| | | | — | | | | | | — | | |
| | |
Year Ended December 31,
|
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
Selling, general and administrative expenses | | | | | | | | | | | | | |
Compensation and benefits
|
| | | $ | 464 | | | | | $ | 184 | | |
Stock-based compensation
|
| | | | 173 | | | | | | 198 | | |
Other expenses and professional fees
|
| | | | 1,765 | | | | | | 734 | | |
Total selling, general and administrative expenses
|
| | | $ | 2,402 | | | | | $ | 1,116 | | |
|
| | |
December 31,
2018 |
| |
December 31,
2017 |
| ||||||
Raw materials
|
| | | $ | 101 | | | | | $ | 98 | | |
Less: Inventory reserve for excess and slow moving inventory
|
| | | | — | | | | | | (5 ) | | |
Total
|
| | | $ | 101 | | | | | $ | 93 | | |
|
| | |
December 31,
2018 |
| |
December 31,
2017 |
| ||||||
Salaries, benefits and incentive compensation
|
| | | $ | 108 | | | | | $ | 92 | | |
Professional fees
|
| | | | 95 | | | | | | 28 | | |
Other
|
| | | | 47 | | | | | | 27 | | |
Total accrued expenses and other current liabilities
|
| | | $ | 250 | | | | | $ | 147 | | |
|
|
2019
|
| | | | 207 | | |
|
2020
|
| | | | 207 | | |
|
2021
|
| | | | 207 | | |
|
2022
|
| | | | 207 | | |
|
2023
|
| | | | 207 | | |
|
Thereafter
|
| | | | 434 | | |
|
Total
|
| | | $ | 1,469 | | |
|
| | |
% of Total Revenue
|
| |
Accounts
Receivable |
| |
Accounts
Receivable |
| |||||||||||||||
Customer
|
| |
2018
|
| |
2017
|
| |
December 31,
2018 |
| |
December 31,
2017 |
| ||||||||||||
A
|
| | | | 63 % | | | | | | 65 % | | | | | | 0 % | | | | | | 100 % | | |
B
|
| | | | 14 % | | | | | | 16 % | | | | | | 0 % | | | | | | 0 % | | |
| | |
Useful Life
(Years) |
| |
December 31,
|
| |||||||||
| | |
2018
|
| |
2017
|
| |||||||||
Machinery and equipment
|
| |
3 – 10
|
| | | $ | 2,893 | | | | | $ | 2,893 | | |
Office furniture and equipment
|
| |
3 – 10
|
| | | | 49 | | | | | | 56 | | |
Leasehold improvements
|
| |
(A)
|
| | | | 228 | | | | | | 228 | | |
| | | | | | | | 3,170 | | | | | | 3,177 | | |
Less: Accumulated depreciation and amortization
|
| | | | | | | (2,970 ) | | | | | | (2,655 ) | | |
Improvements and equipment, net
|
| | | | | | $ | 200 | | | | | $ | 522 | | |
|
| | |
For The Years Ended December 31,
|
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
Federal: | | | | | | | | | | | | | |
Current
|
| | | $ | — | | | | | $ | — | | |
Deferred
|
| | | | — | | | | | | (13 ) | | |
State and local: | | | | | | | | | | | | | |
Current
|
| | | | — | | | | | | — | | |
Deferred
|
| | | | — | | | | | | (3 ) | | |
Income tax provision
|
| | | $ | — | | | | | $ | (16 ) | | |
|
| | |
For The Years Ended December 31,
|
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
U.S. federal statutory rate
|
| | | | 21.0 % | | | | | | 34.0 % | | |
State tax rate, net of federal benefit
|
| | | | 1.1 % | | | | | | 0.1 % | | |
Permanent differences | | | | | | | | | | | | | |
— Change in fair value of warrant liability
|
| | | | 0.0 % | | | | | | 0.0 % | | |
— Change in fair value of contingent consideration
|
| | | | 0.0 % | | | | | | 0.0 % | | |
— Intangible impairment
|
| | | | 0.0 % | | | | | | 0.0 % | | |
— Other
|
| | | | 0.0 % | | | | | | 0.0 % | | |
State tax change
|
| | | | 4.2 % | | | | | | 0.0 % | | |
Tax Reform – Federal Rate Change
|
| | | | 0.0 % | | | | | | (139.1 )% | | |
Tax Reform – Change in valuation allowance
|
| | | | 0.0 % | | | | | | 139.1 % | | |
Change in valuation allowance
|
| | | | (26.3 )% | | | | | | (32.4 )% | | |
Income tax provision
|
| | | | 0.0 % | | | | | | 1.7 % | | |
|
| | |
As of December 31,
|
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
Deferred tax assets: | | | | | | | | | | | | | |
Net operating loss carryforwards
|
| | | $ | 3,110 | | | | | $ | 2,752 | | |
Intangible Assets
|
| | | | 28 | | | | | | 233 | | |
Goodwill and Tradename
|
| | | | — | | | | | | 29 | | |
Accruals
|
| | | | 12 | | | | | | 21 | | |
Other
|
| | | | 18 | | | | | | 2 | | |
Total deferred tax assets
|
| | | | 3,168 | | | | | | 3,037 | | |
Valuation allowance
|
| | | | (3,151 ) | | | | | | (2,957 ) | | |
Deferred tax assets, net of valuation allowance
|
| | | $ | 17 | | | | | $ | 80 | | |
Deferred tax liabilities: | | | | | | | | | | | | | |
Property and equipment
|
| | | | (17 ) | | | | | | (80 ) | | |
Intangible assets
|
| | | | — | | | | | | — | | |
Goodwill and Trade Name
|
| | | | — | | | | | | — | | |
Total deferred tax liabilities
|
| | | | (17 ) | | | | | | (80 ) | | |
Net deferred tax liabilities
|
| | | $ | — | | | | | $ | — | | |
|
| | |
2018
|
| |
2017
|
| ||||||
ASSETS
|
| | | | | | | | | | | | |
Current Assets | | | | | | | | | | | | | |
Cash
|
| | | $ | 359,189 | | | | | $ | — | | |
Other current assets
|
| | | | 4,255 | | | | | | — | | |
Other receivables-related party
|
| | | | 116,558 | | | | | | 17,000 | | |
Total Current Assets
|
| | | | 480,002 | | | | | | 17,000 | | |
Intangible Assets | | | | | | | | | | | | | |
Licenses, net of accumulated amortization
|
| | | | 429,250 | | | | | | 454,500 | | |
Total Assets
|
| | | $ | 909,252 | | | | | $ | 471,500 | | |
LIABLILITIES
|
| | | | | | | | | | | | |
Current Liabilities | | | | | | | | | | | | | |
Accounts payable
|
| | | $ | 294,422 | | | | | $ | 65,155 | | |
Accrued expenses
|
| | | | 448,891 | | | | | | 50,000 | | |
Convertible promissory notes payable
|
| | | | 500,000 | | | | | | — | | |
Due to affiliate
|
| | | | 1,599,142 | | | | | | 2,154,310 | | |
Total Current Liabilities
|
| | | | 2,842,455 | | | | | | 2,269,465 | | |
Commitments and Contingencies | | | | | | | | | | | | | |
MEMBERS’ DEFICIT
|
| | | | | | | | | | | | |
Members’ Deficit
|
| | | | (1,933,203 ) | | | | | | (1,797,965 ) | | |
Total Liabilities and Members’ Deficit
|
| | | $ | 909,252 | | | | | $ | 471,500 | | |
|
| | |
2018
|
| |
2017
|
| ||||||
Operating Expenses | | | | | | | | | | | | | |
Selling, general & administrative
|
| | | $ | 740,481 | | | | | $ | 502,574 | | |
Research & development
|
| | | | 431,013 | | | | | | 235,096 | | |
Total Operating Expenses
|
| | | | 1,171,494 | | | | | | 737,670 | | |
Net Loss from Operations
|
| | | | (1,171,494 ) | | | | | $ | (737,670 ) | | |
Net Loss
|
| | | $ | (1,171,494 ) | | | | | $ | (737,670 ) | | |
|
| | |
2018
|
| |
2017
|
| ||||||
Balance, Beginning of Year
|
| | | $ | (1,797,965 ) | | | | | $ | (1,060,295 ) | | |
Due to Affiliate converted to equity
|
| | | | 1,036,256 | | | | | | — | | |
Net Loss
|
| | | | (1,171,494 ) | | | | | | (737,670 ) | | |
Balance, End of Year
|
| | | $ | (1,933,203 ) | | | | | $ | (1,797,965 ) | | |
|
| | |
2018
|
| |
2017
|
| ||||||
Cash Flow from Operating Activities: | | | | | | | | | | | | | |
Net loss
|
| | | $ | (1,171,494 ) | | | | | $ | (737,670 ) | | |
Adjustments to reconcile net loss to net cash used in operating activities:
|
| | | | | | | | | | | | |
Amortization
|
| | | | 25,250 | | | | | | 25,250 | | |
Changes in operating assets and liabilities:
|
| | | | | | | | | | | | |
Other asset
|
| | | | (4,255 ) | | | | | | — | | |
Due from affiliate
|
| | | | (99,558 ) | | | | | | (17,000 ) | | |
Accounts payable
|
| | | | 229,267 | | | | | | 54,027 | | |
Accrued expenses
|
| | | | 398,891 | | | | | | 50,000 | | |
Net cash used in operating activities
|
| | | | (621,899 ) | | | | | | (625,393 ) | | |
Cash Flows from Financing Activities | | | | | | | | | | | | | |
Due to affiliate
|
| | | | 481,088 | | | | | | 625,393 | | |
Proceeds received from convertible notes
|
| | | | 500,000 | | | | | | — | | |
Net cash provided by financing activities
|
| | | | 981,088 | | | | | | 625,393 | | |
Net Increase in cash and cash equivalents
|
| | | | 359,189 | | | | | | — | | |
Cash and cash equivalents, Beginning of the Year
|
| | | | — | | | | | | — | | |
Cash and cash equivalents, End of the Year
|
| | | $ | 359,189 | | | | | $ | — | | |
Supplemental disclosure of cash flow information: | | | | | | | | | | | | | |
Cash paid for interest
|
| | | $ | — | | | | | $ | — | | |
Income taxes paid
|
| | | $ | — | | | | | $ | — | | |
Non-cash investing activities: | | | | | | | | | | | | | |
Due to affiliate converted to equity
|
| | | $ | 1,036,256 | | | | | $ | — | | |
|
|
2019
|
| | | $ | 25,250 | | |
|
2020
|
| | | | 25,250 | | |
|
2021
|
| | | | 25,250 | | |
|
2022
|
| | | | 25,250 | | |
|
2023
|
| | | | 25,250 | | |
|
Thereafter
|
| | | | 303,000 | | |
| | | | | $ | 429,250 | | |
|
| | |
December 31,
|
| |||||||||
| | |
2018
|
| |
2017
|
| ||||||
Clinical trials
|
| | | $ | 350,085 | | | | | $ | 50,000 | | |
Professional Fees
|
| | | | 94,450 | | | | | | — | | |
Interest
|
| | | | 4,356 | | | | | | — | | |
| | | | $ | 448,891 | | | | | $ | 50,000 | | |
|
Item
|
| |
Amount
to Be Paid |
| |||
Securities and Exchange Commission registration fee
|
| | | $ | 65.33 | | |
Blue Sky fees and expenses
|
| | | | | | |
Legal fees and expenses
|
| | | | 600,000 | | |
Accounting fees and expenses
|
| | | | 30,000 | | |
Printing expenses
|
| | | | 20,000 | | |
Miscellaneous* | | | | | 76,800 | | |
Total
|
| | | $ | 726,865 | | |
|
|
Signature
|
| |
Title
|
| |
Date
|
|
|
/s/ DAVID I. JOHNSON
David I. Johnson
|
| |
Director and Chief Executive Officer
(Principal Executive Officer) |
| |
March 11, 2019
|
|
|
/s/ JOSEPH WARUSZ
Joseph Warusz
|
| | Director and Chief Financial Officer (Principal Financial and Accounting Officer) | | |
March 11, 2019
|
|
Exhibit 2.5
Final Form
BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT
This BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Agreement ”) is delivered as of [●], 20__, by and among Alliqua BioMedical, Inc., a Delaware corporation (“ Alliqua ”), and AquaMed Technologies, Inc., a Delaware corporation (“ AquaMed ”). Alliqua and AquaMed are each individually referred to herein as a “ Party ”, and collectively referred to herein as the “ Parties ”.
Statement of Facts
I. The Parties, have entered into that certain Asset Contribution and Separation Agreement, dated of even date herewith (the “ Contribution Agreement ”), pursuant to which Alliqua has agreed to contribute, transfer, convey and issue to AquaMed the Contributed Alliqua Assets, and AquaMed has agreed to receive the Contributed Alliqua Assets and assume the Assumed Alliqua Liabilities, subject to the terms and conditions of the Contribution Agreement.
II. Pursuant to the terms of the Contribution Agreement, Alliqua desires contribute, transfer, convey and issue to AquaMed the Contributed Alliqua Assets, as set forth below.
III. Pursuant to the terms of the Contribution Agreement, Alliqua desires to assign to AquaMed, and AquaMed desires to assume, the Assumed Alliqua Liabilities, as set forth below.
IV. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Contribution Agreement.
Agreement
NOW, THEREFORE, for good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged and intending to be legally bound, the Parties agree as follows:
1. Conveyance . Alliqua hereby contributes, transfers, conveys and issues to AquaMed Alliqua’s entire right, title and interest in and to the Contributed Alliqua Assets.
2. Further Actions . Alliqua covenants and agrees to warrant and defend the contribution, transfer, conveyance and issuance of the Contributed Alliqua Assets hereby made against all persons whomsoever, to take all steps reasonably necessary to establish the record of AquaMed’s good and marketable title to the Contributed Alliqua Assets and, at the request of AquaMed, to execute and deliver further instruments of transfer and assignment and take such other action as AquaMed may reasonably request more effectively to transfer and assign to and vest in AquaMed good and marketable title in and to each of the Contributed Alliqua Assets.
3. Assumption of Assumed Liabilities . Alliqua hereby assigns to AquaMed and AquaMed hereby agrees to assume, pay, perform or otherwise discharge the Assumed Alliqua Liabilities.
1 |
Final Form
4. Good Faith Efforts; Further Assurances; Cooperation . The Parties shall in good faith undertake to perform their obligations in this Agreement and cause the transactions contemplated by this Agreement to be carried out promptly in accordance with the terms of this Agreement and the Contribution Agreement. Upon the execution of this Agreement and thereafter, each Party shall do such things as may be reasonably requested by the other parties hereto in order to more effectively consummate or document the transactions contemplated by this Agreement. The Parties shall cooperate with each other and their respective counsel or other designees in connection with any steps required to be taken as part of their respective rights and obligations under this Agreement.
5. Notices . All notices or other communications or deliveries provided for under this Agreement shall be given as provided in the Contribution Agreement.
6. Third-Parties . Nothing in this Agreement is intended to confer any rights or remedies, whether express or implied, on any Persons other than the Parties and their successors and permitted assigns.
7. The Contribution Agreement . This Agreement is subject in all respects to the terms of the Contribution Agreement, and all of the representations, warranties, covenants and agreements contained in the Contribution Agreement, all of which shall survive the execution and delivery of this Agreement in accordance with the terms of the Contribution Agreement. Nothing contained in this Agreement shall be deemed to supersede, enlarge on or modify any of the obligations, agreements, covenants, or warranties of the Parties contained in the Contribution Agreement.
8. Counterparts . This Agreement may be executed by the Parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. A signed copy of this Agreement delivered by facsimile, email or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
9. Modification . This Agreement may not be amended except by a written agreement executed by each of the Parties.
10. Governing Law . This Agreement shall be governed and construed in accordance with the laws of the State of Delaware without regard to conflicts of laws principles thereof and all questions concerning the validity and construction hereof shall be determined in accordance with the laws of the State of Delaware.
[Remainder of page intentionally left blank]
2 |
Final Form
IN WITNESS WHEREOF, the Parties have caused this Bill of Sale and Assignment and Assumption Agreement to be executed and delivered as of the date first above written.
AQUAMED TECHNOLOGIES, INC. | ||
By: | ||
Name: | ||
Title: | ||
ALLIQUA BIOMEDICAL, INC. | ||
By: | ||
Name: | ||
Title: |
3 |
Exhibit 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
AQUAMED TECHNOLOGIES, INC.
AquaMed Technologies, Inc., a corporation organized and existing under the laws of the State of Delaware (the “ Corporation ”), certifies that:
A. The name of the Corporation is AquaMed Technologies, Inc. The Corporation’s original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on January 13, 2009. The Corporation was originally incorporated under the name AquaMed Technologies, Inc.
B. This Amended and Restated Certificate of Incorporation was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, and has been duly approved by the written consent of the stockholders of the Corporation in accordance with Section 228 of the General Corporation Law of the State of Delaware.
C. The text of the Certificate of Incorporation is amended and restated to read as forth in EXHIBIT A attached hereto.
IN WITNESS WHEREOF, AquaMed Technologies, Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by [______], a duly authorized officer of the Corporation, on _______________, 2019.
[________] | |
Chief Executive Officer |
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
AQUAMED TECHNOLOGIES, INC.
ARTICLE I
The name of the corporation is AquaMed Technologies, Inc. (hereinafter referred to as the “ Corporation ”).
ARTICLE II
The address of the Corporation’s registered office in the State of Delaware is 251 Little Falls Drive, in the City of Wilmington, County of New Castle, 19808. The name of the registered agent at such address is Corporation Service Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law (the “ DGCL ”).
ARTICLE IV
A. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 105,000,000, consisting of 100,000,000 shares of Common Stock, $0.001 par value per share (the “ Common Stock ”), and 5,000,000 shares of Preferred Stock, $0.001 par value per share (the “ Preferred Stock ”).
B. All shares of Common Stock shall be identical and entitle the holders thereof to the same preferences, limitations and relative rights. Each holder of Common Stock shall be entitled to one vote for each share of Common Stock standing in the holder’s name on the books of the Corporation on each matter submitted to a vote by the stockholders of the Corporation and shall, except as otherwise specifically noted in this Certificate of Incorporation, as amended from time to time, be entitled to receive the net assets of the Corporation upon the dissolution of the Corporation. For so long as any shares of Common Stock are outstanding, subject the rights, if any, of holders of outstanding shares of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive dividends, if any, when, as and if declared by the Board of Directors or any duly authorized committee of the Board of Directors, out of funds legally available therefor.
C. The Preferred Stock may be issued from time to time in one or more series pursuant to a resolution or resolutions providing for such issue duly adopted by the Board of Directors (authority to do so being hereby expressly vested in the Board of Directors). The Board of Directors is further authorized, subject to any limitations prescribed by law, to fix by resolution or resolutions the designation, powers, preferences, and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. The Board of Directors is further authorized to increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares of any such series then outstanding) the number of shares of any series, the number of which was fixed by it, subject to the powers, preferences and rights, and the qualifications, limitations and restrictions thereof stated in this Amended and Restated Certificate of Incorporation or the resolution of the Board of Directors originally fixing the number of shares of such series. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.
D. The number of authorized shares of Preferred Stock or Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the outstanding shares of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the DGCL (or any successor provisions thereto), voting together as a single class, without a separate vote of the holders of the class or classes the number of authorized shares of which are being increased or decreased, unless a vote by any holders of one or more series of Preferred Stock is required by the express terms of any series of Preferred Stock as provided for or fixed pursuant to the provisions of Section C of this Article IV (or any certificate of designation with respect thereto). Except as otherwise required by law or provided in this Section D, holders of Common Stock shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Amended and Restated Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock).
ARTICLE V
Subject to the rights of holders of Preferred Stock, the number of directors that constitutes the entire Board of Directors of the Corporation shall be fixed solely by resolution of the majority of the Whole Board. For purposes of this Amended and Restated Certificate of Incorporation, the term “ Whole Board ” shall mean the total number of authorized directors whether or not there exist any vacancies in the previously authorized directorships. At each annual meeting of stockholders, directors of the Corporation shall be elected to hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified or until their earlier resignation or removal; except that if any such meeting shall not be so held, such election shall take place at a stockholders’ meeting called and held in accordance with the DGCL or by written consent in lieu of an annual meeting pursuant to Section 211(b) of the DGCL and Article VIII hereof.
ARTICLE VI
Except as otherwise provided for or fixed by or pursuant to the provisions of Article IV hereof in relation to the rights of the holders of Preferred Stock to elect directors under specified circumstances or as provided by resolution of the Board of Directors, newly created directorships resulting from any increase in the number of directors, created in accordance with the Bylaws of the Corporation, and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled only by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director, and not by the stockholders. If the directors are divided into classes, a person so elected by the Board of Directors to fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been chosen until his or her successor shall have been duly elected and qualified, or until such director’s earlier death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
ARTICLE VII
A. The Corporation is to have perpetual existence.
B. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by statute or by this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.
C. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, alter, amend or repeal the Bylaws of the Corporation. The affirmative vote of at least a majority of the Whole Board shall be required in order for the Board of Directors to adopt, amend, alter or repeal the Corporation’s Bylaws. The Corporation’s Bylaws may also be adopted, amended, altered or repealed by the stockholders of the Corporation. Notwithstanding the above or any other provision of this Amended and Restated Certificate of Incorporation, the Bylaws of the Corporation may not be amended, altered or repealed except in accordance with Article X of the Bylaws. No Bylaw hereafter legally adopted, amended, altered or repealed shall invalidate any prior act of the directors or officers of the Corporation that would have been valid if such Bylaw had not been adopted, amended, altered or repealed.
D. The election of the directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
E. No stockholder will be permitted to cumulate votes at any election of directors.
ARTICLE VIII
A. Any action required or permitted to be taken at an annual or special meeting of stockholders may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, shall be signed by holders of record on the record date (established in the manner provided in Section B of this Article VIII) of outstanding shares of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, but only if such action is taken in accordance with the provisions of this Article VIII, the Bylaws of the Corporation and applicable law; provided , however , that in the case of the election or removal of directors by written consent, such consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of directors.
B. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the attention of the Secretary of the Corporation, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten days after the date on which such a request is received, adopt a resolution fixing the record date (unless a record date has previously been fixed by the Board of Directors pursuant to the first sentence of this Section B of Article VIII). If no record date has been fixed by the Board of Directors within ten days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action.
ARTICLE IX
A. Special meetings of stockholders of the Corporation may be called only by the Chairperson of the Board of Directors acting pursuant to a resolution adopted by a majority of the Whole Board, and any power of stockholders to call a special meeting of stockholders is specifically denied. Only such business shall be considered at a special meeting of stockholders as shall have been stated in the notice for such meeting.
B. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner and to the extent provided in the Bylaws of the Corporation.
ARTICLE X
A. To the fullest extent permitted by the DGCL as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.
B. The Corporation shall indemnify, to the fullest extent permitted by applicable law, any director or officer of the Corporation who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ Proceeding ”) by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding. The Corporation shall be required to indemnify a person in connection with a Proceeding (or part thereof) initiated by such person only if the Proceeding (or part thereof) was authorized by the Board of Directors.
C. The Corporation shall have the power to indemnify, to the extent permitted by applicable law, any employee or agent of the Corporation who was or is a party or is threatened to be made a party to any Proceeding by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any such Proceeding.
D. Neither any amendment nor repeal of this Article X, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation inconsistent with this Article X, shall eliminate or reduce the effect of this Article X, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article X, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.
ARTICLE XI
Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of this Corporation may provide. The books of this Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of this Corporation.
ARTICLE XII
The Corporation reserves the right to amend or repeal any provision contained in this Amended and Restated Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided , however , that notwithstanding any other provision of this Amended and Restated Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote or no vote, the Board of Directors acting pursuant to a resolution adopted by a majority of the Whole Board and the affirmative vote of sixty-six and two-thirds percent (66 2/3%) of the voting power of the then outstanding voting securities of the Corporation, voting together as a single class, shall be required for the amendment, repeal or modification of the provisions of, or adoption of any provision inconsistent with, Section C of Article IV, Article VI, Section E of Article VII, Article VIII, Article IX or this Article XII of this Amended and Restated Certificate of Incorporation.
Exhibit 3.5
AMENDED AND RESTATED BYLAWS OF
AQUAMED TECHNOLOGIES, INC.
(as amended and restated on [DATE], 2019, and effective immediately as of the
closing of the corporation’s merger with TO Pharmaceuticals, LLC)
TABLE OF CONTENTS
Page | ||
ARTICLE I — CORPORATE OFFICES | 1 | |
1.1 | REGISTERED OFFICE | 1 |
1.2 | OTHER OFFICES | 1 |
ARTICLE II — MEETINGS OF STOCKHOLDERS | 1 | |
2.1 | PLACE OF MEETINGS | 1 |
2.2 | ANNUAL MEETING | 1 |
2.3 | SPECIAL MEETING | 1 |
2.4 | ADVANCE NOTICE PROCEDURES | 2 |
2.5 | NOTICE OF STOCKHOLDERS’ MEETINGS | 5 |
2.6 | QUORUM | 6 |
2.7 | ADJOURNED MEETING; NOTICE | 6 |
2.8 | CONDUCT OF BUSINESS | 6 |
2.9 | VOTING | 6 |
2.10 | STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING | 7 |
2.11 | RECORD DATES | 7 |
2.12 | PROXIES | 8 |
2.13 | LIST OF STOCKHOLDERS ENTITLED TO VOTE | 8 |
2.14 | INSPECTORS OF ELECTION | 8 |
ARTICLE III — DIRECTORS | 9 | |
3.1 | POWERS | 9 |
3.2 | NUMBER OF DIRECTORS | 9 |
3.3 | ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS | 9 |
3.4 | RESIGNATION AND VACANCIES | 9 |
3.5 | PLACE OF MEETINGS; MEETINGS BY TELEPHONE | 10 |
3.6 | REGULAR MEETINGS | 10 |
3.7 | SPECIAL MEETINGS; NOTICE | 10 |
3.8 | QUORUM; VOTING | 11 |
3.9 | BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING | 11 |
3.10 | FEES AND COMPENSATION OF DIRECTORS | 11 |
3.11 | REMOVAL OF DIRECTORS | 11 |
ARTICLE IV — COMMITTEES | 11 | |
4.1 | COMMITTEES OF DIRECTORS | 11 |
4.2 | COMMITTEE MINUTES | 12 |
4.3 | MEETINGS AND ACTION OF COMMITTEES | 12 |
4.4 | SUBCOMMITTEES | 12 |
ARTICLE V — OFFICERS | 12 | |
5.1 | OFFICERS | 12 |
5.2 | APPOINTMENT OF OFFICERS | 13 |
TABLE OF CONTENTS
(Continued)
Page | ||
5.3 | SUBORDINATE OFFICERS | 13 |
5.4 | REMOVAL AND RESIGNATION OF OFFICERS | 13 |
5.5 | VACANCIES IN OFFICES | 13 |
5.6 | REPRESENTATION OF SHARES OR INTERESTS OF OTHER CORPORATIONS OR ENTITIES | 13 |
5.7 | AUTHORITY AND DUTIES OF OFFICERS | 13 |
ARTICLE VI — STOCK | 14 | |
6.1 | STOCK CERTIFICATES; PARTLY PAID SHARES | 14 |
6.2 | SPECIAL DESIGNATION ON CERTIFICATES | 14 |
6.3 | LOST, STOLEN OR DESTROYED CERTIFICATES | 14 |
6.4 | DIVIDENDS | 15 |
6.5 | TRANSFER OF STOCK | 15 |
6.6 | STOCK TRANSFER AGREEMENTS | 15 |
6.7 | REGISTERED STOCKHOLDERS | 15 |
ARTICLE VII — MANNER OF GIVING NOTICE AND WAIVER | 15 | |
7.1 | NOTICE OF STOCKHOLDERS’ MEETINGS | 15 |
7.2 | NOTICE BY ELECTRONIC TRANSMISSION | 15 |
7.3 | NOTICE TO STOCKHOLDERS SHARING AN ADDRESS | 16 |
7.4 | NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL | 16 |
7.5 | WAIVER OF NOTICE | 17 |
ARTICLE VIII — INDEMNIFICATION | 17 | |
8.1 | INDEMNIFICATION OF DIRECTORS AND OFFICERS IN THIRD PARTY PROCEEDINGS | 17 |
8.2 | INDEMNIFICATION OF DIRECTORS AND OFFICERS IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION | 17 |
8.3 | SUCCESSFUL DEFENSE | 18 |
8.4 | INDEMNIFICATION OF OTHERS; ADVANCE PAYMENT TO OTHERS | 18 |
8.5 | ADVANCE PAYMENT OF EXPENSES | 18 |
8.6 | LIMITATION ON INDEMNIFICATION | 18 |
8.7 | DETERMINATION; CLAIM | 19 |
8.8 | NON-EXCLUSIVITY OF RIGHTS | 19 |
8.9 | INSURANCE | 19 |
8.10 | SURVIVAL | 19 |
8.11 | EFFECT OF REPEAL OR MODIFICATION | 19 |
8.12 | CERTAIN DEFINITIONS | 19 |
ARTICLE IX — GENERAL MATTERS | 20 | |
9.1 | EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS | 20 |
9.2 | FISCAL YEAR | 20 |
9.3 | SEAL | 20 |
9.4 | CONSTRUCTION; DEFINITIONS | 20 |
ARTICLE X — AMENDMENTS | 20 |
ii
AMENDED AND RESTATED BYLAWS OF AQUAMED TECHNOLOGIES, INC.
ARTICLE I — CORPORATE OFFICES
1.1 Registered Office . The registered office of AquaMed Technologies, Inc. shall be fixed in the corporation’s certificate of incorporation. References in these bylaws to the certificate of incorporation shall mean the certificate of incorporation of the corporation, as amended from time to time, including the terms of any certificates of designation of any series of Preferred Stock.
1.2 Other Offices . The corporation may at any time establish other offices at any place or places.
ARTICLE II — MEETINGS OF STOCKHOLDERS
2.1 Places of Meetings . Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the board of directors. The board of directors may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the General Corporation Law of the State of Delaware (the “ DGCL ”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the corporation’s principal executive office.
2.2 Annual Meeting . The annual meeting of stockholders shall be held on such date, at such time, and at such place (if any) within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the corporation’s notice of the meeting. At the annual meeting, directors shall be elected and any other proper business, brought in accordance with Section 2.4 of these bylaws, may be transacted.
2.3 Special Meeting
(i) A special meeting of the stockholders, other than those required by statute, may be called at any time only by the affirmative vote of a majority of the Whole Board. A special meeting of the stockholders may not be called by any other person or persons. The board of directors, by the affirmative vote of a majority of the Whole Board, may cancel, postpone or reschedule any previously scheduled special meeting at any time, before or after the notice for such meeting has been sent to the stockholders. For purposes of these bylaws, the term “ Whole Board ” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships.
(ii) The notice of a special meeting shall include the purpose for which the meeting is called. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting by or at the direction of the board of directors, the chairperson of the board of directors, the chief executive officer or the president. Nothing contained in this Section 2.3(ii) shall be construed as limiting, fixing or affecting the time when a meeting of stockholders called by action of the board of directors may be held.
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2.4 Advance Notice Procedures .
(i) Advance Notice of Stockholder Business. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be brought: (A) pursuant to the corporation’s proxy materials with respect to such meeting, (B) by or at the direction of the board of directors, or (C) by a stockholder of the corporation who (1) is a stockholder of record at the time of the giving of the notice required by this Section 2.4(i) and on the record date for the determination of stockholders entitled to vote at the annual meeting and (2) has timely complied in proper written form with the notice procedures set forth in this Section 2.4(i). In addition, for business to be properly brought before an annual meeting by a stockholder, such business must be a proper matter for stockholder action pursuant to these bylaws and applicable law. Except for proposals properly made in accordance with Rule 14a-8 under the Securities and Exchange Act of 1934, and the rules and regulations thereunder (as so amended and inclusive of such rules and regulations, the “ Exchange Act ”), clause (C) above shall be the exclusive means for a stockholder to bring business before an annual meeting of stockholders.
(a) To comply with clause (C) of Section 2.4(i) above, a stockholder’s notice must set forth all information required under this Section 2.4(i) and must be timely received by the secretary of the corporation. To be timely, a stockholder’s notice must be received by the secretary at the principal executive offices of the corporation not later than the 45th day nor earlier than the 75th day before the one-year anniversary of the date on which the corporation first mailed its proxy materials or a notice of availability of proxy materials (whichever is earlier) for the preceding year’s annual meeting; provided , however , that in the event that no annual meeting was held in the previous year or if the date of the annual meeting is advanced by more than 30 days prior to or delayed by more than 60 days after the one-year anniversary of the date of the previous year’s annual meeting, then, for notice by the stockholder to be timely, it must be so received by the secretary not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting, or (ii) the tenth day following the day on which Public Announcement (as defined below) of the date of such annual meeting is first made. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described in this Section 2.4(i)(a). “ Public Announcement ” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(b) To be in proper written form, a stockholder’s notice to the secretary must set forth as to each matter of business the stockholder intends to bring before the annual meeting: (1) a brief description of the business intended to be brought before the annual meeting, the text of the proposed business (including the text of any resolutions proposed for consideration) and the reasons for conducting such business at the annual meeting, (2) the name and address, as they appear on the corporation’s books, of the stockholder proposing such business and any Stockholder Associated Person (as defined below), (3) the class and number of shares of the corporation that are held of record or are beneficially owned by the stockholder or any Stockholder Associated Person and any derivative positions held or beneficially held by the stockholder or any Stockholder Associated Person as of the date of delivery of such notice, (4) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such stockholder or any Stockholder Associated Person with respect to any securities of the corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such stockholder or any Stockholder Associated Person with respect to any securities of the corporation, (5) any material interest of the stockholder or a Stockholder Associated Person in such business, and (6) a statement whether either such stockholder or any Stockholder Associated Person will deliver a proxy statement and form of proxy to holders of at least the percentage of the voting power of the corporation’s voting shares required under applicable law to carry the proposal (such information provided and statements made as required by clauses (1) through (6), a “ Business Solicitation Statement ”). In addition, to be in proper written form, a stockholder’s notice to the secretary must be supplemented not later than ten days following the record date for notice of the meeting to disclose the information contained in clauses (3) and (4) above as of the record date for notice of the meeting. For purposes of this Section 2.4, a “ Stockholder Associated Person ” of any stockholder shall mean (i) any person controlling, directly or indirectly, or acting in concert with, such stockholder, (ii) any beneficial owner of shares of stock of the corporation owned of record or beneficially by such stockholder and on whose behalf the proposal or nomination, as the case may be, is being made, or (iii) any person controlling, controlled by or under common control with such person referred to in the preceding clauses (i) and (ii).
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(c) Without exception, no business shall be conducted at any annual meeting except in accordance with the provisions set forth in this Section 2.4(i) and, if applicable, Section 2.4(ii). In addition, business proposed to be brought by a stockholder may not be brought before the annual meeting if such stockholder or a Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Business Solicitation Statement applicable to such business or if the Business Solicitation Statement applicable to such business contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairperson of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that business was not properly brought before the annual meeting and in accordance with the provisions of this Section 2.4(i), and, if the chairperson should so determine, he or she shall so declare at the annual meeting that any such business not properly brought before the annual meeting shall not be conducted.
(ii) Advance Notice of Director Nominations at Annual Meetings. Notwithstanding anything in these bylaws to the contrary, only persons who are nominated in accordance with the procedures set forth in this Section 2.4(ii) shall be eligible for election or re-election as directors at an annual meeting of stockholders. Nominations of persons for election or re-election to the board of directors of the corporation shall be made at an annual meeting of stockholders only (A) by or at the direction of the board of directors or (B) by a stockholder of the corporation who (1) was a stockholder of record at the time of the giving of the notice required by this Section 2.4(ii) and on the record date for the determination of stockholders entitled to vote at the annual meeting and (2) has complied with the notice procedures set forth in this Section 2.4(ii). In addition to any other applicable requirements, for a nomination to be made by a stockholder, the stockholder must have given timely notice thereof in proper written form to the secretary of the corporation.
(a) To comply with clause (B) of Section 2.4(ii) above, a nomination to be made by a stockholder must set forth all information required under this Section 2.4(ii) and must be received by the secretary of the corporation at the principal executive offices of the corporation at the time set forth in, and in accordance with, the final three sentences of Section 2.4(i)(a) above; provided additionally , however , that in the event the number of directors to be elected to the board of directors is increased and there is no Public Announcement naming all of the nominees for director or specifying the size of the increased board made by the corporation at least ten (10) days before the last day a stockholder may deliver notice of nomination pursuant to the foregoing provisions, a stockholder’s notice required by this Section 2.4(ii) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be received by the secretary at the principal executive offices of the corporation not later than the close of business on the tenth day following the date on which such Public Announcement is first made by the corporation.
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(b) To be in proper written form, such stockholder’s notice to the secretary must set forth:
(1) as to each person (a “ nominee ”) whom the stockholder proposes to nominate for election or re-election as a director: (A) the name, age, business address and residence address of the nominee, (B) the principal occupation or employment of the nominee, (C) the class and number of shares of the corporation that are held of record or are beneficially owned by the nominee and any derivative positions held or beneficially held by the nominee, (D) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of the nominee with respect to any securities of the corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit of share price changes for, or to increase or decrease the voting power of the nominee, (E) a description of all arrangements or understandings between or among the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder or concerning the nominee’s potential service on the board of directors, (F) a written statement executed by the nominee acknowledging that as a director of the corporation, the nominee will owe fiduciary duties under Delaware law with respect to the corporation and its stockholders, and (G) any other information relating to the nominee that would be required to be disclosed about such nominee if proxies were being solicited for the election or re-election of the nominee as a director, or that is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including without limitation the nominee’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected or re-elected, as the case may be); and
(2) as to such stockholder giving notice, (A) the information required to be provided pursuant to clauses (2) through (5) of Section 2.4(i)(b) above, and the supplement referenced in the second sentence of Section 2.4(i)(b) above (except that the references to “business” in such clauses shall instead refer to nominations of directors for purposes of this paragraph), and (B) a statement whether either such stockholder or Stockholder Associated Person will deliver a proxy statement and form of proxy to holders of at least the percentage of voting power of the corporation’s voting shares reasonably believed by such stockholder or Stockholder Associated Person to be necessary to elect or re-elect such nominee(s) (such information provided and statements made as required by clauses (A) and (B) above, a “ Nominee Solicitation Statement ”).
(c) At the request of the board of directors, any person nominated by a stockholder for election or re-election as a director must furnish to the secretary of the corporation (1) that information required to be set forth in the stockholder’s notice of nomination of such person as a director as of a date subsequent to the date on which the notice of such person’s nomination was given, (2) such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as an independent director or audit committee financial expert of the corporation under applicable law, securities exchange rule or regulation, or any publicly disclosed corporate governance guideline or committee charter of the corporation and (3) such other information that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee; in the absence of the furnishing of any such information of the kind specified in this Section 2.4(ii)(c) if requested, such stockholder’s nomination shall not be considered in proper form pursuant to this Section 2.4(ii).
(d) Without exception, no person shall be eligible for election or re-election as a director of the corporation at an annual meeting of stockholders unless nominated in accordance with the provisions set forth in this Section 2.4(ii). In addition, a nominee shall not be eligible for election or re-election if a stockholder or Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Nominee Solicitation Statement applicable to such nominee or if the Nominee Solicitation Statement applicable to such nominee contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairperson of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that a nomination was not made in accordance with the provisions prescribed by these bylaws, and if the chairperson should so determine, he or she shall so declare at the annual meeting, and the defective nomination shall be disregarded.
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(iii) Advance Notice of Director Nominations for Special Meetings.
(a) If the board of directors has authorized in the specific case that stockholders may fill a vacancy or newly created directorship at a special meeting of stockholders, and a special meeting has been properly called for such purpose, nominations of persons for election or appointment to the board of directors at such special meeting shall be made only (1) by or at the direction of the board of directors or (2) by any stockholder of the corporation who (A) is a stockholder of record at the time of the giving of the notice required by this Section 2.4(iii) and on the record date for the determination of stockholders entitled to vote at the special meeting and (B) delivers a timely written notice of the nomination to the secretary of the corporation that includes the information set forth in Sections 2.4(ii)(b) and (ii)(c) above. To be timely, such notice must be received by the secretary at the principal executive offices of the corporation not later than the close of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the board of directors to be elected or appointed at such meeting. A person shall not be eligible for election or appointment as a director at a special meeting unless the person is nominated (i) by or at the direction of the board of directors or (ii) by a stockholder in accordance with the notice procedures set forth in this Section 2.4(iii). In addition, a nominee shall not be eligible for election or appointment if a stockholder or Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Nominee Solicitation Statement applicable to such nominee or if the Nominee Solicitation Statement applicable to such nominee contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. Any person nominated in accordance with this Section 2.4(iii) is subject to, and must comply with, the provisions of Section 2.4(ii)(c).
(b) The chairperson of such special meeting shall, if the facts warrant, determine and declare at the meeting that a nomination or business was not made in accordance with the procedures prescribed by these bylaws, and if the chairperson should so determine, he or she shall so declare at the meeting, and the defective nomination or business shall be disregarded.
(iv) Other Requirements and Rights. In addition to the foregoing provisions of this Section 2.4, a stockholder must also comply with all applicable requirements of state law and of the Exchange Act with respect to the matters set forth in this Section 2.4. Nothing in this Section 2.4 shall be deemed to affect any rights of:
(a) a stockholder to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act; or
(b) the corporation to omit a proposal from the corporation’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act.
2.5 Notice of Stockholders’ Meetings . Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Except as otherwise provided in the DGCL, the certificate of incorporation or these bylaws, the written notice of any meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting.
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2.6 Quorum . The holders of a majority of the voting power of the stock issued, outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders, unless otherwise required by law, the certificate of incorporation, these bylaws or the rules of any applicable stock exchange. Where a separate vote by a class or series or classes or series is required, a majority of the voting power of the then-issued and outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter, except as otherwise required by law, the certificate of incorporation, these bylaws or the rules of any applicable stock exchange.
If a quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting, or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. The chairperson of the meeting shall have the authority to adjourn a meeting of the stockholders in all other events. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.
2.7 Adjourned Meeting; Notice . When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for stockholders entitled to vote is fixed for the adjourned meeting, the board of directors shall fix a new record date for notice of such adjourned meeting in accordance with Section 213(a) of the DGCL and Section 2.11 of these bylaws, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.
2.8 Conduct of Business . The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business. The chairperson of any meeting of stockholders shall be designated by the board of directors; in the absence of such designation, the chairperson of the board, if any, the chief executive officer (in the absence of the chairperson) or the president (in the absence of the chairperson of the board and the chief executive officer), or in their absence any other executive officer of the corporation, shall serve as chairperson of the stockholder meeting.
2.9 Voting . The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.
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Except as may be otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder.
Except as otherwise provided by law, the certificate of incorporation, these bylaws or the rules of any applicable stock exchange, in all matters other than the election of directors, the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Except as otherwise required by law, the certificate of incorporation, these bylaws or the rules of any applicable stock exchange, directors shall be elected by a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Where a separate vote by a class or series or classes or series is required, in all matters other than the election of directors, the affirmative vote of the majority of the voting power of shares of such class or series or classes or series present in person or represented by proxy at the meeting shall be the act of such class or series or classes or series, except as otherwise provided by law, the certificate of incorporation, these bylaws or the rules of any applicable stock exchange.
2.10 Stockholder Action by Written Consent Without a Meeting . Unless otherwise provided in the certificate of incorporation, any action required by statute to be taken at any annual or special meeting of the stockholders, or any action which may be taken at an annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be (i) signed by the holders of record on the record date (established in the manner set forth in Section 2.11 and Article VIII of the corporation’s certificate of incorporation) of outstanding shares of the corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted; provided , however , that in the case of the election or removal of directors by written consent, such consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of directors, and (ii) delivered to the corporation in accordance with Section 228 of the DGCL.
2.11 Record Dates . In order that the corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If the board of directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the board of directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination.
If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with the provisions of Section 213 of the DGCL and this Section 2.11 at the adjourned meeting.
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In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.
2.12 Proxies . Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL. A written proxy may be in the form of a telegram, cablegram, or other means of electronic transmission which sets forth or is submitted with information from which it can be determined that the telegram, cablegram, or other means of electronic transmission was authorized by the stockholder.
2.13 List of Stockholders Entitled to Vote . The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting; provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date. The stockholder list shall be arranged in alphabetical order and show the address of each stockholder and the number of shares registered in the name of each stockholder. The corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the corporation’s principal place of business. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place (as opposed to solely by means of remote communication), then a list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then a list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. The stock ledger of the corporation shall be the only evidence as to the identity of the stockholders entitled to examine the stock list and vote at the meeting and the number of shares held by each of them.
2.14 Inspectors of Election . Before any meeting of stockholders, the board of directors shall appoint an inspector or inspectors of election to act at the meeting or its adjournment. The number of inspectors shall be either one (1) or three (3). If any person appointed as inspector fails to appear or fails or refuses to act, then the chairperson of the meeting shall appoint a person to fill that vacancy.
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Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector or inspectors so appointed and designated shall (i) ascertain the number of shares of capital stock of the corporation outstanding and the voting power of each share, (ii) determine the shares of capital stock of the corporation represented at the meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify their determination of the number of shares of capital stock of the corporation represented at the meeting and such inspector or inspectors’ count of all votes and ballots.
In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the corporation, the inspector or inspectors may consider such information as is permitted by applicable law. If there are three (3) inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all.
ARTICLE III — DIRECTORS
3.1 Powers . The business and affairs of the corporation shall be managed by or under the direction of the board of directors, except as may be otherwise provided in the DGCL or the certificate of incorporation.
3.2 Number of Directors . The board of directors shall consist of one or more members, each of whom shall be a natural person. Unless the certificate of incorporation fixes the number of directors, the number of directors shall be determined from time to time solely by resolution of the Whole Board. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.
3.3 Election, Qualification and Term of Office of Directors . Except as provided in Section 3.4 of these bylaws, each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws. The certificate of incorporation or these bylaws may prescribe other qualifications for directors.
3.4 Resignation and Vacancies . Any director may resign at any time upon notice given in writing or by electronic transmission to the corporation; provided, however , that if such notice is given by electronic transmission, such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the director. A resignation is effective when the resignation is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. Unless otherwise specified in the notice of resignation, acceptance of such resignation shall not be necessary to make it effective. A resignation which is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable. Unless otherwise provided in the certificate of incorporation or these bylaws, when one or more directors resign from the board of directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.
Unless otherwise provided in the certificate of incorporation or these bylaws or if authorized by resolution of the board of directors, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class shall be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and not by the stockholders. If the directors are divided into classes, a person so elected by the directors then in office to fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor shall have been duly elected and qualified.
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If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the Whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the voting power of the capital stock of the corporation at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the DGCL as far as applicable.
3.5 Places of Meetings; Meetings by Telephone . The board of directors may hold meetings, both regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors may participate in a meeting of the board of directors by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
3.6 Regular Meetings . Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board of directors.
3.7 Special Meetings; Notice . Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairperson of the board of directors, the chief executive officer, the president, the secretary or a majority of the authorized number of directors, at such times and places as he or she or they shall designate.
Notice of the time and place of special meetings shall be:
(i) delivered personally by hand, by courier or by telephone;
(ii) sent by United States first-class mail, postage prepaid;
(iii) sent by facsimile; or
(iv) sent by electronic mail,
directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the corporation’s records.
If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or sent at least 24 hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the corporation’s principal executive office) nor the purpose of the meeting.
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3.8 Quorum; Voting . At all meetings of the board of directors, a majority of the total authorized number of directors shall constitute a quorum for the transaction of business. If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
The affirmative vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws.
If the certificate of incorporation provides that one or more directors shall have more or less than one vote per director on any matter, every reference in these bylaws to a majority or other proportion of the directors shall refer to a majority or other proportion of the votes of the directors.
3.9 Board Action by Written Consent Without a Meeting . Unless otherwise restricted by the certificate of incorporation, these bylaws or statute, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board of directors or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the board of directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. Any person (whether or not then a director) may provide, whether through instruction to an agent or otherwise, that a consent to action will be effective at a future time (including a time determined upon the happening of an event), no later than 60 days after such instruction is given or such provision is made and such consent shall be deemed to have been given for purposes of this Section 3.9 at such effective time so long as such person is then a director and did not revoke the consent prior to such time. Any such consent shall be revocable prior to its becoming effective.
3.10 Fees and Compensation of Directors . Unless otherwise restricted by the certificate of incorporation, these bylaws or statute, the board of directors shall have the authority to fix the compensation of directors.
3.11 Removal of Directors . A director may be removed from office by the stockholders of the corporation with or without cause.
No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.
ARTICLE IV — COMMITTEES
4.1 Committees of Directors . The board of directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors or in these bylaws, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the corporation.
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4.2 Committee Minutes . Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.
4.3 Meetings and Action of Committees . Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:
(i) Section 3.5 (place of meetings and meetings by telephone);
(ii) Section 3.6 (regular meetings);
(iii) Section 3.7 (special meetings; notice);
(iv) Section 3.8 (quorum; voting);
(v) Section 3.9 (action without a meeting); and
(vi) Section 7.5 (waiver of notice)
with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members. However :
(i) the time of regular meetings of committees may be determined by resolution of the committee;
(ii) special meetings of committees may also be called by resolution of the committee; and
(iii) notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors or a committee may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.
Any provision in the certificate of incorporation providing that one or more directors shall have more or less than one vote per director on any matter shall apply to voting in any committee or subcommittee, unless otherwise provided in the certificate of incorporation or these bylaws.
4.4 Subcommittees . Unless otherwise provided in the certificate of incorporation, these bylaws or the resolutions of the board of directors designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.
ARTICLE V — OFFICERS
5.1 Officers . The officers of the corporation shall be a president and a secretary. The corporation may also have, at the discretion of the board of directors, a chairperson of the board of directors, a vice chairperson of the board of directors, a chief executive officer, a chief financial officer or treasurer, one or more vice presidents, one or more assistant vice presidents, one or more assistant treasurers, one or more assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person.
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5.2 Appointment of Officers . The board of directors shall appoint the officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws, subject to the rights, if any, of an officer under any contract of employment. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in this Article V for the regular election to such office.
5.3 Subordinate Officers . The board of directors may appoint, or empower the chief executive officer or, in the absence of a chief executive officer, the president, to appoint, such other officers and agents as the business of the corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.
5.4 Removal and Resignation of Officers . Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors or by any officer upon whom such power of removal may be conferred by the board of directors, except that, unless specifically approved by the board, officers may not remove other officers chosen by the board of directors.
Any officer may resign at any time by giving written or electronic notice to the corporation; provided, however , that if such notice is given by electronic transmission, such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the officer. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.
5.5 Vacancies in Offices . Any vacancy occurring in any office of the corporation shall be filled by the board of directors or as provided in Section 5.3.
5.6 Representation of Shares or Interests of Other Corporations or Entities . The chairperson of the board of directors, the president, any vice president, the treasurer, the secretary or any assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares or equity interests of any other corporation or corporations or entity or entities standing in the name of this corporation, including the right to act by written consent. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
5.7 Authority and Duty of Officers . All officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the board of directors.
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ARTICLE VI — STOCK
6.1 Stock Certificates; Partly Paid Shares . The shares of the corporation shall be represented by certificates, provided that the board of directors may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the corporation by the chairperson of the board of directors or vice-chairperson of the board of directors, or the president or a vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The corporation shall not have power to issue a certificate in bearer form.
The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly-paid shares, or upon the books and records of the corporation in the case of uncertificated partly-paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully-paid shares, the corporation shall declare a dividend upon partly-paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.
6.2 Special Designation on Certificates . If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however , that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this Section 6.2 or Sections 151, 156, 202(a) or 218(a) of the DGCL or with respect to this Section 6.2 a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated stock and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.
6.3 Lost, Stolen or Destroyed Certificates . Except as provided in this Section 6.3, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
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6.4 Dividends . The board of directors, subject to any restrictions contained in the certificate of incorporation or applicable law, may declare and pay dividends upon the shares of the corporation’s capital stock. Dividends may be paid in cash, in property, or in shares of the corporation’s capital stock, subject to the provisions of the certificate of incorporation.
The board of directors may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.
6.5 Transfer of Stock . Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by an attorney duly authorized, and, if such stock is certificated, upon the surrender of a certificate or certificates for a like number of shares, properly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer; provided, however, that such succession, assignment or authority to transfer is not prohibited by the certificate of incorporation, these bylaws, applicable law or contract.
6.6 Stock Transfer Agreements . The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.
6.7 Registered Stockholders . The corporation:
(i) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;
(ii) shall be entitled (to the fullest extent permitted by law) to hold liable for calls and assessments the person registered on its books as the owner of shares; and
(iii) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII — MANNER OF GIVING NOTICE AND WAIVER
7.1 Notice of Stockholders’ Meetings . Notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the corporation’s records. An affidavit of the secretary or an assistant secretary of the corporation or of the transfer agent or other agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
7.2 Notice by Electronic Transmission . Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the certificate of incorporation or these bylaws, any notice to stockholders given by the corporation under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any such consent shall be deemed revoked if:
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(i) the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent; and
(ii) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent, or other person responsible for the giving of notice.
However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
Any notice given pursuant to the preceding paragraph shall be deemed given:
(i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;
(ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;
(iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and
(iv) if by any other form of electronic transmission, when directed to the stockholder.
An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
An “ electronic transmission ” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.
7.3 Notice to Stockholders Sharing an Address . Except as otherwise prohibited under the DGCL, without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the corporation under the provisions of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any stockholder who fails to object in writing to the corporation, within 60 days of having been given written notice by the corporation of its intention to send the single notice, shall be deemed to have consented to receiving such single written notice.
7.4 Notice to Person with whom Communication is Unlawful . Whenever notice is required to be given, under the DGCL, the certificate of incorporation or these bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.
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7.5 Waiver of Notice . Whenever notice is required to be given to stockholders, directors or other persons under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders or the board of directors, as the case may be, need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.
ARTICLE VIII — INDEMNIFICATION
8.1 Indemnification of Directors and Officers in Third Party Proceedings . Subject to the other provisions of this Article VIII, the corporation shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ Proceeding ”) (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director of the corporation or an officer of the corporation, or while a director of the corporation or officer of the corporation is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.
8.2 Indemnification of Directors and Officers in Actions by or in the Right of the Corporation . Subject to the other provisions of this Article VIII, the corporation shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the corporation, or while a director or officer of the corporation is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
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8.3 Successful Defense . To the extent that a present or former director or officer of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described in Section 8.1 or Section 8.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.
8.4 Indemnification of Others; Advance Payment to Others . Subject to the other provisions of this Article VIII, the corporation shall have power to advance expenses to and indemnify its employees and its agents to the extent not prohibited by the DGCL or other applicable law. The board of directors shall have the power to delegate the determination of whether employees or agents shall be indemnified or receive an advancement of expenses to such person or persons as the board of directors determines.
8.5 Advance Payment of Expenses . Expenses (including attorneys’ fees) incurred by an officer or director of the corporation in defending any Proceeding shall be paid by the corporation in advance of the final disposition of such Proceeding upon receipt of a written request therefor (together with documentation reasonably evidencing such expenses) and an undertaking by or on behalf of the person to repay such amounts if it shall ultimately be determined that the person is not entitled to be indemnified under this Article VIII or the DGCL. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the corporation deems reasonably appropriate and shall be subject to the corporation’s expense guidelines. The right to advancement of expenses shall not apply to any claim for which indemnity is excluded pursuant to these bylaws, but shall apply to any Proceeding referenced in Section 8.6(ii) or 8.6(iii) prior to a determination that the person is not entitled to be indemnified by the corporation.
8.6 Limitation of Indemnification . Subject to the requirements in Section 8.3 and the DGCL, the corporation shall not be obligated to indemnify any person pursuant to this Article VIII in connection with any Proceeding (or any part of any Proceeding):
(i) for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;
(ii) for an accounting or disgorgement of profits pursuant to Section 16(b) of the Exchange Act, or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlement arrangements);
(iii) for any reimbursement of the corporation by such person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of securities of the corporation, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the corporation pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”), or the payment to the corporation of profits arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liable therefor (including pursuant to any settlement arrangements);
(iv) initiated by such person against the corporation or its directors, officers, employees, agents or other indemnitees, unless (a) the board of directors authorized the Proceeding (or the relevant part of the Proceeding) prior to its initiation, (b) the corporation provides the indemnification, in its sole discretion, pursuant to the powers vested in the corporation under applicable law, (c) otherwise required to be made under Section 8.7 or (d) otherwise required by applicable law; or
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(v) if prohibited by applicable law; provided, however , that if any provision or provisions of this Article VIII shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this Article VIII (including, without limitation, each portion of any paragraph or clause containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this Article VIII (including, without limitation, each such portion of any paragraph or clause containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
8.7 Determination; Claim . If a claim for indemnification or advancement of expenses under this Article VIII is not paid in full within 90 days after receipt by the corporation of the written request therefor, the claimant shall be entitled to an adjudication by a court of competent jurisdiction of his or her entitlement to such indemnification or advancement of expenses. The corporation shall indemnify such person against any and all expenses that are incurred by such person in connection with any action for indemnification or advancement of expenses from the corporation under this Article VIII, to the extent such person is successful in such action, and to the extent not prohibited by law. In any such suit, the corporation shall, to the fullest extent not prohibited by law, have the burden of proving that the claimant is not entitled to the requested indemnification or advancement of expenses.
8.8 Non-Exclusivity of Rights . The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the certificate of incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advancement of expenses, to the fullest extent not prohibited by the DGCL or other applicable law.
8.9 Insurance . The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of the DGCL.
8.10 Survival . The rights to indemnification and advancement of expenses conferred by this Article VIII shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
8.11 Effect of Repeal or Modification . Any amendment, alteration or repeal of this Article VIII shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to such amendment, alteration or repeal.
8.12 Certain Definitions . For purposes of this Article VIII, references to the “ corporation ” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article VIII, references to “ other enterprises ” shall include employee benefit plans; references to “ fines ” shall include any excise taxes assessed on a person with respect to an employee benefit plan (excluding any “parachute payments” within the meanings of Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended); and references to “ serving at the request of the corporation ” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “ not opposed to the best interests of the corporation ” as referred to in this Article VIII.
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ARTICLE IX — GENERAL MATTERS
9.1 Execution of Corporate Contracts and Instruments . Except as otherwise provided by law, the certificate of incorporation or these bylaws, the board of directors may authorize any officer or officers, or agent or agents, to enter into any contract or execute any document or instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
9.2 Fiscal Year . The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors.
9.3 Seal . The corporation may adopt a corporate seal, which shall be adopted and which may be altered by the board of directors. The corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
9.4 Construction; Definitions . Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “ person ” includes both an entity and a natural person.
ARTICLE X – FORUM FOR ADJUDICATION OF DISPUTES
Unless the corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the corporation; (ii) any action asserting a claim of breach of fiduciary duty owed by any director or officer or other employee of the corporation to the corporation or the corporation’s stockholders; (iii) any action asserting a claim against the corporation or any director or officer or other employee of the corporation arising pursuant to any provision of the DGCL, the Certificate of Incorporation or these Bylaws (in each case, as may be amended from time to time); (iv) any action asserting a claim against the corporation or any director or officer or other employee of the corporation governed by the internal affairs doctrine; or (v) any other internal corporate claim as defined in Section 115 of the DGCL or any successor provision, shall be in the Court of Chancery of the State of Delaware, or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the Superior Court of the State of Delaware, or, if the Superior Court of the State of Delaware does not have jurisdiction, the United States District Court for the District of Delaware, subject to the court’s having personal jurisdiction over the indispensable parties named therein. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the corporation shall be deemed to have notice of and consented to the provisions of this Article X. If any action the subject matter of which is within the scope of this Article X is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the preceding sentence and (ii) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. Failure to enforce the foregoing provisions would cause the corporation irreparable harm and the corporation shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions.
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ARTICLE XI — AMENDMENTS
These bylaws may be adopted, amended or repealed by the stockholders entitled to vote; provided, however , that the affirmative vote of the holders of at least 66 2/3% of the total voting power of all outstanding shares of capital stock of the corporation entitled to vote thereon, voting together as a single class, shall be required for the stockholders of the corporation to alter, amend or repeal, or adopt any bylaw inconsistent with, the following provisions of these bylaws: Article II, Sections 3.1, 3.2, 3.4 and 3.11 of Article III, Article VIII and this Article XI (including, without limitation, any such Article or Section as renumbered as a result of any amendment, alteration, change, repeal, or adoption of any other Bylaw). The board of directors, acting by the affirmative vote of at least a majority of the Whole Board, shall also have the power to adopt, amend or repeal bylaws; provided, however , that a bylaw amendment adopted by stockholders which specifies the votes that shall be necessary for the election of directors shall not be further amended or repealed by the board of directors.
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AQUAMED TECHNOLOGIES, INC.
CERTIFICATE OF ADOPTION OF AMENDED AND RESTATED BYLAWS
The undersigned hereby certifies that he is the duly elected, qualified and acting Secretary of AquaMed Technologies, Inc., a Delaware corporation (the “ Company ”), and that the foregoing amended and restated bylaws, comprising twenty-four (24) pages, were adopted as the bylaws of the Company on [DATE], 2019.
(signature) | |
(print name) | |
Secretary | |
(title) |
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Exhibit 10.6
EXECUTION COPY
US PHARMA
LICENSE AGREEMENT
This License Agreement (this “Agreement”), dated as of April 13, 2017 (the “Effective Date”), is by and between Tikun Olam Ltd ., an Israeli corporation, registration number 514263771 (“Licensor”) and TO Pharmaceuticals USA LLC , a Delaware limited liability company (“Licensee”). Licensor and Licensee shall each be individually referred to as a “Party” and collectively as the “Parties”.
WITNESSETH
WHEREAS , Licensor is the Cannabis Business in Israel, and through joint ventures, licenses and partnerships in other jurisdictions.
WHEREAS , in connection with its Cannabis Business or otherwise, Licensor is the owner of certain intellectual property, whether registered or applied for, which includes the Licensor patents, patent applications, plant patents and plant patent applications, continuation and continuation in part applications and patents maturing therefrom, and divisional applications and patents maturing therefrom, which includes the Licensor Trademarks (as defined herein), copyrights, promotional materials, know-how, trade secrets, knowledge, documentation, information relating to clinical or other trials, patient data, plant breeders rights, registered and unregistered cannabis varieties and uniquely identifiable strains of Cannabis in all forms (as further detailed hereunder), including with respect to any forms or strains of Cannabis (collectively known as the “Intellectual Property”) that are currently developed, as specified in more detail in Exhibit B hereof or which may be developed, owned or licensed in the future by Licensor, including Licensor Additional IP (collectively, the “Licensor IP”).
WHEREAS, Licensee is desirous of obtaining from Licensor a license to use the Licensor IP in connection with Licensee’s business, whether currently in existence or not, of producing, researching, developing, promoting, marketing, selling, and distributing Pharmaceutical Products (as defined herein), including for such purpose only, the planting, cultivating, growing, harvesting, use and processing of Cannabis, and application and delivery systems, methods and devices relating thereto (the “Pharmaceutical Business”), in the Territory (as defined herein), and Licensor is desirous of granting such a license to use the Licensor IP in connection with Licensee’s business pursuant to terms and conditions of this Agreement.
NOW, THEREFORE , in consideration of the premises and mutual covenants set forth herein, the Parties hereby agree as follows:
Section 1. Definitions . Capitalized terms used herein are as set forth on Exhibit A hereto.
Section 2. Grant of License .
2.1 Grant by Licensor . Subject to the terms and conditions set forth in this Agreement, Licensor hereby grants to Licensee, and Licensee hereby accepts a perpetual, non-revocable (subject to the terms hereof), royalty-free, exclusive, and sub-licensable license (the “License”) to use the Licensor IP and any Third-Party IP (subject to Section 2.9 hereof) solely in connection with the Pharmaceutical Business and solely in the United States (the “Territory”). Licensor shall not use or grant the right to use the Licensor IP to another third-party in connection with the Pharmaceutical Business in the Territory other than to an Affiliate of Licensee.
2.2 Ownership of Intellectual Property and New IP .
(a) Licensor Ownership . Subject to Section 2.3 hereof, Licensor shall (i) continue to own all Licensor IP owned by Licensor prior to April 19, 2015, and (ii) own all Intellectual Property developed after April 19, 2015 solely by Licensor without any specific or direct collaboration with Licensee or its Affiliates ("Licensor Additional IP").
(b) Licensee Ownership . Licensee shall own any and all Intellectual Property and improvements and modifications of the Licensor IP relating to the Pharmaceutical Business developed or acquired on or after April 19, 2015 (i) solely by Licensee, or (ii) jointly or collaboratively with Licensee anywhere in the world (collectively, the “New IP”), except to the extent such New IP is owned by the Pharmaceutical Affiliate, and is subject to that certain License Agreement of even date herewith between Licensor and the Pharmaceutical Affiliate (the “Affiliate Pharmaceutical License Agreement”). The New IP shall be used and/or licensed to third parties by Licensee solely within the Territory and solely in connection with the Pharmaceutical Business; however, the use of the New IP by (a) the Pharmaceutical Affiliate outside of the Territory for its Pharmaceutical Business, pursuant and subject to the Affiliate Pharmaceutical License Agreement; and (b) Tikun Olam LLC, a Delaware company, which is also an Affiliate of Licensee (hereinafter “TO LLC”), within the Territory pursuant to the License Agreement dated April 20, 2016, between Licensor and TO LLC (the “US Medical Cannabis License Agreement”), shall be permitted and shall not be a breach of this Agreement.
(c) New IP . Licensee shall have the right to use all New IP owned by it solely in connection with the Pharmaceutical Business, and/or license to third parties the right to use such New IP, solely in connection to the Pharmaceutical Business, in each case solely within the Territory. Licensor shall not have the independent right to use or license to third parties the right to use such New IP owned by Licensee outside the Territory in connection with any business similar to or competitive or potentially competitive with the Pharmaceutical Business, but shall be granted a license, pursuant to Section 2.4 below, to use the New IP outside the Territory solely in connection with its Cannabis Business. Any Licensor Additional IP not owned by Licensee or its Affiliates shall be subject to the License granted hereunder.
(d) New Strains . If Licensee, in connection with the Pharmaceutical Products or the Pharmaceutical Business, during the Term of this Agreement or thereafter, makes any improvements to the Licensor IP, including by developing new strains, including any Essentially Derived Variety, based on the TO Strains (collectively, the “New Strains”), Licensee shall own all rights, title and interest in such New Strains and the New IP; provided however, that (i) Licensee shall be entitled to use such New Strains only within the Territory and subject to the terms and conditions set forth in this Agreement regarding the use of the TO Strains; (ii) the Pharmaceutical Affiliate shall be entitled to use such New Strains outside of the Territory but only subject to the terms and conditions set forth in the Affiliate Pharmaceutical License Agreement; (iii) TO LLC shall be entitled to use such New Strains, solely within the Territory, and only subject to the terms of the US Medical Cannabis License Agreement; and (iv) pursuant to Section 2.4 hereof, Licensor shall be granted an non-revocable (subject to the terms hereof), perpetual, sub-licensable royalty-free license to use the New Strains, and shall be entitled to use them solely in connection with its Cannabis Business, and not any Pharmaceutical Business, outside the Territory.
2.3 Clinical Trials . The results of the Clinical Trials and all Intellectual Property in connection therewith and relating thereto shall be owned (a) by Licensor to the extent they were developed by Licensor prior to April 19, 2015 or developed after April 19, 2015 solely by Licensor without any specific or direct collaboration with Licensee or its Affiliates, including without limitation any direct non- de minimis financial contribution pursuant to Section 7.1(e) hereof, and (b) by Licensee, to the extent developed solely or primarily by Licensee or developed by Licensor on or after April 19, 2015 with specific or direct collaboration with Licensee or its Affiliates, including without limitation any direct non- de minimis financial contribution by Licensee or its Affiliates, anywhere in the world, except to the extent owned by the Pharmaceutical Affiliate pursuant to the License Agreements.
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2.4 Grant by Licensee . Licensee hereby grants to Licensor, and Licensor hereby accepts, a perpetual, non-revocable (subject to the terms hereof), royalty-free, non-exclusive, and sub-licensable, license to use the New IP, the New Strains and the results of Clinical Trials, including any improvements and modifications thereof made by Licensee or any other party except Licensor, in each case solely outside the Territory but solely in connection with the Cannabis Business; provided, that the license granted pursuant to this Section 2.4 shall not apply to (a) any portion of Licensee's Intellectual Property which Licensee shall not have made available to TO LLC for use in TO LLC's Cannabis Business (as such term is defined in the US Medical Cannabis License Agreement), (b) any Acquired IP, and (c) any Licensee Excluded IP. For the Purpose of Section 2 of this Agreement, the term Cannabis Business shall exclude any Pharmaceutical Business.
2.5 Right to Sublicense . Licensee shall have the right to grant sublicenses of any of its rights under this License in connection with the Pharmaceutical Business solely within the Territory. The granting of sublicenses shall be at Licensee's sole and exclusive discretion and Licensee shall have the sole and exclusive power to determine the identity of any sublicensee, the applicable licensee fees or royalty rates, if any, and other terms and conditions of any sublicense.
2.6 Delivery of Licensor IP . To the extent permitted by Applicable Law (including for the avoidance of doubt, the export laws of the State of Israel and the importation federal laws and state laws of the United States), Licensor shall provide to Licensee seeds, plants or propagation materials of the strains of Cannabis included in the Licensor IP (the “TO Strains”), for the purpose of reproduction and use thereof by Licensee in accordance with the terms of this Agreement. To the extent such provision is not permitted by Applicable Law, Licensor shall cooperate with Licensee to permit Licensee, to the fullest extent permitted by Applicable Law, to utilize the TO Strains in connection with the Pharmaceutical Products and Licensee’s Pharmaceutical Business.
2.7 No Assignment of Licensor IP . Notwithstanding the foregoing, the License granted hereunder is not intended to be, and shall not be construed as, an assignment by Licensor to Licensee, in part or in whole, of the ownership of the Licensor IP.
2.8 Pharmaceutical Rights Only . The Parties recognize that, notwithstanding anything implicitly or explicitly to the contrary in this Agreement, the License granted hereunder does not grant any rights with respect to any use of Licensor IP or Licensee IP other than with respect to Licensee's Pharmaceutical Business within the Territory.
2.9 Third-Party IP . If at any time Licensor has a right to use the intellectual property of a third-party (“Third-Party IP”), to the extent permitted by such license or similar agreement, such Third-Party IP shall be deemed to be part of the Licensor IP and sub ject hereto. Licensor shall use commercially reasonable efforts to permit the use of any Third-Party IP by Licensee.
Section 3. Consideration, Payment .
In consideration of the License granted and the other Services (as hereinafter defined) provided pursuant to this Agreement, Licensee or an Affiliate of Licensee has paid or caused to be paid to Licensor an aggregate of Two Million Five Hundred Thousand U.S. Dollars ($2,500,000) (the “Payment”), of which $2,000,000 (the “USA Payment”) was paid to Licensor on behalf of Licensee and its Affiliate TO LLC. Licensor hereby acknowledges that (a) the Payment was made timely, and constitutes full payment of all obligations under Section VII of the MOU (as defined herein), and (b) that portions of such USA Payment shall be allocated to Licensee and TO LLC as payment of consideration pursuant to this Agreement and the US Medical Cannabis License Agreement, as determined by Licensee and its Affiliates, without duplication. No royalties or other payments are required hereunder.
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Section 4. Term .
4.1 The License granted under this Agreement is perpetual and non-revocable (subject to the terms hereof).
Section 5. Licensor Representations and Warranties .
5.1 Organization of Licensor . Licensor is a corporation duly organized, validly existing and in good standing under the Laws of Israel. Licensor has all requisite power and authority to own, lease and operate its properties and to carry on its business and is duly qualified or licensed to do business and is in good standing as a foreign corporation in each jurisdiction in which the conduct of its business or the ownership, leasing, holding or use of its properties makes such qualification necessary, except such jurisdictions where the failure to be so qualified or licensed or in good standing would not reasonably be expected to have a material adverse effect on the ability of Licensor to consummate the transactions contemplated hereby.
5.2 Authority . Subject to Section 8 hereof, Licensor has all requisite corporate power and authority to enter into this Agreement to which it is a party and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Licensor. This Agreement has been duly executed and delivered by Licensor and, assuming the due authorization, execution and delivery by the Licensee, and subject to Section 8 hereof, this Agreement constitutes the valid and binding obligations of Licensor, enforceable against Licensor in accordance with its terms, except as such enforceability may be subject to applicable bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium and similar laws affecting the enforcement of creditors’ rights and remedies generally and by general principles of equity.
5.3 Consents . Subject to Section 8 hereof, no consent, waiver, approval, order or authorization of, or registration, declaration or filing with, or notice to, any Governmental Authority, is required by or with respect to Licensor in connection with the execution and delivery of this Agreement by Licensor or the consummation by Licensor of the transactions contemplated hereby except for (a) such consents, approvals, orders, authorizations, registrations, declarations, filings and notices as may be required under Applicable Law and (b) such other filings, authorizations, consents and approvals that if not obtained or made would not have a material adverse effect on the ability of Licensor to consummate the transactions contemplated hereby.
5.4 No Conflict . Subject to Section 8 hereof, the execution and delivery by Licensor of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not conflict with or result in any violation of or default under (with or without notice or lapse of time, or both) or give rise to a right of termination, cancellation, modification or acceleration of any obligation or loss of any benefit under (a) any provision of the Organizational Documents of Licensor, or (b) any Applicable Law applicable to Licensor or any of its properties (whether tangible or intangible) or assets, except, in the case of clause (b), for such conflicts, violations or defaults as would not individually or in the aggregate reasonably be expected to have a material adverse effect on the ability of Licensor to consummate the transactions contemplated hereby.
5.5 Intellectual Property . Licensor is the owner or lawful licensee of the Licensor IP and has sufficient authority to grant Licensee the License pursuant to this Agreement. Licensor has not entered into any additional licenses or other arrangements that may limit Licensor’s rights or the rights of Licensee under this Agreement or which may reasonably be expected to lead to a claim of infringement or invalidity regarding any portion of the Licensor IP or its use. Licensor has no knowledge of infringement of, or conflict with, any license or other intellectual property right of any other third-party and there is no known claim pending, filed or threatened against Licensor of infringement, interference or invalidity regarding the Licensor IP or its use. Licensor has not granted and will not at any time during the Term grant or permit to exist any license or other contingent or non-contingent right, title or interest under or relating to the Licensor IP to any of its employees, principal shareholders or family members of Licensor’s principal shareholders or other third parties claiming rights derived from Licensor, that does or will conflict with or otherwise undermine or impair the rights of Licensee hereunder, including any of Licensor's representations, warranties or covenants hereunder. Notwithstanding the foregoing, Licensee acknowledges MedReleaf's interpretation of the MedReleaf License that it may conduct business within the Territory, so long as it does not make use of "Tikun Olam's Varieties" or the Licensor Trademarks, and the Parties agree that any such activity (to the extent performed by MedReleaf) shall not be deemed a breach of this Agreement by Licensor or any agreement of Licensor with any Affiliate of Licensee.
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5.6 Legal Proceedings . There are no actions pending or threatened against or by Licensor or any Affiliate of Licensor that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. Subject to Section 8 hereof, no event has occurred or circumstances exist that may give rise or serve as a basis for any such action. Licensor warrants that its directors, officers, and management employees have not been convicted of any drug-related felony or of a crime related to fraud.
Section 6. Licensee Representations and Warranties .
6.1 Organization of Licensee . Licensee is a limited liability company duly organized, validly existing and in good standing under the Laws of Delaware. Licensee has all requisite power and authority to own, lease and operate its properties and to carry on its business.
6.2 Authority . Subject to Section 8 hereof, Licensee has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby has been duly authorized by all necessary corporate action on the part of Licensee. This Agreement has been duly executed and delivered by Licensee and, assuming the due authorization, execution and delivery by the other Parties hereto (other than Licensee), and subject Section 8 hereof, this Agreement constitutes the valid and binding obligations of Licensee, enforceable against Licensee in accordance with its terms, except as such enforceability may be subject to applicable bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium and similar laws affecting the enforcement of creditors’ rights and remedies generally and by general principles of equity.
6.3 Consents . Subject to Section 8 hereof, no consent, waiver, approval, order or authorization of, or registration, declaration or filing with, or notice to, any Governmental Authority, is required by or with respect to Licensee in connection with the execution and delivery of this Agreement or the consummation by Licensee of the transactions contemplated hereby except for (a) such consents, approvals, orders, authorizations, registrations, declarations, filings and notices as may be required under Applicable Law and (b) such other filings, authorizations, consents and approvals that if not obtained or made would not have a material adverse effect on the ability of Licensee to consummate the transactions contemplated hereby.
6.4 No Conflict . Subject to Section 8 hereof, the execution and delivery by Licensee of this Agreement and the consummation of the transactions contemplated hereby, do not and will not conflict with or result in any violation of or default under (with or without notice or lapse of time, or both) or give rise to a right of termination, cancellation, modification or acceleration of any obligation or loss of any benefit under (a) any provision of the Organizational Documents of Licensee, or (b) any Applicable Law applicable to Licensee or any of its properties (whether tangible or intangible) or assets, except, in the case of clause (b), for such conflicts, violations or defaults as would not individually or in the aggregate reasonably be expected to have a material adverse effect on the ability of Licensee to consummate the transactions contemplated hereby.
6.5 Legal Proceedings . There are no actions pending or, to Licensee’s knowledge, threatened against or by Licensee or any Affiliate of Licensee that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. Subject to Section 8 hereof, no event has occurred or circumstances exist that may give rise or serve as a basis for any such action. Licensee warrants that its managers, directors, officers, and management employees have not been convicted of any drug-related felony or of a crime related to fraud.
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Section 7. Covenants .
7.1 Licensor Covenants . Licensor shall:
(a) Continue to conduct research and development efforts in connection with the Pharmaceutical Business within Israel and assist Licensee (at its request) with such research and development worldwide;
(b) provide to Licensee and its Affiliates training and assistance with research and development in connection with Licensee’s Pharmaceutical Business (the “Training Services”). In this connection, Licensor shall use a reasonable degree of care ordinarily provided consistent with good industry practices, at no lower standard than Licensor provides for itself, relating to training of the Licensee’s the staff and employees of Licensee, to the extent required or requested by Licensee;
(c) assist Licensee with design and establishment of operations in connection with the cultivation and production of Cannabis and extracts for Pharmaceutical Products (collectively, “Design and Operations Services”). In this connection, Licensor shall use a reasonable degree of care ordinarily provided consistent with good industry practices, at no lower standard than Licensor provides for itself in connection with the design, establishment and operation of Licensor’s Cannabis Business, and in any event in a manner and to the extent sufficient to comply with Applicable Law;
(d) assist Licensee in connection with conducting Clinical Trials and provide all related Clinical Trials Services. In this connection, Licensor shall use a reasonable degree of care, ordinarily provided consistent with good industry practices, at no lower standard than Licensor provides for itself in connection with its own research studies and clinical trials in Israel related to Cannabis Products, including extracts, and in any event in a manner and to the extent sufficient to comply with Applicable Law; and
(e) devote and pay not less than an aggregate of Three Hundred Seventy-Five Thousand U.S. Dollars ($375,000) to further develop and enhance the Licensor IP, including in connection with (i) patent prosecution, (ii) purchasing of equipment, and (iii) by funding up to Two Hundred Fifty Thousand U.S. Dollars ($250,000) in connection with the Clinical Trials, in amounts equal to funding therefor provided by Licensee and its Affiliates. In addition, Licensee, together with its Affiliates, TO LLC and the Pharmaceutical Affiliate, or such other Affiliates of Licensee as Licensee may determine, shall pay the aggregate remaining costs in connection with such Clinical Trials, if any. The obligations of Licensee and its Affiliates pursuant to this Section 7.1(e) shall be shared as determined by Licensee between Licensee and its Affiliates. The obligations of Licensor, Licensee or any of its Affiliates under this Section 7.1(e) and the obligations of Licensee’s Affiliates under any similar provisions of any other agreements, including the Affiliate License Agreements, shall not be duplicative of each other. Accordingly, the aggregate financial commitment of each of Licensor (on the one hand) and of Licensee and its Affiliates (on the other hand) pursuant to clause (iii) above shall be such Two Hundred Fifty Thousand U.S. Dollars ($250,000), and the amounts required pursuant to the second sentence of this Section 7.1(e) shall be shared among Licensee and its Affiliates. Licensee and Licensor acknowledge and agree that as of the date hereof, Licensor has already contributed $125,000 toward its obligations pursuant to clauses (i) and (ii) of this Section 7.1(e) and shall therefore only be required to contribute an additional $250,000, which shall be applied toward Licensor’s obligation to pay for 50% of the aggregate costs in connection with the Clinical Trials as set forth in clause (iii) above of this Section 7.1(e), any Clinical Trials as set forth in clause (iii) of Section 7.1(e) of the Affiliate Pharmaceutical License Agreement or any Clinical Trials as set forth in clause (iii) of Section 7.1(e) of the US Medical Cannabis License Agreement.
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7.2 Licensee Covenants . Licensee shall:
(a) without prejudice to Section 7.1(e), in connection with the Services provided pursuant to Section 7.1, reimburse Licensor for all reasonable and actual out-of-pocket expenses (the “Expenses”), including the cost of air travel, accommodations and meals for employees of Licensor who in so providing such Services are required to travel outside Israel (not including salaries or other compensation paid to its employees, consultants, or related parties, except as Licensee may otherwise agree in writing), in each case upon submission of appropriate documentation evidencing such Expenses consistent with Licensee’s customary expense reimbursement policies; The obligations of Licensee or any of its Affiliates under this Section 7.2 and the obligations of Licensee’s Affiliates under any similar provisions of the Affiliate License Agreements shall not be duplicative of each other; and
(b) use commercially reasonable efforts to obtain any necessary FDA and other jurisdictional, governmental, regulatory approvals to the extent required by Applicable Law in connection with the Pharmaceutical Business in the Territory.
Section 8. Regulatory Disclosures .
8.1 The Parties acknowledge and agree that there is (a) an unpredictable regulatory environment in the area of cannabis law and that existing or new laws, interpretations of law, or enforcement policies may adversely impact the Parties’ business and (b) notwithstanding the laws of various U.S. states and other jurisdictions, Cannabis is a prohibited Schedule I controlled substance under United States federal law.
8.2 Legal Risks . The Parties acknowledge and agree that Licensee faces certain legal risk which include, but are not limited to, the following:
(a) Licensee and its suppliers or vendors, including Licensor, could be subject to criminal prosecution at any time by United States or other Governmental Authority;
(b) United States or other Governmental Authority may take actions to stop, hinder, delay or harm Licensee or take other actions that would be detrimental to Licensee; and
(c) This Agreement may be deemed void for illegality in whole or in material part.
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Section 9. Confidentiality .
From time to time during the term of this Agreement, either Party (as the ”Disclosing Party”) may disclose or make available to the other Party (as the ”Receiving Party”) information which is considered proprietary or confidential by that Party, including without limitation: technology, business practices, trade secrets, processes, policies, procedures, techniques, technical information, formulae, plant strains, financial/financing contacts, investors, contractors, specifications, information data, the identity and special needs of customers or potential customers, databases, data, systems, methods of operation, client or customer lists, solicitation leads, marketing or advertising materials, techniques, know-how, processes, cost data, marketing data, business data, technical data and other technical know-how, Intellectual Property, trade secrets, third-party confidential information and other sensitive or proprietary information, whether orally or in written, electronic or other form or media, whether disclosed to the other Party or obtained by such Party through observation or examination of the other Party’s facilities or procedures or materials, and whether or not marked, designated or otherwise identified as “confidential” (collectively, ”Confidential Information”). Confidential Information shall not include information that, at the time of disclosure and as established by documentary evidence: (i) is or becomes generally available to and known by the public other than as a result of, directly or indirectly, any breach of this Section 9 by the Receiving Party or any of its Representatives; (ii) is or becomes available to the Receiving Party on a non-confidential basis from a third-party source, provided that such third-party is not and was not prohibited from disclosing such Confidential Information; (iii) was known by or in the possession of the Receiving Party or its Representatives prior to being disclosed by or on behalf of the Disclosing Party; (iv) was or is independently developed by the Receiving Party without reference to or use, in whole or in part, of any of the Disclosing Party's Confidential Information; or (v) is required to be disclosed pursuant to applicable federal, state or local law, regulation or a valid order issued by a court or Governmental Authority of competent jurisdiction. The Receiving Party shall: (A) protect and safeguard the confidentiality of the Disclosing Party's Confidential Information with at least the same degree of care as the Receiving Party would protect its own Confidential Information, but in no event with less than a commercially reasonable degree of care; (B) not use the Disclosing Party's Confidential Information, or permit it to be accessed or used, for any purpose other than to exercise its rights or perform its obligations under this Agreement; and (C) not disclose any such Confidential Information to any person or entity, except to the Receiving Party's Representatives who need to know the Confidential Information to assist the Receiving Party, or act on its behalf, to exercise its rights or perform its obligations under the Agreement. The Receiving Party shall be responsible for any breach of this Section 9 caused by any of its Representatives. On the expiration or termination of the Agreement, the Receiving Party shall promptly return, and shall require its Representatives to return to the Disclosing Party all copies, whether in written, electronic or other form or media, of the Disclosing Party's Confidential Information, or destroy all such copies and certify in writing to the Disclosing Party that such Confidential Information has been destroyed. Neither Party will use any Residual Information for any purpose whatsoever, including without limitation, the development of its own products or business. The Parties’ obligations under this Section 9 shall continue indefinitely and shall survive the termination of this Agreement. In addition to all other remedies available at law, the Disclosing Party may seek equitable relief (including injunctive relief) against the Receiving Party and its Representatives to prevent the breach or threatened breach of this Section 9 and to secure its enforcement.
Section 10. Intellectual Property Matters .
10.1 Inspection and Quality Control . Licensee agrees to affix to all Pharmaceutical Products for sale to third parties (and not Pharmaceutical Products held for internal use) that utilize the Licensor IP and any promotional and packaging material in connection with such Pharmaceutical Products, such Marks and notices of the Licensor IP, as shall be reasonably requested by Licensor, to the extent practicable and consistent with commercial practice. Licensee agrees to obtain Licensor’s specific written instructions with respect to the content and placements of all such notices required pursuant to this Section 10, which Licensor agrees to provide promptly. At all times when Licensee commercially uses the Licensor IP, to the extent practicable and consistent with commercial practice, Licensee shall note that Licensee’s use is made under license and shall indicate the owner of the Licensor IP.
10.2 Licensee agrees that Licensor shall have the right, at all reasonable times, upon no less than fifteen (15) Business Day’s prior written notice to Licensee, to inspect the premises of Licensee and elsewhere as Licensor considers necessary in order to verify Licensee's compliance with the terms hereof, including for appropriate quality control with respect to Licensee's use of the Licensor Trademarks.
10.3 Licensee agrees that it will not do or permit any act or thing that would endanger any proprietary right of Licensor with respect to the License granted pursuant to this Agreement and that Licensee will not claim any proprietary interest in the Licensor IP (including the Third-Party IP). Licensee agrees to cooperate with Licensor in registering, protecting and defending the License, including, but not limited to, if so requested by Licensor, executing and filing any and all documents and papers necessary or advisable in order to register or protect the License, including, without limitation, this Agreement or an abstract hereof.
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10.4 In utilizing the Licensor IP in accordance with the terms of this Agreement, Licensee shall apply the same standards that Licensee uses for Licensee's own Intellectual Property and shall not utilize any of the Licensor IP (including without limitation, the Licensor Trademarks):
(a) in such a fashion that would cause confusion with, dilute or damage the reputation or image of Licensor, its products or services; provided however, that Licensee shall not be considered to be in breach of this Section 10.4(a) as a result of the sale by Licensee of Pharmaceutical Products bearing the Licensor name or other Licensor Trademarks; and/or
(b) in connection with any material that is obscene, pornographic, excessively violent, libelous or defamatory.
10.5 Licensee shall have the right, but not the obligation, at its own expense, to take any action it deems advisable in its sole discretion to apply for and prosecute registration of or otherwise protect the Licensor IP (including without limitation, the TO Strains and Licensor Trademarks) and the New IP (including without limitation, New Strains and Essentially Derived Varieties) in connection with the Pharmaceutical Products or the Pharmaceutical Business in the Territory. Licensor agrees to cooperate with Licensee in registering, protecting and defending the Licensor IP, including, but not limited to, if so requested by Licensee, executing and filing any and all documents and instruments necessary or advisable in order to register or protect the Licensor IP. All filings, registrations and applications shall be made in the name of the Party designated as the owner of the applicable Intellectual Property in accordance with the provisions of Section 2.2 hereof.
Section 11. Use of Licensor Trademarks .
11.1 Licensor hereby grants to Licensee and its Affiliates a right and license to use and to sublicense the right to use the Licensor Trademarks in connection with the Pharmaceutical Business, corporate names, and advertising, marketing, promoting and selling of Pharmaceutical Products and other related services within the Territory.
11.2 The Parties recognize the value of the goodwill associated with the Licensor Trademarks, and acknowledge that the Licensor Trademarks and all rights therein, as well as the goodwill which accrues during the term of this Agreement, belongs exclusively to the Licensor, and the Licensee shall not acquire any rights in the Licensor Trademarks, other than as expressly granted in this Agreement. Licensee shall not do anything inconsistent with Licensor's ownership of its Licensor Trademarks. In particular, but without limitation, Licensee shall not attack the validity of the Licensor Trademarks or the Licensor's rights in and to its Licensor Trademarks. Subject to the terms and provisions hereof, the Licensor retains the right to use and to license the use of its Licensor Trademarks for any and all goods or services.
11.3 Licensee shall not misuse or misappropriate any of the Licensor Trademarks. Licensee shall not engage in any conduct that impairs or might tend to impair the validity or enforceability of any of the Licensor Trademarks or any registrations of any of the Licensor Trademarks, or that dilutes or might dilute the distinctive quality of any of the Licensor Trademarks, or that disparages or might disparage any of the Licensor Trademarks. Notwithstanding anything to the contrary contained elsewhere in this Agreement, Licensee may not use any of the Licensor Trademarks on any materials or products unless it has received Licensor's prior written approval for such use, which shall not be unreasonably withheld, delayed or conditioned, except that Licensee shall not be required to obtain such approval in connection with the use of Licensor Trademarks on materials or products which does not materially differ from previously approved uses.
11.4 In addition to each Party’s other rights and remedies under this Agreement or otherwise, Licensee shall upon receipt of notice from the Licensor immediately discontinue any use of, and remove from its premises, all materials bearing any of the Licensor Trademarks, including any signs, labels, stationery, advertising, promotional material and literature that, in Licensor's reasonable opinion, constitutes an improper use of the Licensor Trademarks or reflects non-negligibly adversely on Licensor's reputation or brand image or any of its corporate affiliates or partners or on any of Licensor’s products or services.
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11.5 All graphics, trademarks, service marks, trade names, trade dress, word marks, design marks, slogans and domain names, and all images, logos, artwork, text and other works of authorship (collectively, the “Marks”), created by or on behalf of Licensor that include or refer to the Licensor Trademarks, shall belong exclusively to Licensor, and Licensee assigns Licensor all rights, title and interest in and to said items; provided, that any Marks created by Licensee or its representatives that include or refer to the Licensor Trademarks or which are based on or derived from or combined with any Licensor IP in connection with its business shall be deemed to be Licensee IP, shall be owned by Licensee and shall be used by Licensor pursuant to Section 2.4 hereof subject to all restrictions applicable to New IP. Notwithstanding anything to the contrary herein, all Marks owned by Licensee, to the extent subject to Section 2.4 hereof shall, except with the written consent of Licensee, be used by Licensor in the form created by Licensee without material modification thereto except to the extent required by Applicable Law or applicable Governing Authority.
11.6 Licensee shall not engage in any conduct or take part in any activity that is or might be considered unfair competition or an infringement or other violation of the Licensor's rights in the Licensor Trademarks. Except as otherwise provided herein, Licensee acknowledges that it has no right whatsoever to object to or otherwise prevent the Licensor from allowing any other person to display the Licensor Trademarks or use them as part of any firm, corporation or business name except that Licensor shall not use or permit the use of Licensor Trademarks in the Territory in connection with any business which is similar to or competitive or potentially competitive with the Licensee’s Pharmaceutical Business in the Territory.
Section 12. Third - Party Infringement .
12.1 Report of Infringement . With respect to any Licensor IP subject to the License, including Licensor Trademarks, when information comes to the attention of the Licensee to the effect that any of the licensed rights have been or are threatened to be infringed by a third-party (including any propagation, production or reproduction of the TO Strains or New IP) in violation with the terms of this Agreement, the Licensee shall notify the Licensor in writing of any such infringement or threatened infringement of which it has become aware.
12.2 Action by Licensee . Subject to Section 12.3, in the event of an infringement or threatened infringement by a third-party of the Licensor IP in the Territory, Licensee shall take reasonable action, to stop any infringement or otherwise to enforce its rights, and the Licensor shall cooperate in any such action as reasonably requested. If the Licensee initiates legal action against the infringing party, the Licensee shall have the exclusive right to direct and control the litigation and any settlement thereof. Licensor shall not have any rights against the Licensee for damages or other remedy by reason of the Licensee’s alleged failure to prosecute any alleged infringements or imitations by others of the Licensor Trademarks, except as set forth herein. If Licensee does not diligently initiate legal action against the infringing party, then the Licensor shall have the exclusive right to bring suit, direct and control the litigation, and any settlement thereof (solely with respect to Licensor’s rights), at the equal expense of both Parties. The Licensee shall, at its’ expense, cooperate in any such Licensor action and any settlement thereof as reasonably requested.
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12.3 Licensor Contribution . In the event that Licensee takes action pursuant to paragraph 12.2 above, Licensor shall pay to Licensee an amount equal to one-half of the costs and expenses (including attorney’s fees and expenses and costs of investigation) relating thereto (the “Infringement Contribution”) up to an aggregate amount equal to $200,000 (the “Cap”), which Cap shall include all of Licensor’s payments to (a) TO LLC pursuant to the US Medical Cannabis License Agreement, and (b) the Pharmaceutical Affiliate pursuant to the Affiliate Pharmaceutical License Agreement, in each case with respect to the similar Infringement Contributions included therein. The Infringement Contribution shall be payable solely by means of offset against any royalties due to Licensor in accordance with Section 3 of the US Medical Cannabis License Agreement (the "MM Royalties"), in which event Licensee and its Affiliates shall determine an appropriate allocation of the applicable Infringement Contribution. Notwithstanding the foregoing, if the aggregate amount of the Infringement Contribution, whether pursuant to this Section 12.3 or under any similar provision under the Affiliate License Agreements shall exceed the Cap, Licensor shall, subject to the foregoing allocation, nevertheless participate in and contribute towards such costs, solely by means of offset against any MM Royalties due to Licensor in accordance with the US Medical Cannabis License Agreement, up to the following amounts: (i) an amount equal to 10% of the first $500,000 of MM Royalties due to Licensor during any calendar year, plus (ii) an amount equal to 15% of any MM Royalties due to Licensor during any calendar year exceeding the first $500,000 of MM Royalties (e.g., in a year in which the total amount of MM Royalties due to Licensor is $800,000, the maximum additional payment on account of the Infringement Contribution shall be $95,000, and if the total required Infringement Contribution is higher than such amount, the balance may only be deducted from MM Royalties due in future years). For removal of doubt, other than consenting to the partial offset of the MM Royalties due to Licensor and their transfer from TO LLC to Licensee in accordance with the provisions of this Agreement and the US Medical Cannabis License Agreement, Licensor shall have no liability towards Licensee for the payment of the Infringement Contribution, nor shall Licensee have any claim or demand against Licensor if TO LLC refuses to or refrains from performing any offset or transfer any amount so offset by it to Licensee.
12.4 Enforcement of Rights Upon Sale of Land . Should Licensee or any person on its behalf sell, convey, transfer to or otherwise dispose of any real property on which any of the TO Strains or New Strains shall have been cultivated in connection with the Pharmaceutical Products or the Pharmaceutical Business, Licensee shall inform Licensor in writing, in advance of such sale, conveyance, transfer or disposition of the land and provide reasonable details regarding the intended transferee thereof. Licensee shall inform transferee of Licensor's rights pursuant to this Agreement and obtain transferees' undertaking to destroy and not to use in any manner any seeds, plants or propagation materials which may remain in or on the land. Licensee shall be responsible to enforce, at Licensee's expense, any breach by transferee of said undertaking.
Section 13. Indemnification .
13.1 Indemnity by Licensor . Licensor shall defend, indemnify and hold harmless Licensee and its officers, directors, employees, shareholders, agents, successors and assigns from and against any and all Losses, as incurred, resulting from, or arising out of (i) any claim, suit, action or proceeding against Licensee which alleges that any Licensor IP or deliverable hereunder infringes upon, misappropriates or violates any patents, copyrights, trademarks or trade secret rights or other proprietary rights of persons, firms or entities who are not parties to this Agreement (an “Infringement Claim”); (ii) any gross negligence, willful misconduct or misrepresentation by Licensor or its representatives; or (iii) any material breach of this Agreement by Licensor, its officers, directors, employees, principal shareholders or Affiliates. Notwithstanding anything to the contrary in this Agreement, the use of any extracts, seeds, plants or propagation materials of the TO Strains provided by Licensor pursuant to Section 2.6 above, and any reproduction thereof, shall be tested on a regular basis by Licensee, and any use thereof shall be at the sole risk of Licensee with respect to medical risk.
13.2 Indemnity by Licensee . Licensee shall defend, indemnify and hold harmless Licensor and its officers, directors, employees, shareholders, agents, successors and assigns from and against any and all Losses, as incurred, resulting from, or arising out of (i) any claim, suit, action or proceeding against Licensor which alleges that Licensee IP (other than if the claim, suit, action or proceeding results from an Infringement Claim subject to Section 13.1 ) infringes upon, misappropriates or violates any patents, copyrights, trademarks or trade secret rights or other proprietary rights of persons, firms or entities who are not parties to this Agreement; (ii) any gross negligence, willful misconduct or misrepresentation by Licensee or its representatives; or (iii) any material breach of this Agreement by Licensee, its officers, directors, employees, principal members or Affiliates.
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13.3 Indemnification by Licensor for Infringement Claims . In the case of an Infringement Claim for indemnification pursuant to Section 13.1(i), Licensee shall promptly notify the indemnifying party in writing of any Infringement Claim and cooperate with Licensor at Licensor’s sole cost and expense. Licensor shall immediately take control of the defense and investigation of such Infringement Claim, assert all reasonable counterclaims, seek to recover all Losses and shall employ counsel of its choice to handle and defend the same, at its sole cost and expense. Licensor shall bear the cost of any related proceedings and shall be entitled to retain all sums recovered in any action for its own account. If Licensor obtains a decision in its favor, and the sums recovered by Licensor are less than Licensor’s legal and other applicable costs and expenses (including but not limited to, costs of investigation) in connection therewith (the “Shortfall”), Licensee shall pay the Shortfall to Licensor. If Licensor does not obtain a decision in its favor, Licensor shall pay all costs in connection with the Infringement Claim, including but not limited to, costs of investigation and reasonable attorneys’ fees and expenses incurred and will indemnify and hold harmless Licensee for any and all Losses incurred by Licensee with respect to its business in connection with such Infringement Claim. Licensor shall not settle any Infringement Claim in a manner that adversely affects the rights of Licensee without the Licensee’s prior written consent, which shall not be unreasonably withheld or delayed. Licensee’s failure to perform any obligations under this Section 13.3 shall not relieve Licensor of its obligations hereunder except to the extent that the Licensor can demonstrate that it has been materially prejudiced as a result of such failure by Licensee. Licensee may participate in and observe the proceedings at its own cost and expense.
13.4 Procedures for Third-Party Claims . In the case of any claim for indemnification arising from a claim of a third-party other than an Infringement Claim subject to Section 13.3 above (a “Third-Party Claim”), a party seeking indemnification hereunder (each an “Indemnified Party”) shall give prompt written notice, following such Indemnified Party’s receipt of such claim or demand, to the party from which indemnity is sought (each an “Indemnifying Party”) of any claim or demand of which such Indemnified Party has knowledge and as to which it may request indemnification hereunder; provided, however, that failure to give such notice will not affect such Indemnified Party’s rights hereunder unless, and then solely to the extent that, the rights of the Indemnifying Parties from whom indemnity is sought are prejudiced as a result of such failure. The Indemnifying Party shall have the right (and if it elects to exercise such right, shall do so within twenty (20) days after receiving such notice from the Indemnified Party) to defend and to direct the defense against any such claim or demand, in its name or in the name of the Indemnified Party, as the case may be, at the expense of the Indemnifying Party, and with counsel selected by the Indemnifying Party; provided, that the Indemnifying Party shall be entitled to assume control of the defense of such action only if the Indemnifying Party acknowledges in writing its indemnity obligations and assumes and holds the Indemnified Party harmless from and against all Losses resulting from such Third-Party Claim; and provided further that the Indemnifying Party shall not be entitled to assume control of such defense if (i) the Indemnifying Party shall not have notified the Indemnified Party of its exercise of its right to defend such Third-Party claim within such twenty (20) day period; (ii) such claim or demand seeks an injunction or other equitable relief against the Indemnified Party, (iii) the Indemnified Party shall have reasonably concluded that (x) there is a conflict of interest between the Indemnified Party and the Indemnifying Party in the conduct of the defense of such claim or demand or (y) the Indemnified Party has one or more defenses not available to the Indemnifying Party, (iv) such claim relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation, or (v) the appropriate court rules that the Indemnifying Party failed or is failing to vigorously prosecute or defend such Third-Party Claim. Notwithstanding anything in this Agreement to the contrary, the Indemnified Party shall, at the expense of the Indemnifying Party, cooperate with the Indemnifying Party, and keep the Indemnifying Party fully informed, in the defense of such claim or demand. The Indemnified Party shall have the right to participate in the defense of any claim or demand with counsel employed at its own expense; provided, however, that, in the case of any claim or demand described in clause (i) or (ii) of the second preceding sentence or as to which the Indemnifying Party shall not in fact have employed counsel to assume the defense of such claim or demand, the reasonable fees and disbursements of such counsel shall be at the expense of the Indemnifying Party. The Indemnifying Party shall have no indemnification obligations with respect to any such claim or demand which shall be settled by the Indemnified Party without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, delayed or conditioned. The Indemnifying Party shall not settle any such claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, delayed or conditioned if such settlement is accompanied by a document releasing the Indemnified Party from all liability with respect to the matter in controversy that is binding, valid and enforceable against all applicable Parties). Notwithstanding the foregoing, if the Indemnified Party fails to object to the settlement within five (5) Business Days of receipt of a written notice from the Indemnifying Party containing the terms and condition of such settlement, the Indemnified Party shall be deemed to have consented to the settlement.
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13.5 Procedures for Inter-Party Claims . In the event that an Indemnified Party determines that it has an indemnification claim against an Indemnifying Party hereunder (other than as a result of a Third-party Claim or Infringement Claim), the Indemnified Party shall give prompt written notice thereof to the Indemnifying Party, specifying in reasonable detail, to the extent then known, the amount of such claim and any relevant facts and circumstances relating thereto. The Indemnified Party and the Indemnifying Party shall negotiate in good faith for the thirty (30) day period following receipt of such notice regarding the resolution of any disputed indemnification claims. If no resolution is reached with regard to such disputed claim between the Indemnifying Party and the Indemnified Party within such thirty (30) day period, the Indemnified Party shall, subject to Section 16.5 hereof (but without any duplication of the foregoing 30-day resolution period), be entitled to seek appropriate remedies in accordance with the terms hereof. In the event that the Indemnified Party is required to institute legal proceedings in order to recover its indemnification claims hereunder, the cost of such legal proceedings (including costs of investigation and reasonable attorneys’ fees and disbursements) shall be added to the amount of the indemnification claims payable to the Indemnified Party if the Indemnified Party recovers the indemnification claims in such legal proceedings. In the event that a party hereto claiming to be an Indemnified Party institutes legal proceedings in order to recover indemnification claims hereunder and the applicable court refuses to award any related amounts to such party, such party shall reimburse the defending party for the cost of such legal proceedings (including costs of investigation and reasonable attorneys’ fees and disbursements).
13.6 Recoveries . For purposes of this Section 13, any calculation of Losses shall be net of (i) any insurance proceeds actually received by the Indemnified Party with respect to such Losses (net of any costs of recovery of such insurance proceeds, including premium increases), and (ii) any monies actually received by the Indemnified Party with respect to such Losses pursuant to any indemnification obligations owed thereto by any third parties (net of any costs of recovery of such monies), and shall be exclusive of any amounts paid by Licensor pursuant to Section 12.3.
13.7 Offset . In the event that the Licensee has a Claim against Licensor arising under Section 13 of this Agreement, Licensee shall be entitled to request TO LLC to offset on Licensee’s behalf the amount of such Claim against any amounts due to Licensor pursuant to Section 3 of US Medical Cannabis License Agreement; provided, that (i) any amount so offset shall be separate and apart from, and shall not be subject to any of the limitations set forth in, Section 12.3 hereof or in any corresponding provision of the Affiliate License Agreements, and (ii) such offset shall be exercised in the following manner:
(a) Licensee shall first send to the Licensor a notice (the “Offset Notice”) specifying the amount of Licensee's claim and the manner in which it was calculated, identifying, to the extent applicable, the provisions hereof asserted to give rise to the Claim and briefly identifying the facts which constitute the basis of such obligation or Claim.
(b) Within 30 days after Licensee delivers the Offset Notice to Licensor, Licensor shall deliver to Licensee a written notice (the “Dispute Notice”) identifying in reasonable detail which Claims, or parts thereof, Licensor questions in good faith or does not question in good faith, as the case may be, and the reasons therefor. If within 30 days after giving the Offset Notice, Licensee does not receive a Dispute Notice from Licensor, Licensee shall be entitled to request TO LLC in writing, with a copy to Licensor, to offset the amount of any such Claim against payments due from TO LLC to Licensor pursuant to Section 3 of the US Medical Cannabis License Agreement; provided, that if such Claim is later defeated, defensed, settled or otherwise resolved for a cost to Licensee (the “Claim Resolution Amount”) which is less than the amount offset with respect to such Claim, then Licensee shall promptly instruct TO LLC to remit to Licensor the amount of the difference between the amount of such offset and the Claim Resolution Amount; provided, that if such instruction to TO LLC is not effectuated by TO LLC, then Licensee shall remit such amount directly to Licensor.
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(c) If within 30 days after giving the Offset Notice, Licensee receives a Dispute Notice from Licensor, then (i) with respect to any portion of a Claim not questioned, the offset provisions of Section 13.7(b) above shall apply, and (ii) with respect to any portion of a Claim questioned, Licensee shall be entitled to request TO LLC to provisionally offset the amount thereof against MM Royalties due from TO LLC to Licensor pursuant to Section 3 of the US Medical Cannabis Agreement, by depositing any such amount in escrow with legal counsel to TO LLC.
(d) Any amounts questioned and held in escrow pursuant to Section 13.7(c)(ii) shall be held until six (6) months from the date of Licensee’s receipt of a Dispute Notice from Licensor, unless by such date the Claim becomes subject to a litigation, arbitration or other legal proceeding between the Parties or against one or more of the Parties (a ”Proceeding”). In the event the Claim does not become subject to a Proceeding within 6 months from the date of Licensee’s receipt of a Dispute Notice from Licensor, the funds held in escrow pursuant to Section 13.7(c)(ii) shall thereupon be promptly delivered to Licensor. In the event the Claim becomes subject to a Proceeding within 6 months from the date of Licensee’s receipt of a Dispute Notice from Licensor, the funds shall continue to be held in escrow until the Claim in respect thereof is resolved by agreement of the parties or an order of a court of competent jurisdiction directs payment of the disputed amount.
(e) Upon resolution of a Claim in accordance with the provisions of Section 13.7(d), the funds held in escrow pursuant to Section 13.7(c)(ii) shall thereupon be promptly delivered to Licensor to the extent required in accordance with the terms of the resolution of such Claim, and to the extent not so required to be so paid over to Licensor shall be paid to Licensee in settlement of its Claim, and all interest or other income, if any, which has been earned with respect to any such cash amount shall be allocated between Licensor and Licensee in proportion to their respective entitlements to such sum. Licensee and Licensor shall have no other responsibility or liability to account for any interest with respect to any amount so withheld or otherwise with respect to any Claim.
13.8 No Punitive, Exemplary or Aggravated Damages . In no event shall either Party be liable to the other Party for any claim for punitive, exemplary or aggravated damages or any indirect or consequential Losses in connection with a breach of this Agreement.
13.9 Survival . The obligations of each Party under this Section 13 shall survive the termination or expiration of this Agreement.
Section 14. Non-Competition .
14.1 During the term of this Agreement and for a period of twelve (12) months following the termination or cancellation of this Agreement, Licensor and any Affiliate thereof, will not market or sell Pharmaceutical Products derived from Cannabis or provide advisory services relating thereto in the Territory without the prior written consent of Licensee, which after a Licensor Exit Event will not be unreasonably withheld, delayed or conditioned; provided, that in such event reasonable provisions are effectuated to protect Licensee’s confidential information and business operations.
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14.2 During the term of this Agreement and for a period of twelve (12) months following the termination or cancellation of this Agreement, subject to the Affiliate License Agreements, Licensee and its Affiliates will not, outside the Territory, without first obtaining the written consent of Licensor, market or sell Cannabis Products or provide advisory services relating thereto; provided, that the above restriction shall not apply with respect to Acquired IP and Licensee Excluded IP (and with respect to Licensee Excluded IP, subject to Section 2.7).
14.3 The obligations of each Party under this Section 14 run and inure to the benefit of each Party together with their successors and permitted assigns and shall survive the termination or expiration of this Agreement.
Section 15. Notices . All notices, claims or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and sent to the Parties at the addresses indicated below or to such other address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party. Each such notice or other communication to be given or delivered shall be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered, or (ii) if sent via an internationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one Business Day after deposit with the courier, or (iii) if sent via mail, at the earlier of its receipt or ten (10) days after the same has been deposited in a regularly-maintained government receptacle for the deposit of mail, or (iv) if sent via facsimile, upon confirmation of facsimile transfer, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next Business Day, or (v) if sent via email, PDF or by other electronic mail, upon its delivery, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next Business Day. All notices, claims and other communications hereunder may be given by any other means, but shall not be deemed to have been duly given unless and until it is actually received by the intended recipient.
If to Licensor: | Tikun Olam Ltd. |
183 Gvirol Street | |
Tel Aviv, Israel | |
Attention: Tsachi Cohen, Director & Aharon Lutzky, CEO | |
Fax: +972-3-6006201 | |
Email: tsachi@tikun-olam.co.il; aharon@tikun-olam.co.il | |
with a copy to: | Shenker – Lax Law Offices |
Rogovin Tidhar Tower, | |
11 Menachem Begin Rd., 12th floor | |
Ramat Gan | |
Attention: Oren Shenkar, Adv. | |
Fax: +972-3-6006201 | |
Email: Oren@sl-adv.co.il | |
If to Licensee: | TO Pharmaceuticals LLC |
77 Water Street | |
8 th floor | |
New York, New York 10005 | |
Attention: Chief Executive Officer | |
Fax: (646) 722-4101 | |
Email: IR@tikunolam.us | |
with copies to: | Kaufman & Associates, LLC |
200 Motor Parkway, Suite B-13 | |
Hauppauge, New York 11788 | |
Attention: Neil M. Kaufman, Esq. | |
Fax: (516) 410-1007 | |
Email: nkaufman@kaufman-associates.com | |
and | |
bernie@tikunolam.com | |
stephen@tikunolam.com |
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Section 16. Miscellaneous .
16.1 Cooperation . Both Parties agree reasonably to cooperate with and assist each other in connection with the License granted under this Agreement and the development and success of Licensee’s Pharmaceutical Business within the Territory.
16.2 Prior Agreements/Oral Modification . Except as otherwise provided herein, this Agreement supersedes all prior agreements and constitutes the entire agreement and understanding between the Parties or otherwise with respect to the subject matter of this Agreement, including without limitation that certain Memorandum of Understanding dated as of April 19, 2015 between Licensor and Innocuous, LLC, a New York limited liability company, as amended by that certain letter agreement dated as of September 17, 2015 (the “MOU”). This Agreement may not be amended, modified in any manner or terminated orally or by course of conduct; no amendment, modification, termination or attempted waiver of any of the provisions hereof shall be binding unless in writing and signed by the Parties against whom the same is sought to be enforced. In the event of any explicit or implicit contradiction between the terms of this Agreement and the terms of the MedReleaf License which are applicable to Licensor or relate to the Tikun Olam IP (as defined in the MedReleaf License) the provisions of this Agreement shall prevail as between the Parties hereto.
16.3 Attorney’s Fees . Each party shall bear its own costs and expenses in connection with (a) the negotiation, execution and delivery of this Agreement and (b) any judicial or other action at law or equity that is brought by one of the Parties to this Agreement to enforce or interpret the provisions of this Agreement, in each case except as otherwise provided herein.
16.4 Governing Law; Jurisdiction . This Agreement will be governed by, and construed and enforced in accordance with, the laws of the State of New York, without regard to the conflict of laws provisions thereof. The Parties agree that, in the event of any action or suit as to any matters of dispute between the Parties, service of any process may be made upon the other Party in the same manner as the giving of notices under Section 16 of this Agreement. Notwithstanding anything to the contrary contained herein, in the event that any provision of this Agreement is unenforceable under the laws of the State of New York, and such provision is enforceable under the laws of any other state or jurisdiction, the Parties expressly agree that said provision shall be interpreted and construed under the laws of that state or jurisdiction.
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16.5 Dispute Resolution . In the event of any dispute, claim, question, or disagreement arising from or relating to this Agreement or the breach thereof, the Parties hereto shall use their best efforts to settle the dispute, claim, question, or disagreement. To this effect, they shall consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both Parties. If the dispute cannot be settled through negotiation within a period of seven (7) days, the Parties agree to attempt in good faith to settle the dispute through mediation, administered by a mediator mutually agreeable to both Parties, before resorting to arbitration. If they do not reach such solution, or an agreed upon mediator cannot be identified, within a period of thirty (30) days, then, upon notice by either Party to the other, all disputes, claims, questions, or differences shall be finally settled by arbitration administered by the American Arbitration Association, in New York, New York, in accordance with the provisions of that organization’s Commercial Arbitration Rules. The dispute shall be heard and determined by a panel of three (3) arbitrators, unless otherwise agreed by the Parties. In such case, each Party shall each select one (1) arbitrator. The arbitrator selected by the claimant and the arbitrator selected by respondent shall, within ten (10) days of their appointment, select a third neutral arbitrator. In the event that they are unable to do so, or if for any reason the three (3) arbitrators are not timely empanelled, the Parties, or either of them, or their attorneys, may request that the American Arbitration Association appoint the third or any other necessary arbitrator. Prior to the commencement of hearings, each of the arbitrators appointed shall provide an oath or undertaking of impartiality. The United States Arbitration Act shall govern the interpretation, enforcement, and proceedings pursuant hereto. Notwithstanding any provision hereof, any applicable law or public policy considerations, including without limitation any possible illegality or unenforceability of this Agreement or any portion hereof due to the subject matter hereof, the arbitrators shall interpret this Agreement giving full effect to the terms and provisions hereof. All charges of the American Arbitration Association or any mediator shall be borne equally by the Parties, and each Party hereby agrees to pay all such charges promptly upon request therefor, and if any Party shall fail to do so, the other Party shall be permitted to apply towards such charges any amounts otherwise due to the non-paying Party. The Parties to the arbitration proceeding shall bear their own respective expenses incurred in connection therewith, including, but not limited to, legal fees and expenses.
16.6 Successors and Assigns; Assignment .
(a) The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the Parties. Unless clearly inapplicable, all references in this Agreement to a Party shall be deemed to include any such Party’s successors and assigns. No Party to this Agreement will have the right to assign its rights or obligations under this Agreement without the prior written consent of the other Party; provided, however, that (i) Licensee shall be permitted to assign its rights or obligations under this Agreement to any Affiliate of Licensee, and (ii) in the event of sale or transfer by Licensee of all or substantially all of its assets, this Agreement may be assigned to any successor or assignee thereof, except that the rights and obligations under this Agreement may not be assigned by Licensee in connection therewith without Licensor’s prior written consent prior to September 30, 2018, unless at the time of such assignment (y) the Enterprise Value (as defined below) of Licensee and its Pharmaceutical Affiliate on a consolidated basis in connection with such sale transaction equals or exceeds fifty million dollars ($50,000,000), or (z) the combined Enterprise Value of TO LLC, the Pharmaceutical Affiliate and Licensee, in each case on a consolidated basis, equals or exceeds two hundred fifty million dollars ($250,000,000).
(b) For purposes of this Section 16.6, the “Enterprise Value” of the Pharmaceutical Affiliate, TO LLC and Licensee shall be equal to (i) the pre-transaction value of such company in connection with or immediately prior to the sale of such company or its business (whether in connection with a sale of membership interests, or assets or a merger or consolidation) or (ii) if no such sale transaction has occurred, then the post -transaction value in connection with its most recent financing transaction; provided, however; that if the Parties do not agree on the determination of such Enterprise Value within ten (10) Business Days from the date that a proposed assignment by a Party subject to this Section 16.6 is disclosed by such Party to the other Party, then the determination thereof shall be made by the appointment by mutual agreement of an impartial United States recognized firm of independent certified public accountants or recognized valuation professionals (a “Valuator”), which Valuator shall be instructed to deliver a detailed report containing its calculation of the Enterprise Value (in connection with which calculation of Enterprise Value of the Valuator shall not include any minority discount) and within thirty (30) days after its engagement, which Valuator’s determination of Enterprise Value shall be final and binding. If one or more of the Parties objects or does not agree to the appointment of a Valuator within ten (10) Business Days after request by the other Party, the selection of the Valuator shall be submitted to binding arbitration pursuant to Section 16.5 hereof. The decision of the Valuator may be entered in any court having jurisdiction in New York and the costs and expenses incurred in connection with the arbitration shall be borne equally by the Parties.
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(c) For purposes of this Section 16.6 and only this Section 16.6, a merger, consolidation or similar business combination as a result of which the members or stockholders owning a majority of the voting power of a company prior to the consummation thereof own less than a majority of the voting power of the surviving company in connection with such transaction shall be considered to be a sale of all or substantially all the assets of such company.
16.7 Third-Party Beneficiaries . Licensee’s Affiliates are third-party beneficiaries of Licensee’s rights under this Agreement, and shall be entitled to enforce such rights as provided herein. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the Parties to this Agreement, or the Parties’ respective successors and assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
16.8 Construction; Headings; Severability . The language of all parts of this Agreement shall in all cases be construed as a whole according to its fair meaning, and not strictly for or against any of the Parties. This Agreement has been subject to negotiations among all Parties hereto and each party has been advised to seek such Party’s separate counsel, and, as such, this Agreement shall be deemed prepared by both Parties. Any ambiguities shall not be deemed to be construed against either party hereto. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any Applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction to the greatest extent possible to carry out the intentions of the Parties hereto. Notwithstanding anything to the contrary herein, including without limitation Section 16.2 hereof, if the License granted pursuant to this Agreement is or becomes invalid at any time or for any reason whatsoever, the License granted pursuant to the MOU shall be reinstated and be in full force and effect, subject to any other applicable provisions hereof and thereof, and the Parties will as between themselves continue to perform in good faith their obligations under this Agreement as closely as possible. As used in this Agreement, the term “or” shall be deemed to include the term “and/or” and the singular or plural number shall be deemed to include the other whenever the context so indicates or requires.
16.9 Force Majeure. Neither Party shall be responsible or liable for any delays in the performance of any duties under this Agreement which are not the fault or within the reasonable control of that Party including, but not limited to, fire, flood, natural disasters, acts of God, delays in deliveries by common carriers, governmental acts or orders, late deliveries of products or goods or furnishing of services by third-party vendors, civil disorders, acts of terrorism, or strikes and any other labor-related disruption, where such Party has communicated in writing the circumstances of said event to the other Party and taken any and all appropriate action to mitigate the effects of said event, and in any event, the time period for the performance of an obligation hereunder shall be extended for the amount of time of the delay or impossibility.
16.10 Waiver of Breach . The waiver by any Party of a breach of any provision of this Agreement by the other Parties must be in writing and shall not operate or be construed as a waiver of any subsequent breach by such other party. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.
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16.11 Currency . Unless otherwise indicated, all dollar amounts in this Agreement are expressed in lawful dollars of the United States.
16.12 Right and Remedies . No right or remedy conferred upon or reserved to the Parties by this Agreement is intended to be, nor shall be deemed, exclusive of any other right or remedy herein or by law or equity provided or permitted, but each shall be cumulative of every other right or remedy.
16.13 Counterparts; Faxed or E-Mailed Signatures . This Agreement may be executed in any number of counterparts and by the Parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement. Any executed signature page delivered by facsimile or e-mail transmission shall be binding to the same extent as an original executed signature page, with regard to this Agreement or any amendment thereto.
16.14 Recitals . The Recitals set forth above are hereby incorporated in and made a part of this Agreement by this reference.
Section 17. Offset . Other than as provided in Sections, 12.3 and 13.7 above, Licensee may not offset and may not request TO LLC to offset any amounts due to Licensor hereunder or under the US Medical Cannabis License Agreement from any claim it may have against Licensor, unless Licensee shall have obtained a final and binding judgement against Licensor by a court of competent jurisdiction issued within the framework of the Arbitration set forth in Section 16.5 above, or otherwise approved in writing by Licensor.
Section 18. Publicity . Both Parties shall reasonably cooperate in connection with issuing press releases or promotional or marketing material to the public or third parties in connection with matters subject hereto.
(Signature page to follow)
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IN WITNESS WHEREOF , the Parties hereto have duly executed this License Agreement as of the day and year first written above.
Tikun Olam Ltd. |
By: | /s/ Tsachi Cohen | |
Name: | ||
Title: |
TO PHARMACEUTICAL USA LLC | |
By: TO HOLDING GROUP LLC, Manager | |
By: T.O. GLOBAL llC, Manager |
By: | /s/ Bernard Sucher | |
Name: Bernard Sucher | ||
Title: Chief Executive Officer |
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Exhibit A
Definitions
1. | “Acquired IP” shall mean Intellectual Property licensed by or acquired by Licensee or any Affiliate thereof from a third-party, provided it is not based on, derived from, inseparably or exclusively combined with, or inextricably embedded in any Licensor IP or in which any Licensor IP is inextricably embedded , or (b) owned, or the rights to which are owned, by the surviving company referenced in clause (a) or the acquirer of assets under clause (b) of the definition of “Change of Control Event”. |
2. | “Affiliate” shall mean with respect to any Person, any Person which directly or indirectly, controls, is controlled by or is under common control with such Person, including, without limitation, any general partner, managing member, officer or director of such Person. |
3. | “Affiliate License Agreements” shall mean the Affiliate Pharmaceutical License Agreement and the US Medical Cannabis License Agreement. |
4. | “Affiliate Pharmaceutical License Agreement” shall have the meaning set forth in Section 2.2 of this Agreement. |
5. | “Agreement” shall have the meaning set forth in the preamble of this Agreement. |
6. | “Applicable Law” means all current constitutions, treaties, laws, statutes, codes, ordinances, official plans, orders, decrees, rules, regulations, and by-laws, whether domestic, foreign or international, of any Governmental Authority, and the common law, binding on or affecting any Person, property or matter referred to in the context in which such words are used. |
7. | “Business Day” shall mean a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by Applicable Law to be closed for business |
8. | “Cannabis” shall mean recreational and medical cannabis, and shall include hemp, hemp products and any compounds derived from Cannabis or hemp plants. |
9. | “Cannabis Business” shall mean cultivating, harvesting, producing, promoting, researching, developing, marketing, selling and distributing Cannabis Products, which include, but are not limited to, Cannabis plants or any parts thereof in dry or wet forms, extracts, infusions, and any compositions or formulations consisting of Cannabis plants' constituents as active ingredients or supplements, and further methods of obtaining all of the above (e.g. methods of extraction or processing), clinical and non-clinical uses, applications, and delivery systems and devices related thereto. |
10. | “Cannabis Product” shall mean any Cannabis or any Cannabis-derived and related product, including plant products, cultivation products, extraction products, infusion products, delivery or ingestion devices, machines, apparatuses or products and packaging products and marketing materials relating thereto, which is not a Pharmaceutical Product. |
11. | “Change of Control Event” shall mean (a) a sale or transfer of equity or other ownership interests or merger, consolidation or similar business transaction or combination as a result of which the ultimate members or stockholders owning, directly or indirectly, all of the voting power of Licensee prior to the consummation thereof shall own in the aggregate less than a majority of the voting power of the surviving company, or (b) a sale of all or substantially all of the assets of Licensee to an unrelated third party. |
12. | “Claim” shall mean any claim threatened in writing or any claim which is mature, non-contingent, fixed in amount and has been commenced or filed with an applicable Governmental Authority. |
13. | “Claim Resolution Amount” shall have the meaning set forth in Section 13.7 of this Agreement. |
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14. | “Clinical Trials” shall mean the conduct of research studies, clinical or non-clinical testing, and clinical trials, including but not limited to pre-clinical investigations and randomized, placebo-controlled trials of cannabis-based or cannabis-derived compounds, whether or not as a continuation of prior clinical trials and research studies conducted by Licensor or new clinical trials and research studies, whether conducted by Licensor with specific or direct collaboration with Licensee or otherwise by Licensee. |
15. | “Clinical Trials Services” shall mean the services provided by Licensor relating to and in connection with all aspects of the conduct of Clinical Trials. |
16. | “Confidential Information” shall have the meaning set forth in Section 9 of this Agreement. |
17. | “Design and Operations Services” shall have the meaning set forth in Section 7.1(c) of this Agreement. |
18. | “Disclosing Party” shall have the meaning set forth in Section 9 of this Agreement. |
19. | “Effective Date” shall have the meaning set forth in the preamble of this Agreement. |
20. | “Enterprise Value” shall have the meaning set forth in Section 16.6 of this Agreement. |
21. | “Essentially Derived Variety” shall mean any strain of Cannabis derived from any of TO's Strains, whether intentionally or otherwise. |
22. | “FDA” shall mean the United States Food and Drug Administration. |
23. | “Governmental Authority” shall mean any federal, state, national, supranational, local or other government, whether domestic or foreign, including any subdivision, department, agency, instrumentality, authority (including any regulatory authority), commission, board or bureau thereof, or any court, tribunal or arbitrator. |
24. | “Indemnified Party” shall have the meaning set forth in Section 13.4 of this Agreement. |
25. | “Indemnifying Party” shall have the meaning set forth in Section 13.4 of this Agreement. |
26. | “Infringement Claim” shall have the meaning set forth in Section 13.1 of this Agreement. |
27. | “Intellectual Property” shall have the meaning set forth in the second recital of this Agreement. |
28. | “License” shall have the meaning set forth in Section 2.1 of this Agreement. |
29. | “Licensee” shall have the meaning set forth in the preamble of this Agreement. |
30. | “Licensee Excluded IP” shall mean Intellectual Property created by Licensee or an Affiliate thereof outside of the State of Israel, without any non -deminimis involvement of Licensor, and which is not based on, derived from or inseparably or exclusively combined with or inextricably embedded in any Licensor IP or in which any Licensor IP shall be inextricably embedded, written notice of the development of such Licensee Excluded IP shall have been provided by Licensee to Licensor reasonably promptly upon commencement of its use, which notice shall include a description thereof. Licensee Excluded IP shall not include Acquired IP. |
31. | “Licensee IP” shall mean the New IP, New Strains and the results of Clinical Trials, other than (i) Licensee Excluded IP and (ii) Acquired IP. |
32. | “Licensor” shall have the meaning set forth in the preamble of this Agreement. |
33. | “Licensor Additional IP” shall have the meaning set forth in Section 2.2 of this Agreement. |
34. | “Licensor Exit Event” shall mean (a) a sale or transfer of all of the equity or other ownership interests or merger, consolidation or similar business transaction or combination with or to a purchaser which, directly or through an Affiliate, on a consolidated basis, is a competitor of Licensee, as a result of which the ultimate members or stockholders owning, directly or indirectly, all of the equity interests of Licensee prior to the consummation thereof shall own no equity interests in the surviving company, or (b) a sale of all or substantially all of the assets of Licensor to an unrelated third party. |
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35. | “Licensor IP” shall have the meaning set forth in the second recital of this Agreement. |
36. | “Licensor Trademarks” means Licensor-owned, but not licensed, trademarks, trade names, logos, service marks, designs, emblems, signs, slogans, other similar designations of source or original and general intangibles of like nature, whether registered, applied for or not, specified in Exhibit C , together with the goodwill relating thereto. |
37. | “Losses” means all losses, damages, liabilities, deficiencies, actions, judgments, interest, awards, penalties, fines, or out of pocket third-party costs or expenses of whatever kind, including reasonable attorneys’ fees and expenses, the cost of enforcing any right to indemnification hereunder and the cost of pursuing any insurance providers, actually awarded or incurred, including attorneys’ fees and expenses. |
38. | “Marks” shall have the meaning set forth in Section 11.5 of this Agreement. |
39. | “MedReleaf” shall mean MedReleaf Corporation, a corporation organized under the laws of the Province of Ontario, Canada. |
40. | “MedReleaf License” shall mean that certain License Agreement, dated as of July 17, 2013, as amended, by and between MedReleaf and Licensor. |
41. | “MM Royalties” shall have the meaning set forth in Section 12.3 of this Agreement. |
42. | “MOU” shall have the meaning set forth in Section 16.2 of this Agreement. |
43. | “New IP” shall have the meaning set forth in Section 2.2 of this Agreement; provided, however, that following a Change of Control Event, for purposes hereof, “New IP” shall not include Intellectual Property created by Licensee or an Affiliate thereof within the State of Israel, without any non -deminimis involvement of Licensor, and which is not based on, derived from or inseparably or exclusively combined with or inextricably embedded in any Licensor IP or in which any Licensor IP shall be inextricably embedded . |
44. | “New Strains” shall have the meaning set forth in Section 2.2 of this Agreement. |
45. | “Organizational Documents” shall mean the certificate or articles of incorporation, organization or formation and the bylaws, operating agreement, memorandum or articles of association or organization, or similar organizational documents, as applicable. |
46. | “Party” shall mean the signatories to this Agreement as set forth in the preamble of this Agreement. |
47. | “Payment” shall have the meaning set forth in Section 3 of this Agreement. |
48. | “Person” shall mean an individual, firm, corporation, partnership, association, limited liability company, trust or any other entity. |
49. | “Pharmaceutical Affiliate” shall mean Tikun Olam IP Ltd., a Cayman Islands corporation. |
50. | “Pharmaceutical Business” shall have the meaning set forth in the preamble of this Agreement. |
51. | “Pharmaceutical Product” shall mean any product, compound, medicine or therapeutic which is subject to regulation as a drug, medicine or controlled substance by the FDA. |
52. | “Receiving Party” shall have the meaning set forth in Section 9 of this Agreement. |
53. | “Representative” shall mean any director, officer, employee, member, manager, agent, contractor or advisor who shall have access to any Confidential Information. |
54. | “Residual Information” means any Confidential Information, which may be retained, following the termination of this Agreement, in intangible form in the minds of the Representatives. |
55. | “Services” shall mean the Training Services, the Design and Operations Services and the Clinical Trials Services. |
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56. | “Shortfall” shall have the meaning set forth in Section 13.3 of this Agreement. |
57. | “Territory” shall have the meaning set forth in Section 2.1 of this Agreement. |
58. | “Third-Party Claim” shall have the meaning set forth in Section 13.4 of this Agreement. |
59. | “Third-Party IP” shall have the meaning set forth in Section 2.9 of this Agreement. |
60. | “TO LLC” shall have the meaning set forth in Section 2.2 of this Agreement. |
61. | “TO Strains” shall have the meaning set forth in Section 2.6 of this Agreement. |
62. | “Training Services” shall have the meaning set forth in Section 7.1(b) of this Agreement. |
63. | “United States” shall mean the United States of America and its territories and possessions. |
64. | “USA Payment” shall have the meaning set forth in Section 3 of this Agreement. |
65. | “US Medical Cannabis License Agreement” shall have the meaning set forth in Section 2.2 of this Agreement. |
66. | “Valuator” shall have the meaning set forth in Section 16.6 of this Agreement. |
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Exhibit B
List of Licensor IP
· | All of Licensor’s logos, names, tag lines, packaging, trade dress and other proprietary property or rights reflecting or relating to the Tikun Olam brand and the trademarks or trade names of any strains subject to this License Agreement. |
· | Licensor’s Trademarks, Tradenames and Service Marks worldwide, including those listed on Exhibit C here to. |
· | Licensor Patent and Patent Applications |
CANNABIS PLANT NAMED EREZ | ||||||
Type | Country | Filing Date | App No. | |||
PLANT | United | 11/12/2015 | 14/757,040 | |||
PATENT | States | |||||
APPLICATION |
CANNABIS PLANT NAMED MIDNIGHT | ||||||
Type | Country | Filing Date | App No. | |||
PLANT | United | 11/12/2015 | 14/757,041 | |||
PATENT | States | |||||
APPLICATION |
CANNABIS PLANT NAMED AVIDEKEL | ||||||
Type | Country | Filing Date | App No. | |||
PLANT | United | 11/12/2015 | 14/757,039 | |||
PATENT | States | |||||
APPLICATION |
CANNABINOID AND CANNABIS-BASED COMPOSITIONS AND METHODS FOR THE TREATMENT OF INFLAMMATORY CONDITIONS OF THE GASTROINTESTINAL TRACT | ||||||
Type | Country | Filing Date | App No. | |||
PROVISIONAL | United | 28/3/2016 | 62/313,882 | |||
APPLICATION | States |
A MODEL FOR OPTIMIZING TREATMENT WITH CANNABIS-BASED AND/OR CANNABINOID COMPOSITIONS AND A SYSTEM AND METHODS USING THEREOF | ||||||
Type | Country | Filing Date | App No. | |||
PROVISIONAL | United | To be filed | ||||
APPLICATION | States |
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· | Licensor’s Applications for Plant Breeders Rights (PBR). |
EREZ | ||||||
Type | Country | Filing Date | App No. | |||
PBR | Israel | 13/3/2013 | 4436/13 | |||
PBR | Canada | To be filed |
MIDNIGHT | ||||||
Type | Country | Filing Date | App No. | |||
PBR | Israel | 13/3/2013 | 4437/13 | |||
PBR | Canada | To be filed |
AVIDEKEL | ||||||
Type | Country | Filing Date | App No. | |||
PBR | Israel | 13/3/2013 | 4438/13 | |||
PBR | Canada | To be filed |
· | The following strains of Cannabis: |
Variety Name | Type | ||
o | El-na | Indica | |
o | Avidekel | Indica | |
o | Rafael | Indica | |
o | Midnight | Sativa | |
o | Alaska | Sativa | |
o | Or | Indica | |
o | Erez | Indica | |
o | Dorit | Indica | |
o | Gog & Magog | Indica | |
o | Little Devil | Indica | |
o | Jasmine | Indica | |
o | Zohar | Sativa | |
o | Shira | Sativa | |
o | Tal | Indica | |
o | Barak | Indica | |
o | Omer | Sativa | |
o | Mango | Sativa | |
o | Eran Almog | Indica |
· | Proprietary Trade Secrets, including genetics, cultivating, harvesting, extraction, and distillation techniques and processes, including: |
Tikun Olam Grow System
Tikun Olam has developed proprietary cultivation methods that rely on environmental systems designs that provide the optimal formula for the cultivation of consistent pharmaceutical-grade cannabis at above industry average yields.
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Formulas
Optimized nutrient mixes (irrigation product applications) for cultivating healthy plants targeting active ingredients such as THC and CBD production. Applicable for mother plants, clone plants and flowering plants.
Designs
Validated production room designs that meet GPP and Israeli Ministry of Health’s technical specifications. Applicable for flowering rooms, drying rooms, mother rooms and cloning rooms, designs are proven to meet the technical release criteria allowing for repetitive compliance and quick to market sale of products.
ISO & GMP Certification – Tikun Olam’s grow system, processes and workflow have been designed to meet ISO guidelines and ultimately GMP certification.
Environmental systems – The implementation of our environmental systems ensure optimal temperature, humidity, CO2, odor control and air quality within the grow rooms. This system is designed to provide the perfect environment in all stages of production and processing.
Centralized Irrigation Systems – Fully automated centralized irrigation systems to ensure consistent and ideal levels of water and nutrients. This system features water purification, sterilization and complete monitoring and control. Integrated Control Systems – The implementation of our control system integrates lighting, HVAC, irrigation and other components to control all aspects of the operation.
Processes
Advanced Cultivating Techniques – A grow system that has been optimized for plant cycle length, density, pruning, harvesting, drying and curing. This system incorporates advanced cultivating techniques that will maximize yields and provide consistently high quality product.
Advanced Extraction Expertise – Experience in all different types of extraction methods, which will be taught to Licensee.
Isolating Cannabinoids - Provide knowledge and know-how to Licensee related to the process of isolating cannabinoids found within the cannabis plant.
Quality Control Systems
A Quality Control/Assurance framework, including comprehensive Standard Operating Procedures (SOPs) designed to carry out specific cannabis production methods in compliance with GPP and Israeli Ministry of Health requirements. Maintains operational consistency and compliance while allowing IP methods to achieve their desired outputs.
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Patient Treatment Information
Patient data that provides guidance on treatment.
Product Lines
All of Tikun Olam’s proprietary products, including delivery devices, delivery methods, packaging and ancillary products will be provided to Licensee.
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Exhibit C
List of Licensed Trademarks, Tradenames and Service Marks
Registered:
Type | Country | Filing Date | App No. | TM | ||||
TRADEMARK | United States | 13/11/2012 | 85/777,588 | Tikun Olam | ||||
TRADEMARK | United States | 23/01/2014 | 86/172,750 | EREZ | ||||
TRADEMARK | United States | 23/01/2014 | 86/172,744 | MIDNIGHT | ||||
TRADEMARK | United States | 23/01/2014 | 86/172,749 | AVIDEKEL |
Unregistered:
o | El-na |
o | Rafael |
o | Alaska |
o | Or |
o | Dorit |
o | Gog & Magog |
o | Little Devil |
o | Jasmine |
o | Zohar |
o | Shira |
o | Tal |
o | Barak |
o | Omer |
o | Mango |
o | Eran Almog |
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Exhibit 10.8
EXECUTION VERSION
GLOBAL PHARMA
LICENSE AGREEMENT
This License Agreement (this “Agreement”), dated as of April 13, 2017 (the “Effective Date”), is by and between Tikun Olam Ltd ., an Israeli corporation, registration number 514263771 (“Licensor”) and Tikun Olam IP Ltd., a Cayman Islands company (“Licensee”). Licensor and Licensee shall each be individually referred to as a “Party” and collectively as the “Parties”.
WITNESSETH
WHEREAS , Licensor is the Cannabis Business in Israel, and through joint ventures, licenses and partnerships in other jurisdictions.
WHEREAS , in connection with its Cannabis Business or otherwise, Licensor is the owner of certain intellectual property, whether registered or applied for, which includes the Licensor patents, patent applications, plant patents and plant patent applications, continuation and continuation in part applications and patents maturing therefrom, and divisional applications and patents maturing therefrom, which includes the Licensor Trademarks (as defined herein), copyrights, promotional materials, know-how, trade secrets, knowledge, documentation, information relating to clinical or other trials, patient data, plant breeders rights, registered and unregistered cannabis varieties and uniquely identifiable strains of Cannabis in all forms (as further detailed hereunder),, including with respect to any forms or strains of Cannabis (collectively known as the “Intellectual Property”) that are currently developed, as specified in more detail in Exhibit B hereof or which may be developed, owned or licensed in the future by Licensor, including Licensor Additional IP (collectively, the “Licensor IP”).
WHEREAS, Licensee is desirous of obtaining from Licensor a license to use the Licensor IP in connection with Licensee’s business, whether currently in existence or not, of producing, researching, developing, promoting, marketing, selling and distributing Pharmaceutical Products (as defined herein), including for such purpose only, the planting, cultivating, growing, harvesting, use and processing of Cannabis, and application and delivery systems, methods and devices relating thereto (the “Pharmaceutical Business”), in the Territory (as defined herein), and Licensor is desirous of granting such a license to use the Licensor IP in connection with Licensee’s business pursuant to terms and conditions of this Agreement.
NOW, THEREFORE , in consideration of the premises and mutual covenants set forth herein, the Parties hereby agree as follows:
Section 1. Definitions . Capitalized terms used herein are as set forth on Exhibit A hereto.
Section 2. Grant of License .
2.1 Grant by Licensor . Subject to the terms and conditions set forth in this Agreement, Licensor hereby grants to Licensee, and Licensee hereby accepts a perpetual, non-revocable (subject to the terms hereof), royalty-free, exclusive, and sub-licensable license (the “License”) to use the Licensor IP and any Third-Party IP (subject to Section 2.10 hereof) solely in connection with the Pharmaceutical Business anywhere in the world excluding the United States (the “Territory”). Licensor shall not use or grant the right to use the Licensor IP to another third-party in connection with the Pharmaceutical Business in the Territory other than to an Affiliate of Licensee.
2.2 Ownership of Intellectual Property and New IP .
(a) Licensor Ownership . Subject to Section 2.3 hereof, Licensor shall (i) continue to own all Licensor IP owned by Licensor prior to April 19, 2015, and (ii) own all Intellectual Property developed after April 19, 2015 solely by Licensor without any specific or direct collaboration with Licensee or its Affiliates ("Licensor Additional IP").
(b) Licensee Ownership . Licensee shall own any and all Intellectual Property and improvements and modifications of the Licensor IP relating to the Pharmaceutical Business developed or acquired on or after April 19, 2015 (i) solely by Licensee, or (ii) jointly or collaboratively with Licensee anywhere in the world (collectively, the “New IP”), except to the extent such New IP is owned by the Pharmaceutical Affiliate, and is subject to that certain License Agreement of even date herewith between Licensor and the Pharmaceutical Affiliate (the “Affiliate Pharmaceutical License Agreement”). The New IP shall be used and/or licensed to third parties by Licensee solely within the Territory and solely in connection with the Pharmaceutical Business; however, the use of the New IP by (a) the Pharmaceutical Affiliate outside of the Territory for its Pharmaceutical Business, pursuant and subject to the Affiliate Pharmaceutical License Agreement; and (b) Tikun Olam LLC, a Delaware company, which is also an Affiliate of Licensee (hereinafter “TO LLC”), outside the Territory, pursuant to the License Agreement dated April 20, 2016, between Licensor and TO LLC (the “US Medical Cannabis License Agreement”), shall be permitted and shall not be a breach of this Agreement.
(c) New IP . Licensee shall have the right to use all New IP owned by it solely in connection with the Pharmaceutical Business, and/or license to third parties the right to use such New IP, solely in connection to the Pharmaceutical Business, in each case solely within the Territory. Licensor shall not have the independent right to use or license to third parties the right to use such New IP owned by Licensee in the Territory in connection with any business similar to or competitive or potentially competitive with the Pharmaceutical Business, but shall be granted a license, pursuant to Section 2.4 below, to use the New IP in the Territory solely in connection with its Cannabis Business. Any Licensor Additional IP not owned by Licensee or its Affiliates shall be subject to the License granted hereunder.
(d) New Strains . If Licensee, in connection with the Pharmaceutical Products or the Pharmaceutical Business, during the Term of this Agreement or thereafter, makes any improvements to the Licensor IP, including by developing new strains, including any Essentially Derived Variety, based on the TO Strains (collectively, the “New Strains”), Licensee shall own all rights, title and interest in such New Strains and the New IP; provided however, that (i) Licensee shall be entitled to use such New Strains only within the Territory and subject to the terms and conditions set forth in this Agreement regarding the use of the TO Strains; (ii) the Pharmaceutical Affiliate shall be entitled to use such New Strains outside of the Territory subject to the terms and conditions set forth in the Affiliate Pharmaceutical License Agreement; and (iii) pursuant to Section 2.4 hereof, Licensor shall be granted an non-revocable (subject to the terms hereof), perpetual, sub-licensable, royalty-free license to use the New Strains, and shall be entitled to use them solely in connection with its Cannabis Business, and not any Pharmaceutical Business, in the Territory.
2.3 Clinical Trials. The results of the Clinical Trials and all Intellectual Property in connection therewith and relating thereto shall be owned (a) by Licensor to the extent they were developed by Licensor prior to April 19, 2015 or developed after April 19, 2015 solely by Licensor without any specific or direct collaboration with Licensee or its Affiliates, including without limitation any direct non- de minimis financial contribution pursuant to Section 7.1(e) hereof, and (b) by Licensee, to the extent developed solely or primarily by Licensee or developed by Licensor on or after April 19, 2015 with specific or direct collaboration with Licensee or its Affiliates, including without limitation any direct non- de minimis financial contribution by Licensee or its Affiliates, anywhere in the world, except to the extent owned by the Pharmaceutical Affiliate pursuant to the Affiliate Pharmaceutical License Agreement or by TO LLC pursuant to the US Medical Cannabis License Agreement.
2.4 Grant by Licensee . Licensee hereby grants to Licensor, and Licensor hereby accepts, a perpetual, non-revocable (subject to the terms hereof), royalty-free, non-exclusive, and sub-licensable license to use the New IP, the New Strains and the results of Clinical Trials, including any improvements and modifications thereof made by Licensee or any other party except Licensor, in each case within the Territory but solely in connection with the Cannabis Business; provided, that the license granted pursuant to this Section 2.4 shall not apply to (a) any portion of Licensee's Intellectual Property which Licensee shall not have made available to TO LLC for use in TO LLC's Cannabis Business (as such term is defined in the US Medical Cannabis License Agreement), (b) any Acquired IP, and (c) any Licensee Excluded IP. For the Purpose of Section 2 of this Agreement, the term Cannabis Business shall exclude any Pharmaceutical Business.
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2.5 Right to Sublicense . Licensee shall have the right to grant sublicenses of any of its rights under this License in connection with the Pharmaceutical Business solely within the Territory. The granting of sublicenses shall be at Licensee's sole and exclusive discretion and Licensee shall have the sole and exclusive power to determine the identity of any sublicensee, the applicable licensee fees or royalty rates, if any, and other terms and conditions of any sublicense.
2.6 Delivery of Licensor IP . To the extent permitted by Applicable Law (including for the avoidance of doubt, the export laws of the State of Israel and the importation laws of other jurisdictions and the importation federal laws and state laws of the United States), Licensor shall provide to Licensee seeds, plants or propagation materials of the strains of Cannabis included in the Licensor IP (the “TO Strains”), for the purpose of reproduction and use thereof by Licensee in accordance with the terms of this Agreement. To the extent such provision is not permitted by Applicable Law, Licensor shall cooperate with Licensee to permit Licensee, to the fullest extent permitted by Applicable Law, to utilize the TO Strains in connection with the Pharmaceutical Products and Licensee’s Pharmaceutical Business.
2.7 Distribution Right of First Refusal . Except to the extent prohibited by Licensor’s agreements with MedReleaf as in effect as of the date hereof, Licensor shall have the right of first refusal to distribute any Licensee Excluded IP outside of the United States in connection with Medical Cannabis Products. In the event that Licensee shall have received a bona fide written offer (the “Offer”) from any third-party (the “Offeror”), to distribute any New IP outside of the United States in connection with Medical Cannabis Products, and Licensee desires to accept the Offer, Licensee shall give written notice (the “Notice”) to Licensor stating that a bona fide offer to distribute certain New IP in connection with Medical Cannabis Products has been made, setting forth the material terms and conditions of the Offer, attaching a copy of the Offer, and acknowledging that Licensor shall have the option, exercisable for a period of thirty (30) days after the giving of the Notice, to distribute in connection with Medical Cannabis Products the New IP that is the subject of the Offer upon comparable terms and conditions as stated in the Offer. If Licensor fails to exercise its option to distribute such New IP in connection with Medical Cannabis Products outside of the United States within the foregoing time period, Licensee shall have the right to consummate the transaction with the Offeror upon terms no less favorable to Licensee than those contained in the Offer. If Licensor exercises its option to distribute the New IP within the foregoing time period, Licensor and Licensee shall execute definitive documents consummating the transaction upon the terms contained in the Offer within sixty (60) days.
2.8 No Assignment of Licensor IP . Notwithstanding the foregoing, the License granted hereunder is not intended to be, and shall not be construed as, an assignment by Licensor to Licensee, in part or in whole, of the ownership of the Licensor IP.
2.9 Pharmaceutical Rights Only . The Parties recognize that, notwithstanding anything implicitly or explicitly to the contrary in this Agreement, the License granted hereunder does not grant any rights with respect to any use of Licensor IP or Licensee IP other than with respect to Licensee's Pharmaceutical Business within the Territory.
2.10 Third-Party IP . If at any time Licensor has a right to use the intellectual property of a third-party (“Third-Party IP”), to the extent permitted by such license or similar agreement, such Third-Party IP shall be deemed to be part of the Licensor IP and subject hereto. Licensor shall use commercially reasonable efforts to permit the use of any Third-Party IP by Licensee.
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Section 3. Consideration; Payment . In consideration of the License granted and the other Services (as hereinafter defined) provided pursuant to this Agreement, Licensee or an Affiliate of Licensee has paid or caused to be paid to Licensor an aggregate of Two Million Five Hundred Thousand U.S. Dollars ($2,500,000) (the “Payment”), of which $500,000 (the “Cayman Payment”) was paid to Licensor on behalf of Licensee. Licensor hereby acknowledges that the Payment was made timely, and constitutes full payment of all obligations under Section VII of the MOU (as defined herein). No royalties or other payments are required hereunder.
Section 4. Term .
4.1 The License granted under this Agreement is perpetual and non-revocable (subject to the terms hereof).
Section 5. Licensor Representations and Warranties .
5.1 Organization of Licensor . Licensor is a corporation duly organized, validly existing and in good standing under the Laws of Israel. Licensor has all requisite power and authority to own, lease and operate its properties and to carry on its business and is duly qualified or licensed to do business and is in good standing as a foreign corporation in each jurisdiction in which the conduct of its business or the ownership, leasing, holding or use of its properties makes such qualification necessary, except such jurisdictions where the failure to be so qualified or licensed or in good standing would not reasonably be expected to have a material adverse effect on the ability of Licensor to consummate the transactions contemplated hereby.
5.2 Authority . Subject to Section 8 hereof, Licensor has all requisite corporate power and authority to enter into this Agreement to which it is a party and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Licensor. This Agreement has been duly executed and delivered by Licensor and, assuming the due authorization, execution and delivery by the Licensee, and subject to Section 8 hereof, this Agreement constitutes the valid and binding obligations of Licensor, enforceable against Licensor in accordance with its terms, except as such enforceability may be subject to applicable bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium and similar laws affecting the enforcement of creditors’ rights and remedies generally and by general principles of equity.
5.3 Consents . Subject to Section 8 hereof, no consent, waiver, approval, order or authorization of, or registration, declaration or filing with, or notice to, any Governmental Authority, is required by or with respect to Licensor in connection with the execution and delivery of this Agreement by Licensor or the consummation by Licensor of the transactions contemplated hereby except for (a) such consents, approvals, orders, authorizations, registrations, declarations, filings and notices as may be required under Applicable Law and (b) such other filings, authorizations, consents and approvals that if not obtained or made would not have a material adverse effect on the ability of Licensor to consummate the transactions contemplated hereby.
5.4 No Conflict . Subject to Section 8 hereof, the execution and delivery by Licensor of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not conflict with or result in any violation of or default under (with or without notice or lapse of time, or both) or give rise to a right of termination, cancellation, modification or acceleration of any obligation or loss of any benefit under (a) any provision of the Organizational Documents of Licensor, or (b) any Applicable Law applicable to Licensor or any of its properties (whether tangible or intangible) or assets, except, in the case of clause (b), for such conflicts, violations or defaults as would not individually or in the aggregate reasonably be expected to have a material adverse effect on the ability of Licensor to consummate the transactions contemplated hereby.
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5.5 Intellectual Property . Licensor is the owner or lawful licensee of the Licensor IP and has sufficient authority to grant Licensee the License pursuant to this Agreement. Licensor has not entered into any additional licenses or other arrangements that may limit Licensor’s rights or the rights of Licensee under this Agreement or which may reasonably be expected to lead to a claim of infringement or invalidity regarding any portion of the Licensor IP or its use. Licensor has no knowledge of infringement of, or conflict with, any license or other intellectual property right of any other third-party and there is no known claim pending, filed or threatened against Licensor of infringement, interference or invalidity regarding the Licensor IP or its use. Licensor has not granted and will not at any time during the Term grant or permit to exist any license or other contingent or non-contingent right, title or interest under or relating to the Licensor IP to any of its employees, principal shareholders or family members of Licensor’s principal shareholders or other third parties claiming rights derived from Licensor, that does or will conflict with or otherwise undermine or impair the rights of Licensee hereunder, including any of Licensor's representations, warranties or covenants hereunder. Notwithstanding the foregoing, Licensee acknowledges MedReleaf’s interpretation of the MedReleaf License that it may conduct business within the Territory, so long as it does not make use of "Tikun Olam's Varieties" or the Licensor Trademarks, and the Parties agree that any such activity (to the extent performed by MedReleaf) shall not be deemed a breach of this Agreement by Licensor or any agreement of Licensor with any Affiliate of Licensee.
5.6 Legal Proceedings . There are no actions pending or threatened against or by Licensor or any Affiliate of Licensor that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. Subject to Section 8 hereof, no event has occurred or circumstances exist that may give rise or serve as a basis for any such action. Licensor warrants that its directors, officers, and management employees have not been convicted of any drug-related felony or of a crime related to fraud.
Section 6. Licensee Representations and Warranties .
6.1 Organization of Licensee . Licensee is a company duly organized, validly existing and in good standing under the Laws of the Cayman Islands. Licensee has all requisite power and authority to own, lease and operate its properties and to carry on its business.
6.2 Authority . Subject to Section 8 hereof, Licensee has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby has been duly authorized by all necessary corporate action on the part of Licensee. This Agreement has been duly executed and delivered by Licensee and, assuming the due authorization, execution and delivery by the other Parties hereto (other than Licensee), and subject Section 8 hereof, this Agreement constitutes the valid and binding obligations of Licensee, enforceable against Licensee in accordance with its terms, except as such enforceability may be subject to applicable bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium and similar laws affecting the enforcement of creditors’ rights and remedies generally and by general principles of equity.
6.3 Consents . Subject to Section 8 hereof, no consent, waiver, approval, order or authorization of, or registration, declaration or filing with, or notice to, any Governmental Authority, is required by or with respect to Licensee in connection with the execution and delivery of this Agreement or the consummation by Licensee of the transactions contemplated hereby except for (a) such consents, approvals, orders, authorizations, registrations, declarations, filings and notices as may be required under Applicable Law and (b) such other filings, authorizations, consents and approvals that if not obtained or made would not have a material adverse effect on the ability of Licensee to consummate the transactions contemplated hereby.
6.4 No Conflict . Subject to Section 8 hereof, the execution and delivery by Licensee of this Agreement and the consummation of the transactions contemplated hereby, do not and will not conflict with or result in any violation of or default under (with or without notice or lapse of time, or both) or give rise to a right of termination, cancellation, modification or acceleration of any obligation or loss of any benefit under (a) any provision of the Organizational Documents of Licensee, or (b) any Applicable Law applicable to Licensee or any of its properties (whether tangible or intangible) or assets, except, in the case of clause (b), for such conflicts, violations or defaults as would not individually or in the aggregate reasonably be expected to have a material adverse effect on the ability of Licensee to consummate the transactions contemplated hereby.
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6.5 Legal Proceedings . There are no actions pending or, to Licensee’s knowledge, threatened against or by Licensee or any Affiliate of Licensee that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. Subject to Section 8 hereof, no event has occurred or circumstances exist that may give rise or serve as a basis for any such action. Licensee warrants that its directors, officers, and management employees have not been convicted of any drug-related felony or of a crime related to fraud.
Section 7. Covenants .
7.1 Licensor Covenants . Licensor shall:
(a) Continue to conduct research and development efforts in connection with the Pharmaceutical Business within Israel and assist Licensee (at its request) with such research and development worldwide;
(b) provide to Licensee and its Affiliates training and assistance with research and development in connection with Licensee’s Pharmaceutical Business (the “Training Services”). In this connection, Licensor shall use a reasonable degree of care ordinarily provided consistent with good industry practices, at no lower standard than Licensor provides for itself, relating to training of the Licensee’s the staff and employees of Licensee, to the extent required or requested by Licensee;
(c) assist Licensee with design and establishment of operations in connection with the cultivation and production of Cannabis extracts for Pharmaceutical Products (collectively, “Design and Operations Services”). In this connection, Licensor shall use a reasonable degree of care ordinarily provided consistent with good industry practices, at no lower standard than Licensor provides for itself in connection with the design, establishment and operation of Licensor’s Cannabis Business, and in any event in a manner and to the extent sufficient to comply with Applicable Law;
(d) assist Licensee in connection with conducting Clinical Trials and provide all related Clinical Trials Services. In this connection, Licensor shall use a reasonable degree of care, ordinarily provided consistent with good industry practices, at no lower standard than Licensor provides for itself in connection with its own clinical trials in Israel related to Cannabis Products, including extracts, and in any event in a manner and to the extent sufficient to comply with Applicable Law; and
(e) devote and pay not less than an aggregate of Three Hundred Seventy-Five Thousand U.S. Dollars ($375,000) to further develop and enhance the Licensor IP, including in connection with (i) patent prosecution, (ii) purchasing of equipment, and (iii) by funding up to Two Hundred Fifty Thousand U.S. Dollars ($250,000) in connection with the Clinical Trials, in amounts equal to funding therefor provided by Licensee and its Affiliates. In addition, Licensee, together with its Affiliates, the Pharmaceutical Affiliate and TO LLC, or such other Affiliates of Licensee as Licensee may determine, shall pay the aggregate remaining costs in connection with such Clinical Trials, if any. The obligations of Licensee and its Affiliates pursuant to this Section 7.1(e) shall be shared as determined by Licensee between Licensee and its Affiliates. The obligations of Licensor, Licensee or any of its Affiliates under this Section 7.1(e) and the obligations of Licensee’s Affiliates under any similar provisions of any other agreements, including the Affiliate License Agreements, shall not be duplicative of each other. Accordingly, the aggregate financial commitment of each of Licensor (on the one hand) and of Licensee and its Affiliates (on the other hand) pursuant to clause (iii) above shall be such Two Hundred Fifty Thousand U.S. Dollars ($250,000), and the amounts required pursuant to the second sentence of this Section 7.1(e) shall be shared among Licensee and its Affiliates. Licensee and Licensor acknowledge and agree that as of the date hereof, Licensor has already contributed $125,000 toward its obligations pursuant to clauses (i) and (ii) of this Section 7.1(e) and shall therefore only be required to contribute an additional $250,000, which shall be applied toward Licensor’s obligation to pay for 50% of the aggregate costs in connection with the Clinical Trials as set forth in clause (iii) above of this Section 7.1(e), any Clinical Trials as set forth in clause (iii) of Section 7.1(e) of the Affiliate Pharmaceutical License Agreement or any Clinical Trials as set forth in clause (iii) of Section 7.1(e) of the US Medical Cannabis License Agreement.
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7.2 Licensee Covenants . Licensee shall:
(a) without prejudice to Section 7.1(e), in connection with the Services provided pursuant to Section 7.1, reimburse Licensor for all reasonable and actual out-of-pocket expenses (the “Expenses”), including the cost of air travel, accommodations and meals for employees of Licensor who in so providing such Services are required to travel outside Israel (not including salaries or other compensation paid to its employees, consultants, or related parties, except as Licensee may otherwise agree in writing), in each case upon submission of appropriate documentation evidencing such Expenses consistent with Licensee’s customary expense reimbursement policies; The obligations of Licensee or any of its Affiliates under this Section 7.2 and the obligations of Licensee’s Affiliates under any similar provisions of the Affiliate License Agreements shall not be duplicative of each other; and
(b) use commercially reasonable efforts to obtain any necessary jurisdictional, governmental, regulatory approvals to the extent required by Applicable Law in connection with the Pharmaceutical Business in the Territory.
Section 8. Regulatory Disclosures .
8.1 The Parties acknowledge and agree that there is (a) an unpredictable regulatory environment in the area of cannabis law and that existing or new laws, interpretations of law, or enforcement policies may adversely impact the Parties’ business and (b) notwithstanding the favorable treatment under the laws of certain jurisdictions, Cannabis is a prohibited controlled substance under the laws of many jurisdictions.
8.2 Legal Risks . The Parties acknowledge and agree that Licensee faces certain legal risk which include, but are not limited to, the following:
(a) Licensee and its suppliers or vendors, including Licensor, could be subject to criminal prosecution at any time pursuant to Applicable Law or other Governmental Authority;
(b) Certain jurisdictions, under Applicable Law or other Governmental Authority, may take actions to stop, hinder, delay or harm Licensee or take other actions that would be detrimental to Licensee; and
(c) This Agreement may be deemed void for illegality in whole or in material part.
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Section 9. Confidentiality .
From time to time during the term of this Agreement, either Party (as the ”Disclosing Party”) may disclose or make available to the other Party (as the ”Receiving Party”) information which is considered proprietary or confidential by that Party, including without limitation: technology, business practices, trade secrets, processes, policies, procedures, techniques, technical information, formulae, plant strains, financial/financing contacts, investors, contractors, specifications, information data, the identity and special needs of customers or potential customers, databases, data, systems, methods of operation, client or customer lists, solicitation leads, marketing or advertising materials, techniques, know-how, processes, cost data, marketing data, business data, technical data and other technical know-how, Intellectual Property, trade secrets, third-party confidential information and other sensitive or proprietary information, whether orally or in written, electronic or other form or media, whether disclosed to the other Party or obtained by such Party through observation or examination of the other Party’s facilities or procedures or materials, and whether or not marked, designated or otherwise identified as “confidential” (collectively, ”Confidential Information”). Confidential Information shall not include information that, at the time of disclosure and as established by documentary evidence: (i) is or becomes generally available to and known by the public other than as a result of, directly or indirectly, any breach of this Section 9 by the Receiving Party or any of its Representatives; (ii) is or becomes available to the Receiving Party on a non-confidential basis from a third-party source, provided that such third-party is not and was not prohibited from disclosing such Confidential Information; (iii) was known by or in the possession of the Receiving Party or its Representatives prior to being disclosed by or on behalf of the Disclosing Party; (iv) was or is independently developed by the Receiving Party without reference to or use, in whole or in part, of any of the Disclosing Party's Confidential Information; or (v) is required to be disclosed pursuant to applicable federal, state or local law, regulation or a valid order issued by a court or Governmental Authority of competent jurisdiction. The Receiving Party shall: (A) protect and safeguard the confidentiality of the Disclosing Party's Confidential Information with at least the same degree of care as the Receiving Party would protect its own Confidential Information, but in no event with less than a commercially reasonable degree of care; (B) not use the Disclosing Party's Confidential Information, or permit it to be accessed or used, for any purpose other than to exercise its rights or perform its obligations under this Agreement; and (C) not disclose any such Confidential Information to any person or entity, except to the Receiving Party's Representatives who need to know the Confidential Information to assist the Receiving Party, or act on its behalf, to exercise its rights or perform its obligations under the Agreement. The Receiving Party shall be responsible for any breach of this Section 9 caused by any of its Representatives. On the expiration or termination of the Agreement, the Receiving Party shall promptly return, and shall require its Representatives to return to the Disclosing Party all copies, whether in written, electronic or other form or media, of the Disclosing Party's Confidential Information, or destroy all such copies and certify in writing to the Disclosing Party that such Confidential Information has been destroyed. Neither Party will use any Residual Information for any purpose whatsoever, including without limitation, the development of its own products or business. The Parties’ obligations under this Section 9 shall continue indefinitely and shall survive the termination of this Agreement. In addition to all other remedies available at law, the Disclosing Party may seek equitable relief (including injunctive relief) against the Receiving Party and its Representatives to prevent the breach or threatened breach of this Section 9 and to secure its enforcement.
Section 10. Intellectual Property Matters .
10.1 Inspection and Quality Control . Licensee agrees to affix to all Pharmaceutical Products for sale to third parties (and not Pharmaceutical Products held for internal use) that utilize the Licensor IP and any promotional and packaging material in connection with such Pharmaceutical Products, such Marks and notices of the Licensor IP, as shall be reasonably requested by Licensor, to the extent practicable and consistent with commercial practice. Licensee agrees to obtain Licensor’s specific written instructions with respect to the content and placements of all such notices required pursuant to this Section 10, which Licensor agrees to provide promptly. At all times when Licensee commercially uses the Licensor IP, to the extent practicable and consistent with commercial practice, shall note that Licensee’s use is made under license and shall indicate the owner of the Licensor IP.
10.2 Licensee agrees that Licensor shall have the right, at all reasonable times, upon no less than fifteen (15) Business Day’s prior written notice to Licensee, to inspect the premises of Licensee and elsewhere as Licensor considers necessary in order to verify Licensee's compliance with the terms hereof, including for appropriate quality control with respect to Licensee's use of the Licensor Trademarks.
10.3 Licensee agrees that it will not do or permit any act or thing that would endanger any proprietary right of Licensor with respect to the License granted pursuant to this Agreement and that Licensee will not claim any proprietary interest in the Licensor IP (including the Third-Party IP). Licensee agrees to cooperate with Licensor in registering, protecting and defending the License, including, but not limited to, if so requested by Licensor, executing and filing any and all documents and papers necessary or advisable in order to register or protect the License, including, without limitation, this Agreement or an abstract hereof.
10.4 In utilizing the Licensor IP in accordance with the terms of this Agreement, Licensee shall apply the same standards that Licensee uses for Licensee's own Intellectual Property and shall not utilize any of the Licensor IP (including without limitation, the Licensor Trademarks):
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(a) in such a fashion that would cause confusion with, dilute or damage the reputation or image of Licensor, its products or services; provided however, that Licensee shall not be considered to be in breach of this Section 10.4(a) as a result of the sale by Licensee of Pharmaceutical Products bearing the Licensor name or other Licensor Trademarks; and/or
(b) in connection with any material that is obscene, pornographic, excessively violent, libelous or defamatory.
10.5 Licensee shall have the right, but not the obligation, at its own expense, to take any action it deems advisable in its sole discretion to apply for and prosecute registration of or otherwise protect the Licensor IP (including without limitation, the TO Strains and Licensor Trademarks) and the New IP (including without limitation, New Strains and Essentially Derived Varieties) in connection with the Pharmaceutical Products or the Pharmaceutical Business in the Territory. Licensor agrees to cooperate with Licensee in registering, protecting and defending the Licensor IP, including, but not limited to, if so requested by Licensee, executing and filing any and all documents and instruments necessary or advisable in order to register or protect the Licensor IP. All filings, registrations and applications shall be made in the name of the Party designated as the owner of the applicable Intellectual Property in accordance with the provisions of Section 2.2 hereof.
Section 11. Use of Licensor Trademarks .
11.1 Licensor hereby grants to Licensee and its Affiliates a right and license to use and to sublicense the right to use the Licensor Trademarks in connection with the Pharmaceutical Business, corporate names, and advertising, marketing, promoting and selling of Pharmaceutical Products and other related services within the Territory.
11.2 The Parties recognize the value of the goodwill associated with the Licensor Trademarks, and acknowledge that the Licensor Trademarks and all rights therein, as well as the goodwill which accrues during the term of this Agreement, belongs exclusively to the Licensor, and the Licensee shall not acquire any rights in the Licensor Trademarks, other than as expressly granted in this Agreement. Licensee shall not do anything inconsistent with Licensor's ownership of its Licensor Trademarks. In particular, but without limitation, Licensee shall not attack the validity of the Licensor Trademarks or the Licensor's rights in and to its Licensor Trademarks. Subject to the terms and provisions hereof, the Licensor retains the right to use and to license the use of its Licensor Trademarks for any and all goods or services.
11.3 Licensee shall not misuse or misappropriate any of the Licensor Trademarks. Licensee shall not engage in any conduct that impairs or might tend to impair the validity or enforceability of any of the Licensor Trademarks or any registrations of any of the Licensor Trademarks, or that dilutes or might dilute the distinctive quality of any of the Licensor Trademarks, or that disparages or might disparage any of the Licensor Trademarks. Notwithstanding anything to the contrary contained elsewhere in this Agreement, Licensee may not use any of the Licensor Trademarks on any materials or products unless it has received Licensor's prior written approval for such use, which shall not be unreasonably withheld, delayed or conditioned, except that Licensee shall not be required to obtain such approval in connection with the use of Licensor Trademarks on materials or products which does not materially differ from previously approved uses.
11.4 In addition to each Party’s other rights and remedies under this Agreement or otherwise, Licensee shall upon receipt of notice from the Licensor immediately discontinue any use of, and remove from its premises, all materials bearing any of the Licensor Trademarks, including any signs, labels, stationery, advertising, promotional material and literature that, in Licensor's reasonable opinion, constitutes an improper use of the Licensor Trademarks or reflects non-negligibly adversely on Licensor's reputation or brand image or any of its corporate affiliates or partners or on any of Licensor’s products or services.
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11.5 All graphics, trademarks, service marks, trade names, trade dress, word marks, design marks, slogans and domain names, and all images, logos, artwork, text and other works of authorship (collectively, the “Marks”), created by or on behalf of Licensor that include or refer to the Licensor Trademarks, shall belong exclusively to Licensor, and Licensee assigns Licensor all rights, title and interest in and to said items; provided, that any Marks created by Licensee or its representatives that include or refer to the Licensor Trademarks or which are based on or derived from or combined with any Licensor IP in connection with its business shall be deemed to be Licensee IP, shall be owned by Licensee and shall be used by Licensor pursuant to Section 2.4 hereof subject to all restrictions applicable to New IP. Notwithstanding anything to the contrary herein, all Marks owned by Licensee, to the extent subject to Section 2.4 hereof shall, except with the written consent of Licensee, be used by Licensor in the form created by Licensee without material modification thereto except to the extent required by Applicable Law or applicable Governing Authority.
11.6 Licensee shall not engage in any conduct or take part in any activity that is or might be considered unfair competition or an infringement or other violation of the Licensor's rights in the Licensor Trademarks. Except as otherwise provided herein, Licensee acknowledges that it has no right whatsoever to object to or otherwise prevent the Licensor from allowing any other person to display the Licensor Trademarks or use them as part of any firm, corporation or business name except that Licensor shall not use or permit the use of Licensor Trademarks in the Territory in connection with any business which is similar to or competitive or potentially competitive with the Licensee’s Pharmaceutical Business in the Territory.
Section 12. Third - Party Infringement .
12.1 Report of Infringement . With respect to any Licensor IP subject to the License, including Licensor Trademarks, when information comes to the attention of the Licensee to the effect that any of the licensed rights have been or are threatened to be infringed by a third-party (including any propagation, production or reproduction of the TO Strains or New IP) in violation with the terms of this Agreement, the Licensee shall notify the Licensor in writing of any such infringement or threatened infringement of which it has become aware.
12.2 Action by Licensee . Subject to Section 12.3, in the event of an infringement or threatened infringement by a third-party of the Licensor IP in the Territory, Licensee shall take reasonable action to stop any infringement or otherwise to enforce its rights, and the Licensor shall cooperate in any such action as reasonably requested. If the Licensee initiates legal action against the infringing party, the Licensee shall have the exclusive right to direct and control the litigation and any settlement thereof. Licensor shall not have any rights against the Licensee for damages or other remedy by reason of the Licensee’s alleged failure to prosecute any alleged infringements or imitations by others of the Licensor Trademarks, except as set forth herein. If Licensee does not diligently initiate legal action against the infringing party, then the Licensor shall have the exclusive right to bring suit, direct and control the litigation, and any settlement thereof (solely with respect to Licensor’s rights), at the equal expense of both Parties. The Licensee shall, at its’ expense, cooperate in any such Licensor action and any settlement thereof as reasonably requested.
12.3 Licensor Contribution . In the event that Licensee takes action pursuant to paragraph 12.2 above, Licensor shall pay to Licensee an amount equal to one-half of the costs and expenses (including attorney’s fees and expenses and costs of investigation) relating thereto (the “Infringement Contribution”) up to an aggregate amount equal to $200,000 (the “Cap”), which Cap shall include all of Licensor’s payments to (a) TO LLC pursuant to the US Medical Cannabis License Agreement, and (b) the Pharmaceutical Affiliate pursuant to the Affiliate Pharmaceutical License Agreement, in each case with respect to the similar Infringement Contributions included therein. The Infringement Contribution shall be payable solely by means of offset against any royalties due to Licensor in accordance with Section 3 of the US Medical Cannabis License Agreement (the "MM Royalties"), in which event Licensee and its Affiliates shall determine an appropriate allocation of the applicable Infringement Contribution. Notwithstanding the foregoing, if the aggregate amount of the Infringement Contribution, whether pursuant to this Section 12.3 or under any similar provision under the Affiliate License Agreements shall exceed the Cap, Licensor shall, subject to the foregoing allocation, nevertheless participate in and contribute towards such costs, solely by means of offset against any MM Royalties due to Licensor in accordance with the US Medical Cannabis License Agreement, up to the following amounts: (i) an amount equal to 10% of the first $500,000 of MM Royalties due to Licensor during any calendar year, plus (ii) an amount equal to 15% of any MM Royalties due to Licensor during any calendar year exceeding the first $500,000 of MM Royalties (e.g., in a year in which the total amount of MM Royalties due to Licensor is $800,000, the maximum additional payment on account of the Infringement Contribution shall be $95,000, and if the total required Infringement Contribution is higher than such amount, the balance may only be deducted from MM Royalties due in future years). For removal of doubt, other than consenting to the partial offset of the MM Royalties due to Licensor and their transfer from TO LLC to Licensee in accordance with the provisions of this Agreement and the US Medical Cannabis License Agreement, Licensor shall have no liability towards Licensee for the payment of the Infringement Contribution, nor shall Licensee have any claim or demand against Licensor if TO LLC refuses to or refrains from performing any offset or transfer any amount so offset by it to Licensee.
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12.4 Enforcement of Rights Upon Sale of Land . Should Licensee or any person on its behalf sell, convey, transfer to or otherwise dispose of any real property on which any of the TO Strains or New Strains shall have been cultivated in connection with the Pharmaceutical Products or the Pharmaceutical Business, Licensee shall inform Licensor in writing, in advance of such sale, conveyance, transfer or disposition of the land and provide reasonable details regarding the intended transferee thereof. Licensee shall inform transferee of Licensor's rights pursuant to this Agreement and obtain transferees' undertaking to destroy and not to use in any manner any seeds, plants or propagation materials which may remain in or on the land. Licensee shall be responsible to enforce, at Licensee's expense, any breach by transferee of said undertaking.
Section 13. Indemnification .
13.1 Indemnity by Licensor . Licensor shall defend, indemnify and hold harmless Licensee and its officers, directors, employees, shareholders, agents, successors and assigns from and against any and all Losses, as incurred, resulting from, or arising out of (i) any claim suit, action or proceeding against Licensee which alleges that any Licensor IP or deliverable hereunder infringes upon, misappropriates or violates any patents, copyrights, trademarks or trade secret rights or other proprietary rights of persons, firms or entities who are not parties to this Agreement (an “Infringement Claim”);; (ii) any gross negligence, willful misconduct or misrepresentation by Licensor or its representatives; or (iii) any material breach of this Agreement by Licensor, its officers, directors, employees, principal shareholders or Affiliates. Notwithstanding anything to the contrary in this Agreement, the use of any extracts, seeds, plants or propagation materials of the TO Strains provided by Licensor pursuant to Section 2.6 above, and any reproduction thereof, shall be tested on a regular basis by Licensee, and any use thereof shall be at the sole risk of Licensee with respect to medical risk.
13.2 Indemnity by Licensee . Licensee shall defend, indemnify and hold harmless Licensor and its officers, directors, employees, shareholders, agents, successors and assigns from and against any and all Losses, as incurred, resulting from, or arising out of (i) any claim, suit, action or proceeding against Licensor which alleges that Licensee IP (other than if the claim, suit, action or proceeding results from an Infringement Claim subject to Section 13.1 ) infringes upon, misappropriates or violates any patents, copyrights, trademarks or trade secret rights or other proprietary rights of persons, firms or entities who are not parties to this Agreement; (ii) any gross negligence, willful misconduct or misrepresentation by Licensee or its representatives; or (iii) any material breach of this Agreement by Licensee, its officers, directors, employees, principal members or Affiliates.
13.3 Indemnification by Licensor for Infringement Claims . In the case of an Infringement Claim for indemnification pursuant to Section 13.1(i), Licensee shall promptly notify the indemnifying party in writing of any Infringement Claim and cooperate with Licensor at Licensor’s sole cost and expense. Licensor shall immediately take control of the defense and investigation of such Infringement Claim, assert all reasonable counterclaims, seek to recover all Losses and shall employ counsel of its choice to handle and defend the same, at its sole cost and expense. Licensor shall bear the cost of any related proceedings and shall be entitled to retain all sums recovered in any action for its own account. If Licensor obtains a decision in its favor, and the sums recovered by Licensor are less than Licensor’s legal and other applicable costs and expenses (including but not limited to, costs of investigation) in connection therewith (the “Shortfall”), Licensee shall pay the Shortfall to Licensor. If Licensor does not obtain a decision in its favor, Licensor shall pay all costs in connection with the Infringement Claim, including but not limited to, costs of investigation and reasonable attorneys’ fees and expenses incurred and will indemnify and hold harmless Licensee for any and all Losses incurred by Licensee with respect to its business in connection with such Infringement Claim. Licensor shall not settle any Infringement Claim in a manner that adversely affects the rights of Licensee without the Licensee’s prior written consent, which shall not be unreasonably withheld or delayed. Licensee’s failure to perform any obligations under this Section 13.3 shall not relieve Licensor of its obligations hereunder except to the extent that the Licensor can demonstrate that it has been materially prejudiced as a result of such failure by Licensee. Licensee may participate in and observe the proceedings at its own cost and expense.
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13.4 Procedures for Third-Party Claims . In the case of any claim for indemnification arising from a claim of a third-party other than an Infringement Claim subject to Section 13.3 above (a “Third-Party Claim”), a party seeking indemnification hereunder (each an “Indemnified Party”) shall give prompt written notice, following such Indemnified Party’s receipt of such claim or demand, to the party from which indemnity is sought (each an “Indemnifying Party”) of any claim or demand of which such Indemnified Party has knowledge and as to which it may request indemnification hereunder; provided, however, that failure to give such notice will not affect such Indemnified Party’s rights hereunder unless, and then solely to the extent that, the rights of the Indemnifying Parties from whom indemnity is sought are prejudiced as a result of such failure. The Indemnifying Party shall have the right (and if it elects to exercise such right, shall do so within twenty (20) days after receiving such notice from the Indemnified Party) to defend and to direct the defense against any such claim or demand, in its name or in the name of the Indemnified Party, as the case may be, at the expense of the Indemnifying Party, and with counsel selected by the Indemnifying Party; provided, that the Indemnifying Party shall be entitled to assume control of the defense of such action only if the Indemnifying Party acknowledges in writing its indemnity obligations and assumes and holds the Indemnified Party harmless from and against all Losses resulting from such Third-Party Claim; and provided further that the Indemnifying Party shall not be entitled to assume control of such defense if (i) the Indemnifying Party shall not have notified the Indemnified Party of its exercise of its right to defend such Third-Party claim within such twenty (20) day period; (ii) such claim or demand seeks an injunction or other equitable relief against the Indemnified Party, (iii) the Indemnified Party shall have reasonably concluded that (x) there is a conflict of interest between the Indemnified Party and the Indemnifying Party in the conduct of the defense of such claim or demand or (y) the Indemnified Party has one or more defenses not available to the Indemnifying Party, (iv) such claim relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation, or (v) the appropriate court rules that the Indemnifying Party failed or is failing to vigorously prosecute or defend such Third-Party Claim. Notwithstanding anything in this Agreement to the contrary, the Indemnified Party shall, at the expense of the Indemnifying Party, cooperate with the Indemnifying Party, and keep the Indemnifying Party fully informed, in the defense of such claim or demand. The Indemnified Party shall have the right to participate in the defense of any claim or demand with counsel employed at its own expense; provided, however, that, in the case of any claim or demand described in clause (i) or (ii) of the second preceding sentence or as to which the Indemnifying Party shall not in fact have employed counsel to assume the defense of such claim or demand, the reasonable fees and disbursements of such counsel shall be at the expense of the Indemnifying Party. The Indemnifying Party shall have no indemnification obligations with respect to any such claim or demand which shall be settled by the Indemnified Party without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, delayed or conditioned. The Indemnifying Party shall not settle any such claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, delayed or conditioned if such settlement is accompanied by a document releasing the Indemnified Party from all liability with respect to the matter in controversy that is binding, valid and enforceable against all applicable Parties). Notwithstanding the foregoing, if the Indemnified Party fails to object to the settlement within five (5) Business Days of receipt of a written notice from the Indemnifying Party containing the terms and condition of such settlement, the Indemnified Party shall be deemed to have consented to the settlement.
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13.5 Procedures for Inter-Party Claims . In the event that an Indemnified Party determines that it has an indemnification claim against an Indemnifying Party hereunder (other than as a result of a Third-Party Claim or an Infringement Claim), the Indemnified Party shall give prompt written notice thereof to the Indemnifying Party, specifying in reasonable detail, to the extent then known, the amount of such claim and any relevant facts and circumstances relating thereto. The Indemnified Party and the Indemnifying Party shall negotiate in good faith for the thirty (30) day period following receipt of such notice regarding the resolution of any disputed indemnification claims. If no resolution is reached with regard to such disputed claim between the Indemnifying Party and the Indemnified Party within such thirty (30) day period, the Indemnified Party shall, subject to Section 16.5 hereof (but without any duplication of the foregoing 30-day resolution period), be entitled to seek appropriate remedies in accordance with the terms hereof. In the event that the Indemnified Party is required to institute legal proceedings in order to recover its indemnification claims hereunder, the cost of such legal proceedings (including costs of investigation and reasonable attorneys’ fees and disbursements) shall be added to the amount of the indemnification claims payable to the Indemnified Party if the Indemnified Party recovers the indemnification claims in such legal proceedings. In the event that a party hereto claiming to be an Indemnified Party institutes legal proceedings in order to recover indemnification claims hereunder and the applicable court refuses to award any related amounts to such party, such party shall reimburse the defending party for the cost of such legal proceedings (including costs of investigation and reasonable attorneys’ fees and disbursements).
13.6 Recoveries . For purposes of this Section 13, any calculation of Losses shall be net of (i) any insurance proceeds actually received by the Indemnified Party with respect to such Losses (net of any costs of recovery of such insurance proceeds, including premium increases), and (ii) any monies actually received by the Indemnified Party with respect to such Losses pursuant to any indemnification obligations owed thereto by any third parties (net of any costs of recovery of such monies), and shall be exclusive of any amounts paid by Licensor pursuant to Section 12.3).
13.7 Offset . In the event that the Licensee has a Claim against Licensor arising under Section 13 of this Agreement, Licensee shall be entitled to request TO LLC to offset on Licensee’s behalf the amount of such Claim against any amounts due to Licensor pursuant to Section 3 of US Medical Cannabis License Agreement; provided, that (i) any amount so offset shall be separate and apart from, and shall not be subject to any of the limitations set forth in, Section 12.3 hereof or in any corresponding provision of the Affiliate License Agreements, and (ii) such offset shall be exercised in the following manner:
(a) Licensee shall first send to the Licensor a notice (the “Offset Notice”) specifying the amount of Licensee's claim and the manner in which it was calculated, identifying, to the extent applicable, the provisions hereof asserted to give rise to the Claim and briefly identifying the facts which constitute the basis of such obligation or Claim.
(b) Within 30 days after Licensee delivers the Offset Notice to Licensor, Licensor shall deliver to Licensee a written notice (the “Dispute Notice”) identifying in reasonable detail which Claims, or parts thereof, Licensor questions in good faith or does not question in good faith, as the case may be, and the reasons therefor. If within 30 days after giving the Offset Notice, Licensee does not receive a Dispute Notice from Licensor, Licensee shall be entitled to request TO LLC in writing, with a copy to Licensor, to offset the amount of any such Claim against payments due from TO LLC to Licensor pursuant to Section 3 of the US Medical Cannabis License Agreement; provided, that if such Claim is later defeated, defensed, settled or otherwise resolved for a cost to Licensee (the “Claim Resolution Amount”) which is less than the amount offset with respect to such Claim, then Licensee shall promptly instruct TO LLC to remit to Licensor the amount of the difference between the amount of such offset and the Claim Resolution Amount; provided, that if such instruction to TO LLC is not effectuated by TO LLC, then Licensee shall remit such amount directly to Licensor.
(c) If within 30 days after giving the Offset Notice, Licensee receives a Dispute Notice from Licensor, then (i) with respect to any portion of a Claim not questioned, the offset provisions of Section 13.7(b) above shall apply, and (ii) with respect to any portion of a Claim questioned, Licensee shall be entitled to request TO LLC to provisionally offset the amount thereof against MM Royalties due from TO LLC to Licensor pursuant to Section 3 of the US Medical Cannabis Agreement, by depositing any such amount in escrow with legal counsel to TO LLC.
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(d) Any amounts questioned and held in escrow pursuant to Section 13.7(c)(ii) shall be held until six (6) months from the date of Licensee’s receipt of a Dispute Notice from Licensor, unless by such date the Claim becomes subject to a litigation, arbitration or other legal proceeding between the Parties or against one or more of the Parties (a ”Proceeding”). In the event the Claim does not become subject to a Proceeding within 6 months from the date of Licensee’s receipt of a Dispute € (e) Notice from Licensor, the funds held in escrow pursuant to Section 13.7(c)(ii) shall thereupon be promptly delivered to Licensor. In the event the Claim becomes subject to a Proceeding within 6 months from the date of Licensee’s receipt of a Dispute Notice from Licensor, the funds shall continue to be held in escrow until the Claim in respect thereof is resolved by agreement of the parties or an order of a court of competent jurisdiction directs payment of the disputed amount.
(e) Upon resolution of a Claim in accordance with the provisions of Section 13.7(d), the funds held in escrow pursuant to Section 13.7(c)(ii) shall thereupon be promptly delivered to Licensor to the extent required in accordance with the terms of the resolution of such Claim, and to the extent not so required to be so paid over to Licensor shall be paid to Licensee in settlement of its Claim, and all interest or other income, if any, which has been earned with respect to any such cash amount shall be allocated between Licensor and Licensee in proportion to their respective entitlements to such sum. Licensee and Licensor shall have no other responsibility or liability to account for any interest with respect to any amount so withheld or otherwise with respect to any Claim.
13.8 No Punitive, Exemplary or Aggravated Damages . In no event shall either Party be liable to the other Party for any claim for punitive, exemplary or aggravated damages or any indirect or consequential Losses in connection with a breach of this Agreement.
13.9 Survival . The obligations of each Party under this Section 13 shall survive the termination or expiration of this Agreement.
Section 14. Non-Competition .
14.1 During the term of this Agreement and for a period of twelve (12) months following the termination or cancellation of this Agreement, Licensor and any Affiliate thereof, will not market or sell Pharmaceutical Products derived from Cannabis or provide advisory services relating thereto in the Territory without the prior written consent of Licensee, which after a Licensor Exit Event will not be unreasonably withheld, delayed or conditioned; provided, that in such event reasonable provisions are effectuated to protect Licensee’s confidential information and business operations.
14.2 During the term of this Agreement and for a period of twelve (12) months following the termination or cancellation of this Agreement, subject to the Affiliate License Agreements, Licensee and its Affiliates will not, within the Territory, without first obtaining the written consent of Licensor, market or sell Cannabis Products or provide advisory services relating thereto; provided, that the above restriction shall not apply with respect to Acquired IP and Licensee Excluded IP (and with respect to Licensee Excluded IP, subject to Section 2.7).
14.3 The obligations of each Party under this Section 14 run and inure to the benefit of each Party together with their successors and permitted assigns and shall survive the termination or expiration of this Agreement.
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Section 15. Notices . All notices, claims or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and sent to the Parties at the addresses indicated below or to such other address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party. Each such notice or other communication to be given or delivered shall be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered, or (ii) if sent via an internationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one Business Day after deposit with the courier), or (iii) if sent via mail, at the earlier of its receipt or ten (10) days after the same has been deposited in a regularly-maintained government receptacle for the deposit of mail, or (iv) if sent via facsimile, upon confirmation of facsimile transfer, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next Business Day, or (v) if sent via email, PDF or by other electronic mail, upon its delivery, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next Business Day. All notices, claims and other communications hereunder may be given by any other means, but shall not be deemed to have been duly given unless and until it is actually received by the intended recipient.
If to Licensor: | Tikun Olam Ltd. |
183 Gvirol Street | |
Tel Aviv, Israel | |
Attention: Tsachi Cohen, Director & Aharon Lutzky, CEO | |
Fax: +972-3-6006201 | |
Email: tsachi@tikun-olam.co.il; aharon@tikun-olam.co.il | |
with a copy to: | Shenker – Lax Law Offices |
Rogovin Tidhar Tower, | |
11 Menachem Begin Rd., 12th floor | |
Ramat Gan | |
Attention: Oren Shenkar, Adv. | |
Fax: +972-3-6006201 | |
Email: Oren@sl-adv.co.il | |
If to Licensee: | Tikun Olam IP Ltd. |
c/o Trident Trust Company (Cayman) Ltd. | |
P.O. Box 847, Grand Cayman, KY1-1103 | |
Cayman Islands | |
Attention: Mirae Connor | |
Fax: + 1 (345) 949 0881 | |
Email: mconnor@tridenttrust.com and | |
barryfarkas1@gmail.com | |
with a copy to: | Kaufman & Associates, LLC |
200 Motor Parkway, Suite B-13 | |
Hauppauge, New York 11788 | |
Attention: Neil M. Kaufman, Esq. | |
Fax: (516) 650-8771 | |
Email: nkaufman@kaufman-associates.com | |
and | |
bernie@tikunolam.com | |
stephen@tikunolam.com |
Section 16. Miscellaneous .
16.1 Cooperation . Both Parties agree reasonably to cooperate with and assist each other in connection with the License granted under this Agreement and the development and success of Licensee’s Pharmaceutical Business within the Territory.
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16.2 Prior Agreements/Oral Modification . Except as otherwise provided herein, this Agreement supersedes all prior agreements and constitutes the entire agreement and understanding between the Parties or otherwise with respect to the subject matter of this Agreement, including without limitation that certain Memorandum of Understanding dated as of April 19, 2015 between Licensor and Innocuous, LLC, a New York limited liability company, as amended by that certain letter agreement dated as of September 17, 2015 (the “MOU”). This Agreement may not be amended, modified in any manner or terminated orally or by course of conduct; no amendment, modification, termination or attempted waiver of any of the provisions hereof shall be binding unless in writing and signed by the Parties against whom the same is sought to be enforced. In the event of any explicit or implicit contradiction between the terms of this Agreement and the terms of the MedReleaf License which are applicable to Licensor or relate to the Tikun Olam IP (as defined in the MedReleaf License) the provisions of this Agreement shall prevail as between the Parties hereto.
16.3 Attorney’s Fees . Each party shall bear its own costs and expenses in connection with (a) the negotiation, execution and delivery of this Agreement and (b) any judicial or other action at law or equity that is brought by one of the Parties to this Agreement to enforce or interpret the provisions of this Agreement, in each case except as otherwise provided herein.
16.4 Governing Law; Jurisdiction . This Agreement will be governed by, and construed and enforced in accordance with, the laws of the State of New York, without regard to the conflict of laws provisions thereof. The Parties agree that, in the event of any action or suit as to any matters of dispute between the Parties, service of any process may be made upon the other Party in the same manner as the giving of notices under Section 16 of this Agreement. Notwithstanding anything to the contrary contained herein, in the event that any provision of this Agreement is unenforceable under the laws of the State of New York, and such provision is enforceable under the laws of any other state or jurisdiction, the Parties expressly agree that said provision shall be interpreted and construed under the laws of that state or jurisdiction.
16.5 Dispute Resolution . In the event of any dispute, claim, question, or disagreement arising from or relating to this Agreement or the breach thereof, the Parties hereto shall use their best efforts to settle the dispute, claim, question, or disagreement. To this effect, they shall consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both Parties. If the dispute cannot be settled through negotiation within a period of seven (7) days, the Parties agree to attempt in good faith to settle the dispute through mediation, administered by a mediator mutually agreeable to both Parties, before resorting to arbitration. If they do not reach such solution, or an agreed upon mediator cannot be identified, within a period of thirty (30) days, then, upon notice by either Party to the other, all disputes, claims, questions, or differences shall be finally settled by arbitration administered by the American Arbitration Association, in New York, New York, in accordance with the provisions of that organization’s Commercial Arbitration Rules. The dispute shall be heard and determined by a panel of three (3) arbitrators, unless otherwise agreed by the Parties. In such case, each Party shall each select one (1) arbitrator. The arbitrator selected by the claimant and the arbitrator selected by respondent shall, within ten (10) days of their appointment, select a third neutral arbitrator. In the event that they are unable to do so, or if for any reason the three (3) arbitrators are not timely empanelled, the Parties, or either of them, or their attorneys, may request that the American Arbitration Association appoint the third or any other necessary arbitrator. Prior to the commencement of hearings, each of the arbitrators appointed shall provide an oath or undertaking of impartiality. The United States Arbitration Act shall govern the interpretation, enforcement, and proceedings pursuant hereto. Notwithstanding any provision hereof, any applicable law or public policy considerations, including without limitation any possible illegality or unenforceability of this Agreement or any portion hereof due to the subject matter hereof, the arbitrators shall interpret this Agreement giving full effect to the terms and provisions hereof. All charges of the American Arbitration Association or any mediator shall be borne equally by the Parties, and each Party hereby agrees to pay all such charges promptly upon request therefor, and if any Party shall fail to do so, the other Party shall be permitted to apply towards such charges any amounts otherwise due to the non-paying Party. The Parties to the arbitration proceeding shall bear their own respective expenses incurred in connection therewith, including, but not limited to, legal fees and expenses.
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16.6 Successors and Assigns; Assignment .
(a) The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the Parties. Unless clearly inapplicable, all references in this Agreement to a Party shall be deemed to include any such Party’s successors and assigns. No Party to this Agreement will have the right to assign its rights or obligations under this Agreement without the prior written consent of the other Party; provided, however, that (i) Licensee shall be permitted to assign its rights or obligations under this Agreement to any Affiliate of Licensee, and (ii) in the event of sale or transfer by Licensee of all or substantially all of its assets, this Agreement may be assigned to any successor or assignee thereof, except that the rights and obligations under this Agreement may not be assigned by Licensee in connection therewith without Licensor’s prior written consent prior to September 30, 2018, unless at the time of such assignment (y) the Enterprise Value (as defined below) of Licensee and the Pharmaceutical Affiliate on a consolidated basis in connection with such sale transaction equals or exceeds fifty million dollars ($50,000,000), or (z), the combined Enterprise Value of TO LLC, the Pharmaceutical Affiliate and Licensee, in each case on a consolidated basis, equals or exceeds two hundred fifty million dollars ($250,000,000).
(b) For purposes of this Section 16.6, the “Enterprise Value” of the Pharmaceutical Affiliate, TO LLC and Licensee shall be equal to (i) the pre-transaction value of such company in connection with or immediately prior to the sale of such company or its business (whether in connection with a sale of membership interests, or assets or a merger or consolidation) or (ii) if no such sale transaction has occurred, then the post -transaction value in connection with its most recent financing transaction; provided, however; that if the Parties do not agree on the determination of such Enterprise Value within ten (10) Business Days from the date that a proposed assignment by a Party subject to this Section 16.6 is disclosed by such Party to the other Party, then the determination thereof shall be made by the appointment by mutual agreement of an impartial United States recognized firm of independent certified public accountants or recognized valuation professionals (a “Valuator”), which Valuator shall be instructed to deliver a detailed report containing its calculation of the Enterprise Value (in connection with which calculation of Enterprise Value of the Valuator shall not include any minority discount) and within thirty (30) days after its engagement, which Valuator’s determination of Enterprise Value shall be final and binding. If one or more of the Parties objects or does not agree to the appointment of a Valuator within ten (10) Business Days after request by the other Party, the selection of the Valuator shall be submitted to binding arbitration pursuant to Section 16.5 hereof. The decision of the Valuator may be entered in any court having jurisdiction in New York and the costs and expenses incurred in connection with the arbitration shall be borne equally by the Parties.
(c) For purposes of this Section 16.6 and only this Section 16.6, a merger, consolidation or similar business combination as a result of which the members or stockholders owning a majority of the voting power of a company prior to the consummation thereof own less than a majority of the voting power of the surviving company in connection with such transaction shall be considered to be a sale of all or substantially all the assets of such company.
16.7 Third-Party Beneficiaries . Licensee’s Affiliates are third-party beneficiaries of Licensee’s rights under this Agreement, and shall be entitled to enforce such rights as provided herein. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the Parties to this Agreement, or the Parties’ respective successors and assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
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16.8 Construction; Headings; Severability . The language of all parts of this Agreement shall in all cases be construed as a whole according to its fair meaning, and not strictly for or against any of the Parties. This Agreement has been subject to negotiations among all Parties hereto and each party has been advised to seek such Party’s separate counsel, and, as such, this Agreement shall be deemed prepared by both Parties. Any ambiguities shall not be deemed to be construed against either party hereto. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any Applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction to the greatest extent possible to carry out the intentions of the Parties hereto. Notwithstanding anything to the contrary herein, including without limitation Section 16.2 hereof, if the License granted pursuant to this Agreement is or becomes invalid at any time or for any reason whatsoever, the License granted pursuant to the MOU shall be reinstated and be in full force and effect, subject to any other applicable provisions hereof and thereof, and the Parties will as between themselves continue to perform in good faith their obligations under this Agreement as closely as possible. As used in this Agreement, the term “or” shall be deemed to include the term “and/or” and the singular or plural number shall be deemed to include the other whenever the context so indicates or requires.
16.9 Force Majeure. Neither Party shall be responsible or liable for any delays in the performance of any duties under this Agreement which are not the fault or within the reasonable control of that Party including, but not limited to, fire, flood, natural disasters, acts of God, delays in deliveries by common carriers, governmental acts or orders, late deliveries of products or goods or furnishing of services by third-party vendors, civil disorders, acts of terrorism, or strikes and any other labor-related disruption, where such Party has communicated in writing the circumstances of said event to the other Party and taken any and all appropriate action to mitigate the effects of said event, and in any event, the time period for the performance of an obligation hereunder shall be extended for the amount of time of the delay or impossibility.
16.10 Waiver of Breach . The waiver by any Party of a breach of any provision of this Agreement by the other Parties must be in writing and shall not operate or be construed as a waiver of any subsequent breach by such other party. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.
16.11 Currency . Unless otherwise indicated, all dollar amounts in this Agreement are expressed in lawful dollars of the United States.
16.12 Right and Remedies . No right or remedy conferred upon or reserved to the Parties by this Agreement is intended to be, nor shall be deemed, exclusive of any other right or remedy herein or by law or equity provided or permitted, but each shall be cumulative of every other right or remedy.
16.13 Counterparts; Faxed or E-Mailed Signatures . This Agreement may be executed in any number of counterparts and by the Parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement. Any executed signature page delivered by facsimile or e-mail transmission shall be binding to the same extent as an original executed signature page, with regard to this Agreement or any amendment thereto.
16.14 Recitals . The Recitals set forth above are hereby incorporated in and made a part of this Agreement by this reference.
Section 17. Offset . Other than as provided in Sections, 12.3 and 13.7 above, Licensee may not offset and may not request TO LLC to offset any amounts due to Licensor hereunder or under the US Medical Cannabis License Agreement from any claim it may have against Licensor, unless Licensee shall have obtained a final and binding judgement against Licensor by a court of competent jurisdiction issued within the framework of the Arbitration set forth in Section 16.5 above, or otherwise approved in writing by Licensor.
Section 18. Publicity . Both Parties shall reasonably cooperate in connection with issuing press releases or promotional or marketing material to the public or third parties in connection with matters subject hereto.
(Signature page to follow)
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IN WITNESS WHEREOF , the Parties hereto have duly executed this License Agreement as of the day and year first written above.
Tikun Olam Ltd. |
By: | /s/ Tsachi Cohen | |
Name: | ||
Title: |
Tikun Olam IP Ltd. | |
B y : TO HOLDING GROUP LLC, Manager | |
B y : T.O. GLOBAL LLC, Manager |
By: | /s/ Bernard Sucher | |
Name: Bernard Sucher | ||
Title: Chief Executive Officer |
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Exhibit A
Definitions
1. | “Acquired IP” shall mean Intellectual Property licensed by or acquired by Licensee or any Affiliate thereof from a third-party, provided it is not based on, derived from, inseparably or exclusively combined with, or inextricably embedded in any Licensor IP or in which any Licensor IP is inextricably embedded , or (b) owned, or the rights to which are owned, by the surviving company referenced in clause (a) or the acquirer of assets under clause (b) of the definition of “Change of Control Event”. |
2. | “Affiliate” shall mean with respect to any Person, any Person which directly or indirectly, controls, is controlled by or is under common control with such Person, including, without limitation, any general partner, managing member, officer or director of such Person. |
3. | “Affiliate License Agreements” shall mean the Affiliate Pharmaceutical License Agreement and the US Medical Cannabis License Agreement. |
4. | “Affiliate Pharmaceutical License Agreement” shall have the meaning set forth in Section 2.2 of this Agreement. |
5. | “Agreement” shall have the meaning set forth in the preamble of this Agreement. |
6. | “Applicable Law” means all current constitutions, treaties, laws, statutes, codes, ordinances, official plans, orders, decrees, rules, regulations, and by-laws, whether domestic, foreign or international, of any Governmental Authority, and the common law, binding on or affecting any Person, property or matter referred to in the context in which such words are used. |
7. | “Business Day” shall mean a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by Applicable Law to be closed for business |
8. | “Cannabis” shall mean recreational and medical cannabis, and shall include hemp, hemp products and any compounds derived from Cannabis or hemp plants. |
9. | “Cannabis Business” shall mean cultivating, harvesting, producing, promoting, researching, developing, marketing, selling and distributing Cannabis Products, which include, but are not limited to, Cannabis plants or any parts thereof in dry or wet forms, extracts, infusions, and any compositions or formulations consisting of Cannabis plants' constituents as active ingredients or supplements, and further methods of obtaining all of the above (e.g. methods of extraction or processing), clinical and non-clinical uses, applications, and delivery systems and devices related thereto. |
10. | “Cannabis Product” shall mean any Cannabis or any Cannabis-derived and related product, including plant products, cultivation products, extraction products, infusion products, delivery or ingestion devices, machines, apparatuses or products and packaging products and marketing materials relating thereto, which is not a Pharmaceutical Product. |
11. | “Change of Control Event” shall mean (a) a sale or transfer of equity or other ownership interests or merger, consolidation or similar business transaction or combination as a result of which the ultimate members or stockholders owning, directly or indirectly, all of the voting power of Licensee prior to the consummation thereof shall own in the aggregate less than a majority of the voting power of the surviving company, or (b) a sale of all or substantially all of the assets of Licensee to an unrelated third party. |
12. | “Claim” shall mean any claim threatened in writing or any claim which is mature, non-contingent, fixed in amount and has been commenced or filed with an applicable Governmental Authority. |
13. | “Claim Resolution Amount” shall have the meaning set forth in Section 13.7 of this Agreement. |
14. | “ Clinical Trials” shall mean the conduct of research studies, clinical or non-clinical testing, and clinical trials, including but not limited to pre-clinical investigations and randomized, placebo-controlled trials of cannabis-based or cannabis-derived compounds, whether or not as a continuation of prior clinical trials and research studies conducted by Licensor or new clinical trials and research studies, whether conducted by Licensor with specific or direct collaboration with Licensee or otherwise by Licensee. |
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15. | “Clinical Trials Services” shall mean the services provided by Licensor relating to and in connection with all aspects of the conduct of Clinical Trials. |
16. | “Cayman Payment” shall have the meaning set forth in Section 3 of this Agreement. |
17. | “Confidential Information” shall have the meaning set forth in Section 9 of this Agreement. |
18. | “Design and Operations Services” shall have the meaning set forth in Section 7.1(c) of this Agreement. |
19. | “Disclosing Party” shall have the meaning set forth in Section 9 of this Agreement. |
20. | “Effective Date” shall have the meaning set forth in the preamble of this Agreement. |
21. | “Enterprise Value” shall have the meaning set forth in Section 16.6 of this Agreement. |
22. | “Essentially Derived Variety” shall mean any strain of Cannabis derived from any of TO's Strains, whether intentionally or otherwise. |
23. | “Governmental Authority” shall mean any federal, state, national, supranational, local or other government, whether domestic or foreign, including any subdivision, department, agency, instrumentality, authority (including any regulatory authority), commission, board or bureau thereof, or any court, tribunal or arbitrator. |
24. | “Indemnified Party” shall have the meaning set forth in Section 13.4 of this Agreement. |
25. | “Indemnifying Party” shall have the meaning set forth in Section 13.4 of this Agreement. |
26. | “Infringement Claim” shall have the meaning set forth in Section 13.1 of this Agreement. |
27. | “Intellectual Property” shall have the meaning set forth in the second recital of this Agreement. |
28. | “License” shall have the meaning set forth in Section 2.1 of this Agreement. |
29. “Licensee” shall have the meaning set forth in the preamble of this Agreement.
30. | “Licensee Excluded IP” shall mean Intellectual Property created by Licensee or an Affiliate thereof outside of the State of Israel, without any non -deminimis involvement of Licensor, and which is not based on, derived from or inseparably or exclusively combined with or inextricably embedded in any Licensor IP or in which any Licensor IP shall be inextricably embedded, written notice of the development of such Licensee Excluded IP shall have been provided by Licensee to Licensor reasonably promptly upon commencement of its use, which notice shall include a description thereof. Licensee Excluded IP shall not include Acquired IP. |
31. | “Licensee IP” shall mean the New IP, New Strains and the results of Clinical Trials, other than (i) Licensee Excluded IP and (ii) Acquired IP. |
32. | “Licensor” shall have the meaning set forth in the preamble of this Agreement. |
33. | “Licensor Additional IP” shall have the meaning set forth in Section 2.2 of this Agreement. |
34. | “Licensor IP” shall have the meaning set forth in the second recital of this Agreement. |
35. | “Licensor Exit Event” shall mean (a) a sale or transfer of all of the equity or other ownership interests or merger, consolidation or similar business transaction or combination with or to a purchaser which, directly or through an Affiliate, on a consolidated basis, is a competitor of Licensee, as a result of which the ultimate members or stockholders owning, directly or indirectly, all of the equity interests of Licensee prior to the consummation thereof shall own no equity interests in the surviving company, or (b) a sale of all or substantially all of the assets of Licensor to an unrelated third party. |
36. | “Licensor Trademarks” means Licensor-owned, but not licensed, trademarks, trade names, logos, service marks, designs, emblems, signs, slogans, other similar designations of source or original and general intangibles of like nature, specified in Exhibit C , together with the goodwill relating thereto. |
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37. | “Losses” means all losses, damages, liabilities, deficiencies, actions, judgments, interest, awards, penalties, fines, or out of pocket third-party costs or expenses of whatever kind, including reasonable attorneys’ fees, the cost of enforcing any right to indemnification hereunder and the cost of pursuing any insurance providers, actually awarded or incurred, including attorneys’ fees and expenses. |
38. | “Marks” shall have the meaning set forth in Section 11.5 of this Agreement. |
39. | “Medical Cannabis Product” shall mean any Cannabis or any Cannabis-derived or related product, including plant products, cultivation products, extraction products, infusion products, delivery or ingestion devices, machines, apparatuses or products and packaging products and marketing materials relating thereto, which (a) is used for medical purposes, (b) is not a Pharmaceutical Product, and (c) is not subject to regulation as a drug, medicine or controlled substance by the European Medicines Agency (if within the European Union) or a similar regulatory authority in the applicable jurisdiction. |
40. | “MedReleaf” shall mean MedReleaf Corporation, a corporation organized under the laws of the Province of Ontario, Canada. |
41. | “MedReleaf License” shall mean that certain License Agreement, dated as of July 17, 2013, as amended, by and between MedReleaf and Licensor. |
42. | “MOU” shall have the meaning set forth in Section 16.2 of this Agreement. |
43. | “MM Royalties” shall have the meaning set forth in Section 12.3 of this Agreement. |
44. | “New IP” shall have the meaning set forth in Section 2.2 of this Agreement; provided, however, that following a Change of Control Event, for purposes hereof, “New IP” shall not include Intellectual Property created by Licensee or an Affiliate thereof within the State of Israel, without any non -deminimis involvement of Licensor, and which is not based on, derived from or inseparably or exclusively combined with or inextricably embedded in any Licensor IP or in which any Licensor IP shall be inextricably embedded . |
45. | “New Strains” shall have the meaning set forth in Section 2.2 of this Agreement. |
46. | “Organizational Documents” shall mean the certificate or articles of incorporation, organization or formation and the bylaws, operating agreement, memorandum or articles of association or organization, or similar organizational documents, as applicable. |
47. | “Notice” shall have the meaning set forth in Section 2.7 of this Agreement. |
48. | “Offer” shall have the meaning set forth in Section 2.7 of this Agreement. |
49. | “Offeror” shall have the meaning set forth in Section 2.7 of this Agreement. |
50. | “Party” shall mean the signatories to this Agreement as set forth in the preamble of this Agreement. |
51. | “Payment” shall have the meaning set forth in Section 3 of this Agreement. |
52. | “Person” shall mean an individual, firm, corporation, partnership, association, limited liability company, trust or any other entity. |
53. | “Pharmaceutical Affiliate” shall mean TO Pharmaceuticals LLC., a Delaware limited liability company. |
54. | “Pharmaceutical Business” shall have the meaning set forth in the preamble of this Agreement. |
55. | “Pharmaceutical Product” shall mean, with respect to each applicable jurisdiction, any product, compound, medicine or therapeutic which is subject to regulation as a medical drug, medicine or controlled substance in such jurisdiction by the European Medicines Agency (if within the European Union) or any national regulatory agency or authority. |
56. | “Receiving Party” shall have the meaning set forth in Section 9 of this Agreement. |
57. | “Representative” shall mean any director, officer, employee, member, manager, agent, contractor or advisor who shall have access to any Confidential Information. |
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58. “Residual Information” means any Confidential Information, which may be retained, following the termination of this Agreement, in intangible form in the minds of the Representatives.
59. | “Services” shall mean the Training Services, the Design and Operations Services and the Clinical Trials Services. |
60. | “Shortfall” shall have the meaning set forth in Section 13.3 of this Agreement. |
61. | “Territory” shall have the meaning set forth in Section 2.1 of this Agreement. |
62. | “Third-Party Claim” shall have the meaning set forth in Section 13.4 of this Agreement. |
63. | “Third-Party IP” shall have the meaning set forth in Section 2.10 of this Agreement. |
64. | “TO LLC” shall have the meaning set forth in Section 2.2 of this Agreement. |
65. | “TO Strains” shall have the meaning set forth in Section 2.6 of this Agreement. |
66. | “Training Services” shall have the meaning set forth in Section 7.1(b) of this Agreement. |
67. | “United States” shall mean the United States of America and its territories and possessions. |
68. | “US Medical Cannabis License Agreement” shall have the meaning set forth in Section 2.2 of this Agreement. |
69. | “Valuator” shall have the meaning set forth in Section 16.6 of this Agreement. |
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Exhibit B
List of Licensor IP
· | All of Licensor’s logos, names, tag lines, packaging, trade dress and other proprietary property or rights reflecting or relating to the Tikun Olam brand and the trademarks or trade names of any strains subject to this License Agreement. |
· | Licensor’s Trademarks, Tradenames and Service Marks worldwide, including those listed on Exhibit C here to. |
· | Licensor Patent and Patent Applications |
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· | Licensor’s Applications for Plant Breeders Rights (PBR). |
EREZ | ||||||
Type | Country | Filing Date | App No. | |||
PBR | Israel | 13/3/2013 | 4436/13 | |||
PBR | Canada | To be filed | ||||
MIDNIGHT | ||||||
Type | Country | Filing Date | App No. | |||
PBR | Israel | 13/3/2013 | 4437/13 | |||
PBR | Canada | To be filed | ||||
AVIDEKEL | ||||||
Type | Country | Filing Date | App No. | |||
PBR | Israel | 13/3/2013 | 4438/13 | |||
PBR | Canada | To be filed |
· | The following strains of Cannabis: |
Variety Name | Type | ||
o | El-na | Indica | |
o | Avidekel | Indica | |
o | Rafael | Indica | |
o | Midnight | Sativa | |
o | Alaska | Sativa | |
o | Or | Indica | |
o | Erez | Indica | |
o | Dorit | Indica | |
o | Gog & Magog | Indica | |
o | Little Devil | Indica | |
o | Jasmine | Indica | |
o | Zohar | Sativa | |
o | Shira | Sativa | |
o | Tal | Indica | |
o | Barak | Indica | |
o | Omer | Sativa | |
o | Mango | Sativa | |
o | Eran Almog | Indica |
· | Proprietary Trade Secrets, including genetics, cultivating, harvesting, extraction, and distillation techniques and processes, including: |
Tikun Olam Grow System
Tikun Olam has developed proprietary cultivation methods that rely on environmental systems designs that provide the optimal formula for the cultivation of consistent pharmaceutical-grade cannabis at above industry average yields.
Formulas
Optimized nutrient mixes (irrigation product applications) for cultivating healthy plants targeting active ingredients such as THC and CBD production. Applicable for mother plants, clone plants and flowering plants.
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Designs
Validated production room designs that meet GPP and Israeli Ministry of Health’s technical specifications. Applicable for flowering rooms, drying rooms, mother rooms and cloning rooms, designs are proven to meet the technical release criteria allowing for repetitive compliance and quick to market sale of products.
ISO & GMP Certification – Tikun Olam’s grow system, processes and workflow have been designed to meet ISO guidelines and ultimately GMP certification.
Environmental systems – The implementation of our environmental systems ensure optimal temperature, humidity, CO2, odor control and air quality within the grow rooms. This system is designed to provide the perfect environment in all stages of production and processing.
Centralized Irrigation Systems – Fully automated centralized irrigation systems to ensure consistent and ideal levels of water and nutrients. This system features water purification, sterilization and complete monitoring and control.
Integrated Control Systems – The implementation of our control system integrates lighting, HVAC, irrigation and other components to control all aspects of the operation.
Processes
Advanced Cultivating Techniques – A grow system that has been optimized for plant cycle length, density, pruning, harvesting, drying and curing. This system incorporates advanced cultivating techniques that will maximize yields and provide consistently high quality product.
Advanced Extraction Expertise – Experience in all different types of extraction methods, which will be taught to Licensee.
Isolating Cannabinoids - Provide knowledge and know-how to Licensee related to the process of isolating cannabinoids found within the cannabis plant.
Quality Control Systems
A Quality Control/Assurance framework, including comprehensive Standard Operating Procedures (SOPs) designed to carry out specific cannabis production methods in compliance with GPP and Israeli Ministry of Health requirements. Maintains operational consistency and compliance while allowing IP methods to achieve their desired outputs.
Patient Treatment Information
Patient data that provides guidance on treatment.
Product Lines
All of Tikun Olam’s proprietary products, including delivery devices, delivery methods, packaging and ancillary products will be provided to Licensee.
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Exhibit C
List of Licensed Trademarks, Tradenames and Service Marks
Registered:
Type | Country | Filing Date | App No. | TM | ||||
TRADEMARK | United States | 13/11/2012 | 85/777,588 | Tikun Olam | ||||
TRADEMARK | United States | 23/01/2014 | 86/172,750 | EREZ | ||||
TRADEMARK | United States | 23/01/2014 | 86/172,744 | MIDNIGHT | ||||
TRADEMARK | United States | 23/01/2014 | 86/172,749 | AVIDEKEL |
Unregistered:
o | El-na |
o | Rafael |
o | Alaska |
o | Or |
o | Dorit |
o | Gog & Magog |
o | Little Devil |
o | Jasmine |
o | Zohar |
o | Shira |
o | Tal |
o | Barak |
o | Omer |
o | Mango |
O | Eran Almog |
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Exhibit 10.14
MASTER INTERCOMPANY SERVICES AGREEMENT
This MASTER INTERCOMPANY SERVICES AGREEMENT (this “ Agreement ”) is made and entered into as of January 1, 2018, by and among certain subsidiaries of T.O. GLOBAL LLC, a New York Limited Liability Company (“ Parent ”) providing services (as set forth in Schedule B hereto, collectively, the “ Service Providers ”) and certain subsidiaries of Parent receiving such services (as set forth in Schedule B hereto, collectively, the “ Service Recipients ”).
WITNESSETH :
WHEREAS the Service Providers desire and are willing to provide, or cause to be provided, to the Service Recipients, certain services as set forth herein and in the Schedules hereto during the periods set forth herein and in the Schedules hereto;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
TERMS AND CONDITIONS
1. | Agreement to Provide Services . |
1.1. Agreement . Upon the terms and subject to the conditions contained herein and in the Schedules attached hereto (each, as it may be amended from time to time, a “ Schedule ”), the Service Providers hereby agree to provide, or cause their affiliates to provide, to the Service Recipients the services (as set forth in Schedule A, the “ Services ”) listed in the Schedules. Each of the Services shall be provided and accepted in accordance with the terms, limitations and conditions set forth herein and in the Schedules.
1.2. Scope of Services . The parties agree that upon the terms and subject to the conditions contained herein, additional or new services which are not currently contemplated in this Agreement may be added to the Schedules from time to time. Any new or additional services undertaken by the Service Providers to the Service Recipients shall be provided for a fee that includes the cost plus applicable operating margin (as may be determined from time to time) as more fully described in Section 2 , and any such transactions shall be conducted on an arm’s-length basis.
1.3. Review of Services . The parties agree that: (i) the scope, frequency and manner of delivery of the Services detailed herein are subject to periodic review by the parties; (ii) changes to any of the Services (including the addition or deletion of services) may be made at any time if agreed to by the parties; and (iii) this Agreement may be amended from time to time according to the terms set out in herein.
1.4. | Right to Deliver and Request Instructions . |
a. | Each Service Recipient, acting through any of its authorized officers, may from time to time deliver to a Service Provider instructions with respect to matters arising under this Agreement, and the Service Provider shall follow such instructions provided they are consistent with the terms and conditions of this Agreement. |
b. | At any time, any Service Provider may, if it reasonably deems it necessary or appropriate, request instructions from a Service Recipient, within a reasonable period prior to the time necessary for taking action with respect to any matter contemplated by this Agreement, and may defer action thereon pending receipt of such instructions. Any action taken by a Service Provider, its officers, directors, employees, agents or representatives in accordance with the instructions of a Service Recipient, or failure to act by a Service Provider pending the receipt of such instructions after request therefor, shall be deemed to be proper conduct within the scope of service authority under this Agreement. |
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1.5. Service Designees . Each Service Provider may perform the services to be provided hereunder through its own officers and employees, or through agents, independent contractors or other parties designated by it; provided, however, that each Service Provider will remain liable hereunder as if it has performed such services directly.
2. | Cost Sharing . |
2.1. Each Service Recipient agrees to bear and to pay its share of the Net Costs as defined in Section 2.2 below and, as contemplated by this Agreement, make payment arrangements with the Service Provider on an arm’s length basis for all activities covered by this Agreement for each calendar month.
2.2. The Parent or its designee shall compute the costs that it incurs in connection with providing Services under this Agreement (its “ Net Costs ”) in accordance with the following formula: Net Costs = Direct Costs + Indirect Costs
“ Direct Costs ” means the sum of all external and all internal direct costs incurred by a Service Provider and directly attributable to a particular Service provided to a particular Service Recipient.
“ Indirect Costs ” means all external and all internal indirect costs incurred by the Service Provider in providing the Services to the Service Recipients, which cannot be directly attributed to a particular Service provided to a particular Service Recipient, including but not limited to salaries and bonuses, wages for permanent and temporary employees, expatriate costs (where applicable), facilities charges (including office rent, depreciation, maintenance, utilities and supplies), travel costs, pension benefits, insurance benefits, depreciation of fixed assets and all expenses to third parties incurred in connection with the Services, excluding value added tax, withholding taxes and/or similar levies, which shall be paid by the respective Service Provider, if legally required.
3. Reporting; Timing of Payments . Each Service Provider shall submit a statement to each applicable Service Recipient no later than twenty (20) calendar days after the end of each calendar [month/quarter/half] (unless otherwise agreed to by the parties), with respect to the amount of Net Costs payable by such Service Recipient for such month (a “ Statement ”). Such Statement shall set forth in reasonable detail: (i) the Direct Costs incurred in providing each Service to such Service Recipient and (ii) the Indirect Costs incurred in providing each Service to such Service Recipient. Unless any such Service Recipient disagrees as to the amounts payable as set forth in the Statement, all Statements shall be settled not later than forty-five (45) calendar days following receipt by the Service Recipient from the Service Provider of such Statement relating to the Services provided. In the event of any disagreement between the Service Providers and the Service Recipients with respect to any Statement or any amounts owed thereunder, the parties hereto agree to negotiate in good faith to resolve such dispute.
4. Standards for Performance of Service . Each Service Provider shall perform its obligations hereunder in a prudent and efficient manner and in accordance with applicable law and good industry practice.
5. | Access to Employees and Information . |
5.1. Access . At the request of any Service Recipient, each Service Provider shall, and shall cause its affiliates to, use its reasonable best efforts to provide for consultation with the Service Recipient, shortly after such request, its employees providing Services hereunder. At the request of any Service Recipient, each Service Provider shall, and shall cause its affiliates to, make available information relating to such Service Provider’s business.
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5.2. Inspection . Each Service Provider hereby agrees that, upon reasonable notice from any Service Recipient, it shall make its books and records with respect to Services and payment therefor available to the Service Recipient and its representatives for inspection during normal business hours at such Service Provider’s principal place of business.
6. Force Majeure . No party shall be liable for any failure of performance attributable to acts, events or causes (including, but not limited to, war, riot, rebellion, civil disturbances, power failures, failure of telephone lines and equipment, flood, storm, fire and earthquake or other acts of God or conditions or events of nature, or any law, order, proclamation, regulation, ordinance, demand or requirement of any governmental authority) beyond its control that prevent in whole or in part performance by such party hereunder. The affected provisions and/or other requirements of this Agreement shall be suspended during the period of such disability and no Service Provider shall have any liability to any Service Recipient or any other party in connection therewith other than by reason of breach or nonfulfillment of its covenants in this Section 6 . The Service Providers shall make all reasonable efforts to remove such disability as soon as and to the extent reasonably possible and to assist the Service Recipients in finding third parties to provide affected Services during the period of such disability.
7. Indemnification . The Service Recipients shall indemnify, defend and hold harmless the Service Providers, their affiliates, their officers, directors, employees, agents and representatives from and against any and all losses, liabilities, claims, damages, actions, fines, penalties, expenses or costs (including court costs and reasonable attorneys’ fees) (“ Losses ”) suffered or incurred by any such Person arising from or in connection with any Service Providers’ performance or non-performance of any covenant, agreement or obligation of the Service Provider hereunder, other than by reason of the Service Providers’ or any of their affiliates’ gross negligence, willful misconduct or bad faith. This Section 7 shall survive any termination or expiration of this Agreement.
8. New Service Providers and Service Recipients . Additional subsidiaries of Parent may become Service Providers or Service Recipients, as the case may be, under this Agreement. The Parent shall then sign an entry or similar agreement with such subsidiary.
9. | Term and Termination . |
9.1. Term of Services . The term of this Agreement shall be one (1) year beginning from the date of completion of the transactions contemplated by the Purchase Agreements, provided that such term shall renew automatically for successive terms of one (1) year unless the Parent provides written notice to the other parties hereto that this Agreement shall not be renewed at least fifteen (15) days prior to the expiration of any one (1) year term.
9.2. Termination by Parent . The Parent may terminate this Agreement, or any part of this Agreement, at any time upon sixty (60) days prior written notice to the parties hereto.
9.3. Termination by Other Parties . Each of the Service Providers and Service Recipients may terminate its interest in this Agreement for a subsequent calendar year by providing written notice to the Parent not less than sixty (60) days prior to the end of any calendar year. The dismissal of a single Service Provider or Service Recipient will not affect the validity of the Agreement as a whole.
9.5. Termination on Material Breach . This Agreement shall terminate with respect to any party hereto that breaches its obligations herein if such breach remains uncured for thirty (30) days after such party receives written notice of the breach from the Parent.
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9.6. Automatic Termination . This Agreement shall terminate automatically, without any notice or other action whatsoever on the part of any party hereto, as to any party and such party’s subsidiaries that (i) becomes the subject of any voluntary petition in bankruptcy or other voluntary proceeding relating to insolvency, receivership, liquidation, or composition for the benefit of creditors; (ii) becomes the subject of an involuntary petition in bankruptcy or any other involuntary proceeding relating to insolvency, receivership, liquidation, or composition for the benefit of creditors, if such petition or proceeding is not dismissed within thirty (30) days of the filing or initiation thereof; (iii) is in default under any agreement or indenture governing indebtedness of such party.
10. | General Provisions . |
10.1. Assignment; Successors and Assigns . Except as set forth below, this Agreement and the rights and obligations hereunder shall not be assigned or transferred in whole or in part by any party hereto without the written consent of the Parent. Any attempted assignment or delegation in contravention hereof shall be null and void. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto.
10.2. No Third-Party Beneficiaries . Except for Persons entitled to indemnification under Section 7 hereof, this Agreement is for the sole benefit of the parties hereto, and nothing herein expressed or implied shall give or be construed to give to any Person or entity, other than the parties hereto, any legal or equitable rights hereunder.
10.3. Remedies . Except as otherwise expressly provided herein, none of the remedies set forth in this Agreement is intended to be exclusive, and each party shall have all other remedies now or hereafter existing at law or in equity or by statute or otherwise, and the election of any one or more remedies shall not constitute a waiver of the right to pursue other available remedies. Nothing contained herein shall be deemed to be a limitation on any remedies that otherwise may exist or be available to any party under the Purchase Agreements or any other related agreement.
10.4. Interpretation; Definitions . The headings contained in this Agreement or in any Schedule hereto are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted. When a reference is made in this Agreement to Articles, Sections or Schedules, such reference shall be to an Article or Section of or Schedule to this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The phrases “the date of this Agreement,” “the date hereof” and terms of similar import, unless the context otherwise requires, shall be deemed to refer to the date set forth in the first paragraph of this Agreement. The words “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this Agreement shall refer to this Agreement as a whole (including the Schedules) and not to any particular Section in which such words appear. All references herein to dollar amounts shall be deemed to be references to U.S. Dollars.
10.5. Amendments . The parties hereto will periodically review this Agreement as to the reasonableness of its terms and, in any case, not later than three (3) months after the end of Parent’s accounting year. Such review may be evidenced by documentation reasonably acceptable to the Parent. No amendment to this Agreement shall be effective unless it shall be in writing and signed by Parent and each party to be bound by the proposed amendment, provided that any Schedule hereto may be amended by the Parent provided that the Parent provides written notice to each party to be bound by the proposed amendment and that no such notified party objects in writing to such amendment within seven (7) calendar days of receipt of notice thereof.
10.6. Cooperation . The Service Recipients will provide all information that the Service Providers reasonably request for performance of services pursuant hereto, and the Service Recipients will cooperate with any reasonable request of the Service Providers in connection with the performance of services pursuant hereto.
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10.7. Counterparts . This Agreement and any amendments hereto may be executed by facsimile and in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other party.
10.8. Severability . If any provision of this Agreement or the application of any such provision to any Person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof.
10.9. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such State, without regard to the choice of law principles of such State.
10.10. Waiver . Except as otherwise provided in this Agreement, any failure of any of the parties hereto to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Any consent given by any party pursuant to this Agreement shall be valid only if contained in a written consent signed by such party.
10.11. Notices . All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent by telecopy, or by postage prepaid, registered, certified or express mail or by reputable overnight courier service and shall be deemed given when delivered by hand or upon receipt of telecopy confirmation if sent by facsimile, three days after mailing (one (1) Business Day in the case of guaranteed overnight express mail or guaranteed overnight courier service), at the address for the entity receiving such notice that is kept by and may be requested from the Parent, which Parent shall keep an accurate and current record of the addresses of all entities party hereto. Any party hereto may change its address in the records of the Parent by providing written instructions to the Parent specifying the new address of such entity. The address of the Parent is: 77 Water Street, 8 th Fl, New York, NY 10005.
10.12. Authority . None of the parties hereto shall act or represent or hold itself out as having authority to act as an agent or partner of the other party, or in any way bind or commit the other party to any obligations. Nothing contained in this Agreement shall be construed as creating a partnership, joint venture, agency, trust or other association of any kind, each party being individually responsible only for its obligations as set forth in this Agreement.
10.13. Schedules . All Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.
10.14. Entire Agreement . This Agreement (including the Schedules hereto) contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, whether written or oral, relating to such subject matter.
[Signature Page Follows ]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above mentioned.
T.O. GLOBAL LLC
By: | /s/ Bernard Sucher | |
Bernard Sucher, CEO |
TO HOLDINGS GROUP LLC
BY: T.O. GLOBAL LLC, MANAGER
By: | /s/ Bernard Sucher | |
Bernard Sucher, CEO |
FOR AND ON BEHALF OF
TIKUN OLAM LLC (and each of its Subsidiaries indicated on Schedule B)
TO HOLDINGS GROUP LLC
BY: T.O. GLOBAL LLC, MANAGER
By: | /s/ Bernard Sucher | |
Bernard Sucher, CEO |
FOR AND ON BEHALF OF
TO PHARMACEUTICALS LLC (and each of its Subsidiaries indicated on Schedule B)
TO HOLDINGS GROUP LLC
BY: T.O. GLOBAL LLC, MANAGER
By: | /s/ Bernard Sucher | |
Bernard Sucher, CEO |
ISRAEL LIAISON HOLDING GROUP LTD
By: | /s/ Peretz Charach | |
Name: | ||
Title: |
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Schedule A
Administrative Services
Scope : Each Service Provider providing Services to any Service Recipient shall provide all of the services to the Service Recipient as the Service Recipient may from time to time request from the Service Provider, including without limitation the following:
1. | Support Services Such technical, marketing and business support services and assistance as may be requested from time to time relating. |
2. | Treasury. Services for the administration of certain treasury functions as may be requested from time to time, which may include but shall not be limited to managing capital structure, and investment & debt portfolios; financing for operations; managing credit lines and facilities; managing compliance with financial covenants. |
3. | Tax. Tax support and tax compliance services as may be necessary to ensure that the Service Recipient complies with applicable tax laws and as may be requested from time to time. The Service Provider shall coordinate with and assist the Service Recipient’s certified public accountants (the “ Accountants ”) in preparing tax returns in order that such tax returns be filed as soon as reasonably practicable after the end of each fiscal year. The Service Provider shall use all reasonable efforts to cause such tax returns to be filed on a timely basis and shall, promptly after the receipt thereof from such Accountants, deposit such copies with the permanent records of the subject entity. Such tax services may also include assistance with respect to tax research and planning; tax examinations; tax provisions; sales, use, liquor, and property tax. |
4. | Legal support services - as may be requested from time to time, which may include but shall not be limited to the administration of any litigation by, against or involving a Service Recipient, maintenance of trademarks and monitoring compliance with any regulatory requirements to which any Service Recipient is subject or may become subject in the future, but which shall not include any legal services the provision of which the Service Provider concludes, after consultation with its counsel, could reasonably be expected to create a conflict of interest or violate an ethical rule. |
5. | Accounting support services as may be requested from time to time to assist in the maintenance of (a) a system of accounting for the Service Recipient administered in accordance with generally accepted accounting principles in the United States (“ U.S. GAAP ”) consistently applied and other accounting principles reasonably requested, and (b) a set of audit procedures that are consistent with U.S. GAAP. In addition, the Service Provider shall provide such support services for the Service Recipients as they may request from time to time to, including but not limited to: |
6. | Financial Statements - The Service Provider shall provide such assistance to the Service Recipient as may be requested from time to time by the Service Recipient in the preparation of an audited consolidated balance sheet as at the end of each fiscal year and audited statements of income and results of operations and cash flows for such fiscal year (including notes thereto) of Parent and any subsidiary requested by Parent, which set forth in each case (in comparative form) corresponding figures for the preceding fiscal year and which are accompanied by the report thereon of the Accountants to the effect that such financial statements have been prepared in accordance with U.S. GAAP applied on a basis consistent with prior years (except as otherwise specified in such report). In addition, the Service Provider shall provide other financial statements and periodic reports as reasonably requested by the Service Recipients. XXThe Service Provider shall provide such assistance to the Service Recipient as may be requested from time to time in the preparation of a report of Parent and any subsidiary consisting of an unaudited consolidated balance sheet as at the end of each fiscal quarter and an unaudited statement of operations, setting forth in each case in comparative form the corresponding figures for the preceding fiscal quarter. If requested by the Service Recipient, any such reports shall be certified by the Service Provider to be correct and complete, to fairly present in all material respects the consolidated financial condition of the Service Recipient, as the case may be, at the date shown and the results of operations for the period then ended and to have been prepared in accordance with U.S. GAAP consistently applied, except for year-end adjustments. The reports for each fiscal quarter shall include a narrative discussion describing the business and operations of the Service Recipient during the preceding quarter. The Service Provider may engage outside accountants in connection with the provision of administrative services relating to the preparation of financial statements and periodic reports, in accordance with applicable corporate policies. |
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7. | Financial Statements - The Service Provider shall provide budgeting, forecasting, financial planning and analysis services as may be requested. |
8. | The Service Provider shall provide such support and assistance to the Service Recipient as may be requested from time to time in connection with the management of any real or leasehold property interests of the Service Recipient. |
9. | Borrowing Docs - The Service Provider shall provide such support services as may be requested from time to time in connection with the administration of Parent’s and Parent’s subsidiaries financing arrangements, which may include but shall not be limited to the administration of Parent’s and its subsidiaries’ respective obligations and responsibilities under any loan documents and related security and other documents related to any borrowings of Parent or any subsidiary of Parent |
10. | Government Approvals - The Service Provider shall provide such support services as may be requested from time to time by the Service Recipient in connection with filings by the Service Recipient with any Governmental Authority of any periodic or other reports required to be filed by such Service Recipient under the provisions of any government rule applicable to it, including any filings or reports required under the U.S. Securities Exchange Act of 1934, as amended, and in connection with maintaining compliance with all permits, licenses and governmental approvals necessary or desirable for the conduct of such Person’s respective business. Such services may include but shall not be limited to preparing any application, filing or notice relating thereto. |
11. | IR/PR - The Service Provider shall provide such support services as may be requested from time to time by the Service Recipient relating to investor and public relations matters of Parent and its subsidiaries. |
12. | HR - The Service Provider shall provide and make available as necessary all professional, supervisory, managerial, administrative and other personnel as are necessary to perform its obligations hereunder, which personnel may be employees of the Service Provider or any of its affiliates, or third parties. Such personnel shall be qualified and experienced in the duties to which they are assigned. In addition, the Service Provider shall provide such support and assistance to the Service Recipient as may be requested from time to time in connection with the human resources matters of the Service Recipient, including but not limited to: |
13. | Corp Financing - The Service Provider shall provide such support services as may be requested form time to time by the Service Recipient relating to corporate finance matters of the Service Recipient |
14. | The Service Provider shall provide such other assistance or services relating to the conduct of the Service Recipient’s business as may be requested from time to time by the Service Recipient |
15. | IP - Each Service Provider providing Administrative Services to any Service Recipient shall provide all intellectual property license services to the Service Recipient as the Service Recipient may from time to time request from the Service Provider, including without limitation the following: |
16. | IT - Each Service Provider providing Administrative Services to any Service Recipient shall provide such support services as may be requested from time to time by the Service Recipient relating to information technology matters of the Service Recipient. Such support services may include but shall not be limited to: |
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17. | Travel - Each Service Provider providing Administrative Services to any Service Recipient shall provide all air travel services to the Service Recipient as the Service Recipient may from time to time request from the Service Provider, including without limitation the following: |
Schedule B
Service Providers and Service Recipients
Service Providers
TO GLOBAL LLC
TO HOLDING GROUP LLC
Service Recipients
ISRAEL LIAISON HOLDING GROUP LTD
TIKUN OLAM LLC, for and on behalf of itself and as member and/or managing member of all of its wholly owned subsidiaries
· | Tikun Olam California LLC |
· | Tikun Olam Delaware LLC |
· | TOCA Invest LLC |
· | Tikun DC LLC |
· | Tikun Olam Florida LLC |
· | Tikun Olam Nevada LLC |
· | Tikun Olam Oregon LLC |
· | Tikun Olam Pennsylvania LLC |
· | Tikun Olam Washington LLC |
TO PHARMACEUTICALS LLC, for and on behalf of itself and as member and/or managing member of all of its wholly owned subsidiaries
· | TOP Invest LLC |
· | Tikun Olam IP Ltd |
· | TO Pharmaceuticals USA LLC |
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Exhibit 10.15
TO Pharmaceuticals LLC
77 Water Street, Suite 821
New York, New York 10005
September 26, 2018
T.O. Global LLC
77 Water Street, Suite 821
New York, New York 10005
Re: Acknowledgement of $1,036,256.12 owed by TO Pharmaceuticals LLC, a Delaware limited liability company (“TOP”), to T.O. Global LLC, a New York limited liability company (the “Company”, together with TOP, each a “Party” and collectively known as the “Parties), pursuant to that certain Master Intercompany Services Agreement, dated as of January 1, 2018 (the “MICS Agreement”)
Gentlemen:
This letter agreement (this “Letter Agreement”) sets forth the agreement between the Parties with respect to certain matters set forth herein. In consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:
1. Acknowledgment of Advancement . Each Party hereby acknowledges and agrees that as of the date hereof, TOP owes the Company an amount equal to $1,036,256.12 in connection with certain services performed and funding provided by the Company from time to time for the benefit of TOP and its subsidiaries (the “Debt”), pursuant to the terms and conditions of the MICS Agreement. A Statement (as defined in the MICS Agreement) is attached hereto as Exhibit A. The Parties hereby acknowledge and agree that the delivery of such Statement shall be sufficient to satisfy the terms and conditions of Section 3 of the MICS Agreement.
2. Conversion of Debt . The Parties hereby acknowledge and agree that, at the sole option of the Company, the Debt may be converted into Class A Units of TOP (“Conversion Units”), in an amount equal to up to six percent (6%) of the aggregate issued and outstanding membership interests of TOP, at a rate of 0.05790074% per $10,000 of Debt so converted, such amount to be calculated on a fully diluted basis as of the date of conversion.
3. Issuance of Conversion Units . As promptly as practicable after the conversion of the Debt, each of TOP and the Company shall execute a joinder to the Amended and Restated Operating Agreement of TOP, substantially in the form attached hereto as Exhibit B (the “Operating Agreement”). Upon TOP’s receipt of the executed joinder to the Operating Agreement, the Company shall be bound by, and subject to, all of the terms and provisions of the Operating Agreement.
4. Consent and Other Instruments . Each Party hereby represents and warrants that such Party irrevocably and unconditionally (a) consents to the transactions referred to herein, and (b) shall, without further consideration, execute and deliver to the other such other instruments as may be necessary and shall take such corporate or other action as the other may reasonably request to carry out the transactions referred to hereinabove and contemplated herein and otherwise effectuate the terms and provisions of this Agreement.
5. Binding . This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and permitted assigns. No assignment shall relieve the assigning party of any of its obligations hereunder.
Please confirm your agreement with the foregoing by executing below.
Very truly yours,
TO PHARMACEUTICALS LLC
By: | /s/ Bernard sucher | |
Name: Bernard sucher | ||
Title: Manager |
Acknowledged and agreed to by:
T.O. GLOBAL LLC
By: | /s/ Bernard sucher | |
Name: Bernard sucher | ||
Title: Chief Executive |
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Exhibit 10.16
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this “Agreement”), dated as of March 9, 2016 is by and between TO Pharmaceuticals LLC, a Delaware limited liability company (the “Company”) and Sidney Taubenfeld, an individual residing at 247 West 87th Street, Apt. 7G, New York, New York 10024 (the “Employee”).
WITNESSETH:
WHEREAS , the Company, together with its subsidiaries, owns the exclusive licenses to exploit Tikun Olam Ltd.’s intellectual property, including without limitation its proprietary cannabis genetics in connection with pharmaceuticals worldwide (the “Business”);
WHEREAS , the Company desires to hire Employee to serve as the executive vice president of the Company, and Employee desires to become employed as the executive vice president of the Company, by the Company, all on the terms and conditions set forth below.
NOW, THEREFORE , for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Retention of Services; Term . The Company hereby retains the services of Employee, and Employee agrees to furnish such services, upon the terms and conditions hereinafter set forth. Subject to earlier termination on the terms and conditions hereinafter provided, and further subject to certain provisions hereof which survive the term of the employment of Employee by the Company, the term of this Agreement shall commence on the date hereof (the “Commencement Date”) and continue for a period of two (2) years thereafter (the “Initial Term”); provided , however , unless otherwise terminated by either party hereto upon prior written notice to the other party not later than sixty (60) days prior to the expiration of the then-current term of this Agreement, this Agreement shall continue by its terms for an additional one (1) year term (each, a “Renewal Term” and, together with the Initial Term, the “Term”).
2. Duties and Extent of Services During Period of Employment . During the Term of employment, Employee shall: (a) be employed by the Company as Executive Vice President or in such other position or positions as the Board of Directors of the Company (the “Board”) shall determine; (b) manage the Company’s Business and perform such duties and services as are commensurate with Employee’s position or as may be otherwise directed by the Board; (c) devote his full time business efforts to serve the Company; (d) perform all duties incident to Employee’s position to the best of Employee’s ability and in compliance with the policies and procedures of the Company; (e) report directly to the Chief Executive Officer of the Company or such other officer of the Company as may be determined by the Board; and (f) perform Employee’s responsibilities and duties hereunder at the office of the Company located in New York metropolitan area (or wherever the Board may determine), subject, however, to the travel requirements of Employee’s position, as shall be determined from time to time by the Company.
3. Remuneration . During the Term, the Company shall pay to Employee as compensation for Employee’s services hereunder:
(a) Base salary at a rate of one hundred sixty eight thousand dollars ($168,000.00) annually, commencing on the Commencement Date, payable in a manner consistent with the Company’s payroll practices.
(b) The Company shall issue to Employee a warrant to purchase 500 units of membership interests of the Company (the “Units”), in the form attached hereto as Exhibit A .
(c) The Company hereby represents that as of the date hereof it has 9,500 Units issued and outstanding.
(d) The Units shall be subject to the terms and provisions of that certain Unit Repurchase Agreement of even date herewith, in the form attached hereto as Exhibit B .
4. Employee Benefits; Expenses .
(a) During the Term of this Agreement, the Company may, in its sole discretion, provide Employee the right to participate in the Company’s then existing medical and dental insurance and other employee benefit plans and policies on the same terms as are then generally available to the Company’s executive and managerial employees.
(b) The Company shall reimburse Employee, in accordance with the practice followed from time to time for other officers of the Company, for all reasonable and necessary business and traveling expenses, and other disbursements incurred by Employee for or on behalf of the Company in the performance of Employee’s duties hereunder, upon presentation by Employee to the Company of an appropriate accounting or documentation of such.
5. Disability . This Agreement may be terminated at the option of the Company if, as a result of any physical or mental disability, Employee is unable to perform substantially all of Employee’s major duties hereunder for a continuous period of four months or at least ninety (90) days in any consecutive period of one hundred eighty (180) days. Employee shall continue to receive Employee’s full salary plus bonus payments, if any, payable to Employee under Section 3 hereof regardless of any illness or incapacity, unless and until this Agreement is terminated. If Employee’s employment is terminated pursuant to this Section 5, Employee (or Employee’s personal representative, in the case of Employee’s death) shall be entitled to receive Employee’s full salary through the effective date of termination.
6. Confidential Information; Proprietary Rights .
(a) In the course of Employee's employment by the Company, Employee will have access to and possession of valuable and important confidential or proprietary data or information of the Company and/or persons or entities (each, an “Affiliate”) controlling, controlled by or under common control of the Company and their respective operations. Employee will not, during Employee's employment by the Company or at any time thereafter, divulge or communicate to any person, nor shall Employee direct any other employee, representative or agent of the Company or any of its Affiliates to divulge or communicate to any person or entity (other than to a person or entity bound by confidentiality obligations similar to those contained herein and other than as necessary in performing Employee’s duties hereunder) or use to the detriment of the Company, or any of its Affiliates or for the benefit of any other person or entity, including, without limitation, any competitor, supplier, licensor, licensee or customer of the Company, any of its Affiliates, any of such confidential or proprietary data or information or make or remove any copies thereof, whether or not marked or otherwise identified as “confidential” or “secret.” Employee shall take all reasonable precautions in handling the confidential or proprietary data or information within the Company to a strict need-to-know basis and shall comply with any and all security systems and measures adopted from time to time by the Company to protect the confidentiality of confidential or proprietary data or information.
(b) The term "confidential or proprietary data or information" as used in this Agreement shall mean information not generally available to the public, including, without limitation, all customer information, database information, personnel information, financial information, account lists or other account information, names, telephone numbers or addresses, supplier or vendor lists, trade secrets, patented or other proprietary information, forms, information regarding operations, systems, methods, processes, financing, services, strains, genetics, cultivation techniques or processes, manufacturing, processing, extraction, distribution, storage, transportation, know how, computer and any other processed or collated data, computer programs, pricing, marketing and advertising data.
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(c) Employee will at all times promptly disclose to the Company in such form and manner as the Company may reasonably require, any inventions, improvements or procedural or methodological innovations, including, without limitation, those relating to programs, methods, forms, systems, services, designs, marketing ideas, products or processes (whether or not capable of being trademarked, copyrighted or patented) conceived or developed or created by Employee during or in connection with Employee’s employment with the Company and which in any way relate to the Business of the Company (the "Intellectual Property"). Employee agrees that all such Intellectual Property shall be the sole property of the Company and shall be "work made for hire" as defined in 17 U.S.C. § 101. Employee hereby assigns all of Employee’s right, title and interest to the Intellectual Property to the Company. Employee further agrees that Employee, without charge, will execute such instruments and perform such acts as may reasonably be requested by the Company to transfer to and perfect in the Company all legally protectable rights in such Intellectual Property. To the extent any moral rights or other Intellectual Property rights are not legally transferable to the Company, Employee hereby waives and agrees to never assert any such rights against the Company or any of its Affiliates, even after termination of employment with the Company.
(d) All written materials, books, records and documents made by Employee or coming into Employee’s possession during Employee’s employment by the Company concerning any products, processes or systems used, developed, investigated, purchased, sold or considered by the Company or any of its Affiliates or otherwise concerning the Business or affairs of the Company or any of its Affiliates, including, without limitation, any files, customer records such as names, telephone numbers, addresses and e-mail addresses, lists, firm records, brochures and literature, shall be the sole property of the Company, shall not be removed from the Company’s premises or transmitted to third parties by Employee, and upon termination of Employee’s employment by the Company, or upon request of the Company during Employee’s employment by the Company, Employee shall promptly deliver the same to the Company. In addition, upon termination of Employee’s employment by the Company, Employee will deliver to the Company all other Company property in Employee’s possession or under Employee’s control, including, but not limited to, financial statements, marketing and sales data, customer and supplier lists and information, account lists and other account information, database information, plans, designs and other documents, and Employee shall not retain any electronically stored versions of the same.
(e) During the Term of this Agreement, Employee shall comply in all respects with all applicable federal and state securities laws, including without limitation with respect to insider trading, and all policies and codes of conduct or ethics of the Company and its Affiliates with respect thereto.
7. Non-Competition .
(a) During the Term of this Agreement and one (1) year thereafter (except in the event that Employee’s employment hereunder is terminated without “cause”) (the "Restricted Period"), Employee shall not, without the written consent of the Company, directly or indirectly, (i) become associated with, render services to, invest in, represent, advise or otherwise participate in as an officer, employee, director, stockholder, partner, member, promoter, agent of, consultant for or otherwise, any business which is conducted anyone in world and which is competitive with the Business conducted by the Company; or (ii) for Employee’s own account or for the account of any other person or entity (A) interfere with the Company’s relationship with any of its suppliers, customers, accounts, brokers, representatives or agents or (B) solicit or transact any business with any customer, account or supplier of the Company who or which transacts, has transacted or proposes to transact business with the Company at any time during the Term of this Agreement; or (iii) employ or otherwise engage, or solicit, entice or induce on behalf of Employee or any other person or entity, the services, retention or employment of any person who has been an employee, principal, partner, stockholder, sales representative, trainee, consultant to or agent of the Company within one year of the date of such offer or solicitation. Notwithstanding any provisions in this Section 7, (1) this Section 7 shall not prohibit Employee from purchasing or owning up to five percent (5%) of the outstanding capital stock of a company which has a class of securities registered under Section 12 of the Securities Act of 1934, as amended and (2) to the extent not inconsistent with Employee’s obligations under this Agreement, Employee may engage in charitable or civic activities and make passive investments which are non-competitive and non-conflicting with the Company’s Business.
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(b) If any one or more of the restrictions contained in this Section 7 shall for any reason be held to be unreasonable with regard to time, duration, geographic scope or activity, the parties contemplate and hereby agree that such restriction shall be modified and shall be enforced to the full extent compatible with applicable law. The parties hereto intend that the covenants contained in this Section 7 shall be deemed a series of separate covenants for each country, state, county and city. If, in any judicial proceeding, a court shall refuse to enforce all the separate covenants deemed included in this Section 7 because, taken together, they cover too extensive a geographic area, the parties intend that those of such covenants (taken in order of the cities, counties, states and countries therein which are least populous) which if eliminated would permit the remaining separate covenants to be enforced in such proceeding shall, for the purpose of such proceeding, be deemed eliminated from the provisions of this Section 7.
8. Remedies . Employee acknowledges that the covenants contained in Sections 6 and 7 are fair and reasonable in order to protect the Company’s Business and were a material and necessary inducement for the Company to agree to the terms of this Agreement and to the employment of Employee by the Company. Employee further acknowledges that any remedy at law for any breach or threatened or attempted breach of the covenants contained in Sections 6 and 7 may be inadequate and that the violation of any of the covenants contained in Sections 6 and 7 will cause irreparable and continuing damage to the Company. Accordingly, the Company shall be entitled to specific performance or any other mode of injunctive and/or other equitable relief to enforce its rights hereunder, including, without limitation, an order restraining any further violation of such covenants, or any other relief a court might award, without the necessity of showing any actual damage or irreparable harm or the posting of any bond or furnishing of other security, and that such injunctive relief shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. The covenants in Sections 6 and 7 shall run in favor of the Company and its Affiliates, successors and assigns. The provisions of Sections 6 and 7 and this Section 8 shall survive the termination of this Agreement.
9. Termination .
(a) The Company may terminate Employee’s services hereunder "for cause" by delivering to Employee not less than ten (10) days prior to the date on which the termination is to be effective, a written notice of termination for cause specifying the act, acts or failure to act that constitute the cause. For the purposes of this agreement, “for cause” shall mean: (i) any act of material fraud or embezzlement adversely affecting the financial, market, reputation or other interests of the Company, (ii) in the event of a conviction of or plea of guilty or nolo contendere by Employee for any felony or other serious crime or crime involving moral turpitude, or any knowing violation of any federal or state banking, securities or tax law or regulation, (iii) any refusal to perform or willful misconduct or gross negligence in connection with Employee’s duties hereunder, if such refusal or willful misconduct or gross negligence is not cured within twenty (20) days after written notice thereof, or (iv) any material breach by Employee of this Agreement if such material breach is not cured within twenty (20) days after written notice thereof.
(b) The Company may also terminate Employee’s services: (i) in the event that Employee dies or the Company places Employee on disability status pursuant to Section 5 hereof, or (ii) upon a determination by the Board, in its reasonable discretion, within nine (9) months after the date hereof, that Employee has failed to achieve his performance goals as set forth in Exhibit B hereto within the first six (6) months after the date hereof (the “Threshold Obligation”).
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(c) In the event that (i) the Company terminates Employee’s employment hereunder "for cause" as set forth in Section 9(a), (ii) the Company terminates Employee’s employment pursuant to Section 9(b), or (iii) Employee voluntarily terminates Employee’s employment by the Company, the Company shall pay to Employee any unpaid compensation payable pursuant to Section 3 hereof, which payment (y) shall include all compensation earned up until and including the date on which the termination is effective and (z) shall be made within thirty (30) days after the termination date, and no other compensation shall be payable to Employee.
(d) If the Company terminates Employee’s employment hereunder for any reason other than "for cause" as set forth in Section 9(a) or pursuant to Section 9(b) hereof, the Company shall pay to Employee compensation payable pursuant to Section 3 hereof for the lesser of (y) six (6) months, or (z) the remaining Term of this Agreement. Employee and the Company acknowledge that the foregoing provisions of this Section 9(d) are reasonable and are based upon the facts and circumstances of the parties at the time of entering into this Agreement, and with due regard to future expectations.
10. Representations and Warranties of Employee . Employee hereby represents and warrants to the Company, and acknowledges that such representations and warranties are material inducements to the Company entering into this Agreement, as follows:
(a) Employee has the legal capacity to execute and deliver, and has duly executed and delivered, this Agreement.
(b) Employee is not subject to any restrictive covenant or confidentiality obligations to any former employer or contractor of Employee; and the obligations and duties undertaken by Employee hereunder, will not conflict with, constitute a breach of or otherwise violate the terms of any other agreement to which Employee is a party. Employee is not required to obtain the consent of any person, firm, corporation or other entity in order to enter into and perform Employee’s obligations under this Agreement.
(c) As of the date hereof, Employee does not have any ownership interest in and is not employed by any company or entity (other than the Company) which is engaged in the Business.
(d) to the knowledge of Employee, Employee is not the subject of any grand jury, prosecutorial, legislative, administrative or other investigation or inquiry by any governmental agency or authority.
11. Notices . All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand, messenger or courier service addressed:
If to the Company:
TO Pharmaceuticals LLC
One Old Country Road
Carle Place, New York 11514
Newark, Delaware 19713
Fax: (646) 786–4005
Email: barryfarkas1@gmail.com
Attention: Barry Farkas
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With a copy to:
Abrams, Fensterman, Fensterman,
Eisman, Formato, Ferrara & Wolf LLP
1111 Marcus Avenue, Suite 107
Lake Success, New York 11042
Facsimile: (516) 368-6638
Email: nkaufman@abramslaw.com
Attention: Neil Kaufman, Esq.
If to Employee:
Sidney Taubenfeld
247 West 87th Street, Apt. 7G
New York, New York 10024
Email: staub18@yahoo.com
With a copy to:
Michael Schneider, Esq.
11 East 44 th Street – 19 th Fl.
New York, New York 10017
Telephone: (212) 888-2100
Facsimile: (646) 461-1781
Email: michael@mslaw-us.com
Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one business day after deposit with the courier), or (ii) if sent via mail, at the earlier of its receipt or five (5) days after the same has been deposited in a regularly-maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile, upon confirmation of facsimile transfer, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day, or (iv) if sent via electronic mail, upon its delivery, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day.
12. Successors and Assigns; Third Party Beneficiaries . This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company, and unless clearly inapplicable, all references herein to the Company shall be deemed to include any such successor. In addition, this Agreement shall be binding upon and inure to the benefit of Employee and Employee’s heirs, executors, legal representatives and assigns; provided, however, that the obligations of Employee hereunder may not be delegated without the prior written approval of the Company. In the event of any consolidation or merger of the Company into or with any other company during the Term of this Agreement, person or entity during the Term of this Agreement, such successor company shall assume this Agreement and become obligated to perform all of the terms and provisions hereof applicable to the Company, and Employee's obligations hereunder shall continue in favor of such successor company.
13. Acknowledgment . Employee acknowledges that Employee has carefully read this Agreement, has had an opportunity to consult counsel regarding this Agreement.
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14. Waiver of Jury Trial .
EACH PARTY TO THIS AGREEMENT HEREBY UNCONDITIONALLY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY RELATED DOCUMENTS, ANY DEALINGS BETWEEN OR AMONG THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.
15. Enforcement . It is the desire and intent of the parties hereto that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, to the extent that a restriction contained in this Agreement is more restrictive than permitted by the laws of any jurisdiction where this Agreement may be subject to review and interpretation, the terms of such restriction, for the purpose only of the operation of such restriction in such jurisdiction, shall be the maximum restriction allowed by the laws of such jurisdiction and such restriction shall be deemed to have been revised accordingly herein.
16. Miscellaneous . This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York, without regard to conflicts of laws. The parties hereto hereby irrevocably submit to the exclusive jurisdiction of any New York State or Federal court sitting in Kings County, New York over any suit, action or proceeding arising out of or relating to this Agreement. This Agreement contains the entire agreement of the parties relating to the subject matter hereof and supersedes any other agreements entered into between Employee and the Company prior to the date of this Agreement relating thereto. This Agreement may not be altered, modified, amended or terminated except by a written instrument signed by each of the parties hereto. No term or provision hereof shall be deemed waived and no breach consented to or excused, unless such waiver, consent or excuse shall be in writing and signed by the party claimed to have waived, consented or excused. A consent, waiver or excuse of any breach shall not constitute a consent to, waiver or, or excuse of any other or subsequent breach whether or not of the same kind of the original breach. If any provision of this Agreement shall be held by a court of competent jurisdiction to be contrary to law or public policy, the remaining provisions shall remain in full force and effect. This Agreement may be executed in two or more counterparts, all of which taken together shall constitute one and the same agreement. The headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the day of and year first above written.
COMPANY: |
TO PHARMACUETICALS LLC | ||
B y: TO HOLDING GROUP LLC , Manage r | ||
By: TO INVESTOR LLC , Manager |
By: | /s/ Berel Farkas | |
Name: | Berel Farkas | |
Title: | Authorized Signatory |
EMPLOYEE: |
/s/ Sidney Taubenfeld | ||
Sidney Taubenfeld |
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Exhibit A
Warrant To Purchase Units
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THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS.
VOID AFTER 5:00 P.M. ON MARCH 9 , 2023
TO PHARMACEUTICALS LLC
WARRANT TO PURCHASE UNITS
Carle Place, New York
Certificate No. 1
THIS IS TO CERTIFY THAT, for value received, Sidney Taubenfeld, an individual residing at 247 West 87th Street, Apt. 7G, New York, New York 10024 (the “Warrantholder”), is entitled, subject to the provisions and upon the terms and conditions set forth herein, to purchase from TO PHARMACEUTICALS LLC, a Delaware limited liability (the “Company”), up to 500 units (the “Warrant Units”) of the membership interests of the Company (“Units”), at an exercise price equal to $700 per Unit (the “Exercise Price”) at the times and in the manner set forth below.
As provided herein, the Exercise Price and the number of Warrant Units which may be purchased upon the exercise of this Warrant are, upon the happening of certain events, subject to modification and adjustment.
The rights of the registered holder of this Warrant shall be subject to the following further terms and conditions:
1. | Exercise of Warrant; Payment of Exercise Price . |
(a) | Exercise of Warrant . |
(i) While this Warrant remains outstanding, this Warrant shall be exercisable, in whole or in part, as of the date hereof (the “Exercisability Date”), with the exercise form attached as Exhibit A hereto (the “Exercise Form”) duly executed by the Warrantholder or by the Warrantholder’s duly authorized attorney-in-fact, at the principal office of the Company, or at such other office or agency in the United States as the Company may designate by notice in writing to the Warrantholder (in either event, the “Company Offices”), accompanied by payment in accordance with Section 1(b), of the aggregate Exercise Price payable for the Warrant Units being purchased. If the Warrantholder exercises the Warrant for fewer than all of the Warrant Units issuable in accordance with this Warrant, the Company shall, upon each exercise prior to the Expiration Date, execute and deliver to the Warrantholder a new Warrant (dated as of the date hereof) evidencing the balance of the Units that remain subject to issuance upon the exercise of this Warrant. This Warrant shall expire on the seventh (7 th ) anniversary of the date hereof (the “Expiration Date”), and thereupon the Warrantholder shall surrender this Warrant.
(ii) On the date of exercise of this Warrant, upon the the Warrantholder exercising same in compliance with the terms hereof, and if previous to such exercise the Warrantholder is not a party to the operating agreement of the Company, upon the execution and delivery to the Company of the joinder agreement in the form attached hereto as Exhibit B , the Warrantholder shall be deemed to have become the holder of record for all purposes of the Units to which the exercise relates.
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(iii) As soon as practicable after the exercise of all or part of this Warrant, the Company, at its expense (including the payment by it of any applicable issue taxes), will cause to be issued in the name of and delivered to the Warrantholder a certificate or certificates evidencing the number of duly authorized, validly issued, fully paid and nonassessable Units to which the Warrantholder shall be entitled upon such exercise, if the units of membership interests of the Company are certificated as of such time.
(iv) Any portion of this Warrant, except as otherwise provided in paragraph (b) below, shall become exercisable at the times and in the amounts set forth below (with respect to each tranche and sub-tranche of exercisability, the “Exercisability Date”) until this Warrant expires, so long as the Warrantholder is an employee of the Company or one of its subsidiaries, or Tikun Olam Holding Group LLC, a New York limited liability company (“TOHG”, and together with the Company and its subsidiaries herein referred to as the “Company Group”) as of the Exercisability Date. Except as otherwise provided in paragraphs (b)(i) through (iii) below, upon the termination of the employment by the Company Group of Warrantholder for any reason (whether by the Company Group or by Warrantholder), any portion of this Warrant that is not exercisable as of such termination shall be automatically cancelled and surrendered to the Company:
Number of Units | Exercisability Date | |
75 | September 9 , 2016 | |
50 | March 9 , 2017 | |
175* (15.9091 per month*) | On the 9 th day of each of April 2017 through February 2018 | |
200 | March 9, 2018 | |
100 | The Company having a valuation of $100 million or more** | |
100 | The Company having a valuation of $200 million or more** |
** For these purposes, the Company’s valuation will be equal to the pre-transaction equity value of the Company in connection with its most recently completed financing transaction.
(b) | Certain Limitations . |
(i) The portion of this Warrant that is exercisable for 75 Units on September 9, 2016 (the “75 Warrant Tranche”) shall remain exercisable by the Warrantholder or his successors or assigns for the period from the Exercisability Date until this Warrant expires regardless of whether the Warrantholder is an employee of the Company Group as of the date of such exercise, except in the following circumstances:
(A) If prior to the first anniversary of the date hereof, the employment of Warrantholder has been terminated by the Company Group “for cause” as set forth in section 9(a) of that certain Employment Agreement of even date herewith between the Company and Warrantholder (the “Employment Agreement”); or
(B) If prior to the first anniversary of the date hereof, the Warrantholder voluntarily terminates his employment with the Company Group.
(ii) If prior to the Exercisability Date for the initial 75 Warrant Tranche, the Warrantholder dies or becomes Disabled, then the 75 Warrant Tranche shall be automatically cancelled and surrendered to the Company.
(iii) Except as provided by paragraph (ii) above, if prior to the Exercisability Date for the initial 75 Warrant Tranche, the employment by the Company Group of Warrantholder has been terminated without cause as set forth in section 9(a) of the Employment Agreement, the 75 Warrant Tranche shall remain exercisable through the Expiration Date.
(iv) The portions of this Warrant that are exercisable for 100 Units, upon the occurrence of the Company having a valuation in excess of $100 million or $200 million, respectively (collectively, the “200 Warrant Tranche”) shall remain exercisable by the Warrantholder or his successors or assigns for the period from the Exercisability Date until this Warrant expires, except if at any time the employment of Warrantholder has been terminated by the Company Group “for cause” as set forth in section 9(a) of the Employment Agreement. Any portion of the 200 Warrant Tranche that has not been exercised as of the date of such termination for cause, if such termination should occur after the second anniversary of the date hereof, shall be automatically cancelled and surrendered to the Company.
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(v) This Warrant and any Units issued pursuant to this Warrant are subject to the terms and conditions of that certain Repurchase Agreement of even date herewith between the Company and the Warrantholder during the term of such agreement.
(vi) This Warrant shall become immediately exercisable upon (a) the acquisition of a majority of the voting power of the Company by a person or entity or group of persons or entities by means of any transaction or series of related transactions (including without limitation any stock acquisition, reorganization, merger or consolidation, but excluding any sale of stock for capital raising purposes); or (b) a sale or other disposition of all or substantially all of the assets of the Company (and any subsidiaries, taken as a whole) by means of any transaction or series of related transactions, except where such sale, lease or other disposition is to a wholly-owned subsidiary of the Company.
(c) Payment of Exercise Price . Payment of the Exercise Price shall be made, at the option of the Warrantholder as expressed in the Exercise Form, by the following methods:
(i) by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such aggregate Exercise Price for Warrant Units being purchased hereunder;
(ii) by instructing the Company to withhold a number of Warrant Units then issuable upon exercise of this Warrant with an aggregate fair market value (“Fair Market Value”), as determined in good faith by the Board of Directors of the Company as of the Exercise Date, equal to the aggregate Exercise Price for Warrant Units being purchased hereunder;
(iii) by surrendering to the Company (x) Warrant Units previously acquired by the Warrantholder with an aggregate Fair Market Value as of the Exercise Date equal to the aggregate Exercise Price for Warrant Units being purchased hereunder and/or (y) other securities of the Company having a value as of the Exercise Date equal to the aggregate Exercise Price for Warrant Units being purchased hereunder (which value in the case of debt securities shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred stock shall be the liquidation value thereof plus accumulated and unpaid dividends, and in the case of Units shall be the Fair Market Value thereof); or
(iv) any combination of the foregoing.
In the event of any withholding of Warrant Units or surrender of other equity securities pursuant to clause (c)(ii), or (iii) above where the number of Units whose value is equal to the aggregate Exercise Price is not a whole number, the number of Units withheld by or surrendered to the Company shall be rounded up to the nearest whole unit and the Company shall make a cash payment to the Warrantholder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a Unit being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a Unit being so withheld or surrendered multiplied by (y) in the case of Units, the Fair Market Value per Warrant Unit as of the Exercise Date, and, in all other cases, the value thereof as of the Exercise Date determined in accordance with clause (iii)(y) above.
2. | Issuance of Units; Reservation of Units . |
(a) The Company covenants and agrees that all Units which may be issued upon the exercise of all or part of this Warrant will, upon issuance in accordance with the terms hereof, be validly issued and free from all taxes, liens and charges with respect to the issue thereof.
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(b) The Company further covenants and agrees that if any Units to be reserved for the purpose of the issuance of Units upon the exercise of this Warrant require registration with, or approval of, any governmental authority under any federal or state law before such Units may be validly issued or delivered upon exercise, then the Company will promptly use its best efforts to effect such registration or obtain such approval, as the case may be.
3. | Adjustments of Exercise Price, Number and Character of Warrant Units, and Number of Warrants . |
The Exercise Price and the number and kind of securities purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the happening of the events enumerated in this Section 3.
(a) Distributions, Subdivisions and Combinations . In case the Company shall at any time on or before the Expiration Date:
(i) pay or make a distribution in Units or other securities of the Company to holders of all its outstanding Units;
(ii) subdivide or reclassify the outstanding Units into a greater number of Units;
(iii) combine the outstanding Units into a smaller number of Units; or
(iv) issue by reclassification of its Units other securities of the Company (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation),
then the number and kind of securities purchasable upon exercise of this Warrant outstanding immediately prior thereto shall be adjusted so that the Warrantholder shall be entitled to receive the kind and number of Units or other securities of the Company which the Warrantholder would have owned or have been entitled to receive after the happening of any of the events described above had this Warrant been exercised in full immediately prior to the earlier of the happening of such event or any record date in respect thereto. In the event of any adjustment of the number of Units or other securities of the Company purchasable upon the exercise of this Warrant pursuant to this Paragraph 3(a), the Exercise Price shall be adjusted to be the amount resulting from dividing the number of Units (including fractional Units) covered by this Warrant immediately after such adjustment into the total amount payable upon exercise of this Warrant in full immediately prior to such adjustment. An adjustment made pursuant to this Paragraph 3(a) shall become effective immediately after the effective date of such event retroactive to the record date for any such event. Such adjustment shall be made successively whenever any event listed above shall occur.
(b) Extraordinary Dividends . In case the Company shall at any time on or before the Expiration Date fix a record date for the issuance of rights, options, or warrants to all holders of its outstanding Units, entitling them (for a period expiring within 45 days after such record date) to subscribe for or purchase Units (or securities exchangeable for or convertible into Units) at a price per Unit (or having an exchange or conversion price per Unit, with respect to a security exchangeable for or convertible into Units) which is lower than the current Exercise Price per Unit (as defined in Paragraph 3(d) below) on such record date, then the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, of which (i) the numerator shall be the number of Units outstanding on such record date plus the number of Units which the aggregate offering price of the total number of Units so to be offered (or the aggregate initial exchange or conversion price of the exchangeable or convertible securities so to be offered) would purchase at such current Exercise Price and (ii) the denominator shall be the number of Units outstanding on such record date plus the number of additional Units to be offered for subscription or purchase (or into which the exchangeable or convertible securities so to be offered are initially exchangeable or convertible). Such adjustment shall become effective at the close of business on such record date; however, to the extent that Units (or securities exchangeable for or convertible into Units) are not delivered after the expiration of such rights, options, or warrants, the Exercise Price shall be readjusted (but only with respect to any portion of this Warrant exercised after such expiration) to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of Units (or securities exchangeable for or convertible into Units) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company and shall be described in a statement mailed to the Warrantholder. Units owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation.
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(c) Extraordinary Distributions . In case the Company shall at any time after the original date of issuance of this Warrant distribute to all holders of its Units (including any such distribution made in connection with a consolidation or merger in which the Company is the surviving corporation) evidences of its indebtedness or assets (excluding cash dividends and distributions payable out of consolidated net income or earned surplus in accordance with New York law and dividends or distributions payable in Units of stock described in Paragraph 3(a) above) or rights, options, or warrants or exchangeable or convertible securities containing the right to subscribe for or purchase Units (or securities exchangeable for or convertible into Units), then the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for such distribution by a fraction, of which (i) the numerator shall be the current Exercise Price per Unit of the portion of the evidences of indebtedness or assets so to be distributed or of such rights, options or warrants applicable to one Unit and (ii) the denominator shall be such current Exercise Price per Unit. Such adjustment shall be made whenever any such distribution is made, and shall become effective on the date of distribution retroactive to the record date for such transaction.
(d) Minimum Adjustment . Except as hereinafter provided, no adjustment of the Exercise Price hereunder shall be made if such adjustment results in a change of the Exercise Price then in effect of less than one dollar ($ 1.00) per unit. Any adjustment of less than one dollar ($1.00) per unit of any Exercise Price shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, together with adjustment or adjustments so carried forward, amounts to one dollar ($1.00) per unit or more. However, upon exercise of this Warrant, the Company shall make all necessary adjustments (to the nearest cent) not theretofore made to the Exercise Price up to and including the effective date upon which this Warrant is exercised.
(e) Notice of Adjustments . Whenever the Exercise Price shall be adjusted pursuant to this Section 3, the Company shall promptly deliver a certificate signed by the President or a Vice President and by the Chief Financial Officer, Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company, setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board of Directors of the Company made any determination hereunder), by first class mail postage prepaid to each Warrantholder.
(f) Capital Reorganizations and Other Reclassifications . In case of any capital reorganization of the Company, or of any reclassification of the Units (other than a reclassification, subdivision or combination of Units referred to in Paragraph 3(a)), this Warrant shall, after such capital reorganization, reclassification of Units, consolidation, merger, or sale, be immediately exercisable, upon the terms and conditions specified in this Warrant, for the kind, amount and number of Units or other securities, assets, or cash to which a holder of the number of Units purchasable (at the time of such capital reorganization, reclassification of Units, consolidation, merger or sale) upon exercise of this Warrant would have been entitled to receive upon such capital reorganization, reclassification of Units, consolidation, merger, or sale; and in any such case, if necessary, the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Warrantholder shall be appropriately adjusted so as to be applicable, as nearly equivalent as possible, to any Units or other securities, assets, or cash thereafter deliverable on the exercise of this Warrant. The Company shall not effect any such consolidation, merger, or sale, unless prior to or simultaneously with the consummation thereof the successor corporation or entity (if other than the Company) resulting from such consolidation or merger or the corporation or entity purchasing such assets or other appropriate corporation or entity shall assume, by written instrument, the obligation to deliver to the Warrantholder such Units, securities, assets, or cash as, in accordance with the foregoing provisions, such holders may be entitled to purchase and the other obligations hereunder. The subdivision or combination of Units at any time outstanding into a greater or lesser number of Units shall not be deemed to be a reclassification of the Units for purposes of this Paragraph 3(f).
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(g) Adjustments to Other Securities . In the event that at any time, as a result of an adjustment made pursuant to this Section 3, the Warrantholder shall become entitled to purchase any Units or securities of the Company other than the Units, thereafter the number of such other Units or securities so purchasable upon exercise of each Warrant and the exercise price for such Units or securities shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as possible to the provisions with respect to the Units contained in Paragraphs 3(a) through (d), inclusive.
(h) Deferral of Issuance of Additional Units in Certain Circumstances . In any case in which this Section 3 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event issuing to the Warrantholder exercised after such record date the Units, if any, issuable upon such exercise over and above the Units, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided , however , that the Company shall deliver as soon as practicable to such holder a due bill or other appropriate instrument provided by the Company evidencing such holder’s right to receive such additional Units upon the occurrence of the event requiring such adjustment.
(i) Initial Investment . Notwithstanding the foregoing, the number of Units for which this Warrant shall be exercisable and the Exercise Price shall not adjusted in connection with the initial investment of up to $500,000 by or on behalf of the member of the Company.
4. Replacement of Securities . If this Warrant shall be lost, stolen, mutilated or destroyed, the Company shall, on such terms as to indemnity or otherwise as the Company may in its discretion reasonably impose, issue a new warrant of like tenor or date representing in the aggregate the right to subscribe for and purchase the number of Units which may be subscribed for and purchased hereunder. Any such new warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed warrant shall be at any time enforceable by anyone.
5. Registration . This Warrant shall be numbered and shall be registered in a register (the “Warrant Register”) maintained at the Company Offices as they are issued. The Warrant Register shall list the name, address and Social Security or other Federal Identification Number, if any, of all warrantholders. The Company shall be entitled to treat the Warrantholder as set forth in the Warrant Register as the owner in fact of this Warrant as set forth therein for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Warrant on the part of any other person, and shall not be liable for any registration or transfer of this Warrant that is registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration of transfer, or with such knowledge of such facts that its participation therein amounts to bad faith.
6. Transfer . NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT HAS BEEN ACQUIRED, AND ANY UNITS OR ANY OTHER SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE REQUIRED TO BE ACQUIRED, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR THIS WARRANT AND/OR SUCH UNITS OR OTHER SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THIS WARRANT AND SUCH UNITS OR OTHER SECURITIES TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND SUCH STATE SECURITIES LAWS.
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7. Exchange of Warrant . This Warrant may be exchanged for another warrant entitling the Warrantholder thereof to purchase a like aggregate number of Units as this Warrant entitles such Warrantholder to purchase. A Warrantholder desiring to so exchange this Warrant shall make such request in writing delivered to the Company, and shall surrender this Warrant therewith. Thereupon, the Company shall execute and deliver to the person entitled thereto a new warrant or warrants, as the case may be, as so requested.
8. Notices . All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand, messenger or courier service addressed:
If to the Company:
TO PHARMACEUTICALS LLC
One Old Country Road
Carle Place, New York 11514
Fax: (646) 786–4005
Email: barryfarkas1@gmail.com
Attention: Barry Farkas
With a copy to:
Abrams, Fensterman, Fensterman,
Eisman, Formato, Ferrara & Wolf, LLP
1111 Marcus Avenue, Suite 107
Lake Success, New York 11042
Telephone: (516) 328-2300
Facsimile: (516) 328-6638
Attention: Neil M. Kaufman
Email: nkaufman@abramslaw.com
If to the Warrantholder:
Sidney Taubenfeld
247 West 87th Street, Apt. 7G
New York, New York 10024
Email: staub18@yahoo.com
With a copy to:
Michael Schneider, Esq.
11 East 44 th Street – 19 th Fl.
New York, New York 10017
Telephone: (212) 888-2100
Facsimile: (646) 461-1781
Email: michael@mslaw-us.com
Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one business day after deposit with the courier), or (ii) if sent via mail, at the earlier of its receipt or five (5) days after the same has been deposited in a regularly-maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile, upon confirmation of facsimile transfer, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day, or (iv) if sent via electronic mail, upon its delivery, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day.
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9. Miscellaneous . This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant is deemed to have been delivered in the State of New York and shall be construed and enforced in accordance with and governed by the laws of such State, without regard to its conflicts of laws principles. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.
10. Expiration . Unless as hereinafter provided, the right to exercise this Warrant shall expire at the Expiration Date.
[Signature Page Follows]
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TO PHARMACEUTICALS LLC
[SIGNATURE PAGE TO WARRANT TO PURCHASE UNITS
Dated: March 9, 2015
TO PHARMACUETICALS LLC | ||
By: TO HOLDING GROUP LLC , Manager | ||
By: TO INVESTOR LLC , Manager | ||
By: | ||
Name: | ||
Title: | ||
EMPLOYEE: | ||
Sidney Taubenfeld |
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EXHIBIT A
EXERCISE FORM
Dated:_______________, ____ |
TO PHARMACEUTICALS LLC:
The undersigned hereby irrevocably elects to exercise the within Warrant, to the extent of purchasing _________________ Units, and hereby makes payment of the Exercise Price in payment of the actual Exercise Price therefor as follows:
¨ $___________________ by certified or official bank check payable to the order of the Company or by wire transfer.
¨ $________________ by withholding Warrant Units issuable upon exercise of this Warrant;
¨ $_____________ by surrendering to the Company (x) $__________ for Warrant Units previously acquired by the Warrantholder, and/or (y) $_______ for other securities of the Company.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name: | |
(Please type or print in block letters) | |
Taxpayer Identification Number: | |
Address: | |
Signature: | |
(Signature must conform in all respects to the name of the Warrantholder as set forth on the face of this Warrant) |
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EXHIBIT B
JOINDER TO OPERATING AGREEMENT
OF TO PHARMACEUTICALS LLC
This JOINDER (the “ Joinder ”) to Operating Agreement of TO Pharmaceuticals LLC, a Delaware limited liability company (the “ Company ”), dated as of October 21, 2015, as amended or restated from time to time (the “ Agreement ”), is made and entered into as of the date below, by and between the Company and the unitholder listed below (“ Unitholder ”). Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Agreement.
WHEREAS , on the date hereof, Unitholder has acquired certain Units, and the Agreement and the Company require Unitholder, as a holder of such Interest, to become a party to the Agreement, and Unitholder agrees to do so in accordance with the terms hereof.
NOW, THEREFORE , in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Joinder hereby agree as follows:
A. Agreement to be Bound . Unitholder hereby (i) acknowledges that he/she/it has received and reviewed a complete copy of the Agreement and (ii) agrees that upon execution of this Joinder, he/she/it shall become a party to the Agreement and shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Agreement as though an original party thereto and shall be deemed, and is hereby admitted as, a Member for all purposes thereof and entitled to all the rights incidental thereto.
B. Governing Law . This Agreement and the rights of the parties hereunder shall be interpreted in accordance with the laws of the State of Delaware, and all rights and remedies shall be governed by such laws without regard to principles of conflicts of laws.
C. Headings; Counterparts . The headings of this Joinder are inserted for convenience only and do not constitute a part of this Joinder. This Joinder may be executed in multiple counterparts (and may be transmitted via facsimile or other electronic submission) each of which shall be deemed to be an original and all of which taken together shall constitute one and the same agreement
IN WITNESS WHEREOF , the parties hereto have executed this Joinder to the Operating Agreement of TO Pharmaceuticals LLC as of the date set forth below.
UNITHOLDER: | UNITHOLDER: | ||||
If an Entity: | If an Individual: | ||||
By: | |||||
Name: | Name: | ||||
Title: | Date: | ||||
Date: | Address: | ||||
Address: | |||||
TO PHARMACEUTICALS LLC: | FOR COMPANY USE ONLY: | ||||
By: | Number of Units: | ||||
Name: | Class of Units: | ||||
Title: | Capital Contribution: | ||||
Date: |
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Exhibit B
Threshold Obligation
6 Month Goals
1. | Review and evaluate the Company's data and decide which indications the Company will pursue with emphasis on identifying indications which will differentiate the Company from the numerous other cannabis companies, particularly to find indications that will have the highest probability for success requiring the least amount of time and money. |
2. | Recruit a prominent Scientific Advisory Board to guide with the indication decisions. |
3. | Once indications are identified, use the success of Zynerba as a template. |
4. | In-license/Partner unique drug delivery technology: Buccal, Filmstrip and Sustained action. Available in Israel and/or Canada. Unique drug delivery allows for better patent protection. |
5. | Patents: develop and prosecute valid patents essential for valuation |
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Exhibit 10.17
TO Pharmaceuticals LLC
77 Water Street, 8 th floor
New York, New York 10005
October 19, 2018
Mr. Seth Yakatan
PO Box 2140
Manhattan Beach, CA 90267
MANAGEMENT CONSULTING AGREEMENT
Dear Seth:
We are very pleased to offer you the position of Interim Chief Executive Officer (“CEO”) of TO Pharmaceuticals LLC, a Delaware limited liability company (the “Company”), effective as of October 1, 2018. This offer of is conditioned on your satisfactory completion of certain requirements, as more fully explained in this letter. Your role as CEO will be subject to the terms and conditions set forth in this letter, which supersede anything said or communicated to you during any discussions or correspondence about your employment with the Company or its affiliates. Your firm, Sutherland Paige and Associates, Inc. D/B/A Katan Associates, International (“Katan”), will be engaged as an consultant and independent contractor to the Company to provide your services on an interim basis until you and the Company enter into a definitive employment agreement (the “Employment Agreement”).
Your position with the Company will be full-time, effective immediately. This will be an exempt executive position. In your capacity as CEO, you will perform duties and responsibilities that are reasonable and consistent with such position, and as may be assigned to you from time to time by the Company’s board of managers (the “Board”) or its designees, in connection with which you will be generally responsible for the Company’s operations and affairs, including without limitation completion of its financial statements, financing activities and the Company’s merger with a public company or other public listing. You agree to devote as much time as is required and best efforts to the performance of your duties and to the furtherance of the Company's interests, and to be subject to the Company’s customary confidentiality and work-for-hire provisions. The Company acknowledges that Katan and Seth Yakatan may be involved in other projects during the term of this agreement and that such efforts may require some of Seth Yakatan’s time and attention, which will not unreasonably interfere with his duties to the Company.
In consideration of your services, Katan will receive a salary of $12,500 per month; provided, that until the Company raises at least $3,000,000 in gross proceeds from one or more financing transactions (the “3M Financing”) after the date hereof (not including any advances to the Company from T.O. Global LLC or any affiliate thereof), the Company will pay Katan at a rate of $5,000 per month in cash billable each month and payable within 15 days of presentation of invoices, and the remaining $7,500 per month will be deferred. The deferred amount shall be payable solely out of the proceeds of the $3M Financing. In addition, the Company will reimburse you or Katan for reasonable business expenses you incur on behalf of the Company, including travel expenses, upon submission of evidence thereof consistent with the Company’s expense reimbursement policy.
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In addition, you will become eligible for participation in the equity of the Company’s successor through a grant of options to purchase common stock of such successor. The exercise price of such options shall be based on a fair market value determined by the equity value of such successor in connection its round of financing (the “Concurrent Financing”) to be raised substantially concurrently with having a class of equity securities (the “Public Stock”) listed for trading on Nasdaq (the “Listing”; and collectively with Concurrent Financing, referred to herein as “Going Public”); however, all options shall be issued with a cashless exercise feature. Your aggregate option grant would be for 3% of the Public Stock, after giving effect to Going Public, subject to vesting as follows:
(a) | One-third upon (i) (A) the Listing, and (B) such successor having raised at least $10,000,000 from the Concurrent Financing; and (ii) you having been employed by the Company for at least six months after Going Public; |
(b) | One-third upon (i) the product of (A) the number of issued and outstanding shares of Public Stock, and (B) the volume weighted average of the closing price of the Public Stock for a period of 20 consecutive trading days, equalling or exceeding $100,000,000 on or prior to June 30, 2019, and (ii) you having been employed by the Company for at least 1 year after Going Public; and |
(c) | One-third upon the Company’s completion of two phase 2 clinical studies with a plan for FDA new drug approval through a phase 3 study in the USA. |
Until the execution and delivery of the Employment Agreement, your engagement and position as interim CEO will be at-will, meaning that you or the Company may terminate the relationship at any time, with or without cause, and with or without notice. The Company acknowledges that regardless of termination, any historical cash or accrual amounts owed to the Company shall be payable and due in accordance with the terms hereof. The Company cannot wilfully terminate this Agreement for the express purpose of avoiding vesting of the option subject to paragraph (a) above.
This offer is contingent upon:
(a) Verification of your right to work in the United States, as demonstrated by your completion of the I-9 form upon hire and your submission of acceptable documentation (as noted on the I-9 form) verifying your identity and work authorization within three days of starting employment;
(b) Satisfactory completion of a background investigation, for which the required notice and consent forms are attached to this letter; and
(c) Your execution of the Company’s customary confidentiality and work-for-hire agreement and employee handbook;
This offer will be withdrawn if any of the above conditions are not satisfied.
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By accepting this offer, you confirm that you are able to accept your responsibilities and carry out the work that it would involve without breaching any legal restrictions on your activities, such as restrictions imposed by a current or former employer or client. You also confirm that you will inform the Company about any such restrictions and provide the Company with as much information about them as possible, including any agreements between you and your current or former employer or client describing such restrictions on your activities. Such activities shall be disclosed in Exhibit A to this Agreement.
You further confirm that you will not remove or take any documents or proprietary data or materials of any kind, electronic or otherwise, with you from your current or former employer or client(s) to the Company without written authorization from your current or former employer and/or client(s), nor will you use or disclose any such confidential information during the course and scope of your employment with the Company. If you have any questions about the ownership of particular documents or other information, discuss such questions with your former employer and/or client(s) before removing or copying the documents or information.
This Offer Letter shall be governed by and construed in accordance with the laws of the State of New York without regard to the conflict of laws principles thereof. State and federal courts sitting in the City of New York shall have exclusive jurisdiction to hear any dispute arising under this Offer Letter.
All of us at the Company are excited at the prospect of you joining our team. If you have any questions about the above details, please call me immediately. If you wish to accept this position, please sign below and return this letter agreement to me within 3 days. This offer is open for you to accept until October 21, 2018, at which time it will be deemed to be withdrawn.
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I look forward to hearing from you.
Yours sincerely,
TO PHARMACEUTICALS LLC
By: | /s/ Bernard Sucher | ||
Name: | Bernard Sucher | ||
Title: | Authorized Representative |
Accepted:
/s/ Seth Yakatan | ||
Seth Yakatan |
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Exhibit A
Disclosure on past and current clients in which Seth Yakatan / Katan is/was involved:
Past Roles:
1. | Seth Yakatan/Katan acted as interim CEO and a board member of Kalytera Therapeutics, Inc. from January 2014 until July 2017. No current relationship exists with this company and Seth Yakatan/Katan is not bound by any non-competition or confidentiality agreement with Kalytera. Seth Yakatan/Katan is a shareholder in Kalytera and owns 800,000 shares in the company. |
2. | Seth Yakatan/Katan acted as a consultant to GB Sciences, Inc. from January 2018 until March 2018. No current relationship exists with the company and Seth Yakatan/Katan is not bound by any non-competition or confidentiality agreement with GB. Seth Yakatan/Katan is a shareholder in GB and owns 25,000 shares in the company. |
3. | Seth Yakatan/Katan acted as a consultant to Ocean Grown Ventures, LLC. from April 2018 until August 2018. No current relationship exists with the company and Seth Yakatan/Katan is not bound by any non-competition or confidentiality agreement with Ocean Grown. Seth Yakatan/Katan is a shareholder in Ocean Grown and owns shares in the company equivalent to 1.5% of the outstanding equity of Ocean Grown. |
4. | Seth Yakatan/Katan has acted as a consultant to Jay Pharma/Tikun Pharma from March 2018 until the date of execution of this agreement. Such agreement is still in place. |
5. | Seth Yakatan/Katan has acted as a consultant to Electrum Partners from June 2017 until the date of execution of this agreement. Such agreement is still in place and may remain in place until the employment agreement is entered into. |
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Exhibit 10.19
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS.
VOID AFTER 5:00 P.M. ON MARCH 9, 2023
TO PHARMACEUTICALS LLC
WARRANT TO PURCHASE UNITS
Carle Place, New York
Certificate No. 1
THIS IS TO CERTIFY THAT, for value received, Sidney Taubenfeld, an individual residing at 247 West 87th Street, Apt. 7G, New York, New York 10024 (the “Warrantholder”), is entitled, subject to the provisions and upon the terms and conditions set forth herein, to purchase from TO PHARMACEUTICALS LLC, a Delaware limited liability (the “Company”), up to 500 units (the “Warrant Units”) of the membership interests of the Company (“Units”), at an exercise price equal to $700 per Unit (the “Exercise Price”) at the times and in the manner set forth below.
As provided herein, the Exercise Price and the number of Warrant Units which may be purchased upon the exercise of this Warrant are, upon the happening of certain events, subject to modification and adjustment.
The rights of the registered holder of this Warrant shall be subject to the following further terms and conditions:
1. | Exercise of Warrant; Payment of Exercise Price . |
(a) | Exercise of Warrant . |
(i) While this Warrant remains outstanding, this Warrant shall be exercisable, in whole or in part, as of the date hereof (the “Exercisability Date”), with the exercise form attached as Exhibit A hereto (the “Exercise Form”) duly executed by the Warrantholder or by the Warrantholder’s duly authorized attorney-in-fact, at the principal office of the Company, or at such other office or agency in the United States as the Company may designate by notice in writing to the Warrantholder (in either event, the “Company Offices”), accompanied by payment in accordance with Section 1(b), of the aggregate Exercise Price payable for the Warrant Units being purchased. If the Warrantholder exercises the Warrant for fewer than all of the Warrant Units issuable in accordance with this Warrant, the Company shall, upon each exercise prior to the Expiration Date, execute and deliver to the Warrantholder a new Warrant (dated as of the date hereof) evidencing the balance of the Units that remain subject to issuance upon the exercise of this Warrant. This Warrant shall expire on the seventh (7 th ) anniversary of the date hereof (the “Expiration Date”), and thereupon the Warrantholder shall surrender this Warrant.
(ii) On the date of exercise of this Warrant, upon the the Warrantholder exercising same in compliance with the terms hereof, and if previous to such exercise the Warrantholder is not a party to the operating agreement of the Company, upon the execution and delivery to the Company of the joinder agreement in the form attached hereto as Exhibit B , the Warrantholder shall be deemed to have become the holder of record for all purposes of the Units to which the exercise relates.
(iii) As soon as practicable after the exercise of all or part of this Warrant, the Company, at its expense (including the payment by it of any applicable issue taxes), will cause to be issued in the name of and delivered to the Warrantholder a certificate or certificates evidencing the number of duly authorized, validly issued, fully paid and nonassessable Units to which the Warrantholder shall be entitled upon such exercise, if the units of membership interests of the Company are certificated as of such time.
(iv) Any portion of this Warrant, except as otherwise provided in paragraph (b) below, shall become exercisable at the times and in the amounts set forth below (with respect to each tranche and sub-tranche of exercisability, the “Exercisability Date”) until this Warrant expires, so long as the Warrantholder is an employee of the Company or one of its subsidiaries, or Tikun Olam Holding Group LLC, a New York limited liability company (“TOHG”, and together with the Company and its subsidiaries herein referred to as the “Company Group”) as of the Exercisability Date. Except as otherwise provided in paragraphs (b)(i) through (iii) below, upon the termination of the employment by the Company Group of Warrantholder for any reason (whether by the Company Group or by Warrantholder), any portion of this Warrant that is not exercisable as of such termination shall be automatically cancelled and surrendered to the Company:
Number of Units | Exercisability Date | |
75 | September 9, 2016 | |
50 | March 9, 2017 | |
175* (15.9091 per month*) | On the 9 th day of each of April 2017 through February 2018 | |
200 | March 9, 2018 | |
100 | The Company having a valuation of $100 million or more** | |
100 | The Company having a valuation of $200 million or more** |
** For these purposes, the Company’s valuation will be equal to the pre-transaction equity value of the Company in connection with its most recently completed financing transaction.
(b) | Certain Limitations . |
(i) The portion of this Warrant that is exercisable for 75 Units on September 9, 2016 (the “75 Warrant Tranche”) shall remain exercisable by the Warrantholder or his successors or assigns for the period from the Exercisability Date until this Warrant expires regardless of whether the Warrantholder is an employee of the Company Group as of the date of such exercise, except in the following circumstances:
(A) If prior to the first anniversary of the date hereof, the employment of Warrantholder has been terminated by the Company Group “for cause” as set forth in section 9(a) of that certain Employment Agreement of even date herewith between the Company and Warrantholder (the “Employment Agreement”); or
(B) If prior to the first anniversary of the date hereof, the Warrantholder voluntarily terminates his employment with the Company Group.
(ii) If prior to the Exercisability Date for the initial 75 Warrant Tranche, the Warrantholder dies or becomes Disabled, then the 75 Warrant Tranche shall be automatically cancelled and surrendered to the Company.
(iii) Except as provided by paragraph (ii) above, if prior to the Exercisability Date for the initial 75 Warrant Tranche, the employment by the Company Group of Warrantholder has been terminated without cause as set forth in section 9(a) of the Employment Agreement, the 75 Warrant Tranche shall remain exercisable through the Expiration Date.
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(iv) The portions of this Warrant that are exercisable for 100 Units, upon the occurrence of the Company having a valuation in excess of $100 million or $200 million, respectively (collectively, the “200 Warrant Tranche”) shall remain exercisable by the Warrantholder or his successors or assigns for the period from the Exercisability Date until this Warrant expires, except if at any time the employment of Warrantholder has been terminated by the Company Group “for cause” as set forth in section 9(a) of the Employment Agreement. Any portion of the 200 Warrant Tranche that has not been exercised as of the date of such termination for cause, if such termination should occur after the second anniversary of the date hereof, shall be automatically cancelled and surrendered to the Company.
(v) This Warrant and any Units issued pursuant to this Warrant are subject to the terms and conditions of that certain Repurchase Agreement of even date herewith between the Company and the Warrantholder during the term of such agreement.
(vi) This Warrant shall become immediately exercisable upon (a) the acquisition of a majority of the voting power of the Company by a person or entity or group of persons or entities by means of any transaction or series of related transactions (including without limitation any stock acquisition, reorganization, merger or consolidation, but excluding any sale of stock for capital raising purposes); or (b) a sale or other disposition of all or substantially all of the assets of the Company (and any subsidiaries, taken as a whole) by means of any transaction or series of related transactions, except where such sale, lease or other disposition is to a wholly-owned subsidiary of the Company.
(c) Payment of Exercise Price . Payment of the Exercise Price shall be made, at the option of the Warrantholder as expressed in the Exercise Form, by the following methods:
(i) by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such aggregate Exercise Price for Warrant Units being purchased hereunder;
(ii) by instructing the Company to withhold a number of Warrant Units then issuable upon exercise of this Warrant with an aggregate fair market value (“Fair Market Value”), as determined in good faith by the Board of Directors of the Company as of the Exercise Date, equal to the aggregate Exercise Price for Warrant Units being purchased hereunder;
(iii) by surrendering to the Company (x) Warrant Units previously acquired by the Warrantholder with an aggregate Fair Market Value as of the Exercise Date equal to the aggregate Exercise Price for Warrant Units being purchased hereunder and/or (y) other securities of the Company having a value as of the Exercise Date equal to the aggregate Exercise Price for Warrant Units being purchased hereunder (which value in the case of debt securities shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred stock shall be the liquidation value thereof plus accumulated and unpaid dividends, and in the case of Units shall be the Fair Market Value thereof); or
(iv) any combination of the foregoing.
In the event of any withholding of Warrant Units or surrender of other equity securities pursuant to clause (c)(ii), or (iii) above where the number of Units whose value is equal to the aggregate Exercise Price is not a whole number, the number of Units withheld by or surrendered to the Company shall be rounded up to the nearest whole unit and the Company shall make a cash payment to the Warrantholder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a Unit being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a Unit being so withheld or surrendered multiplied by (y) in the case of Units, the Fair Market Value per Warrant Unit as of the Exercise Date, and, in all other cases, the value thereof as of the Exercise Date determined in accordance with clause (iii)(y) above.
2. | Issuance of Units; Reservation of Units . |
(a) The Company covenants and agrees that all Units which may be issued upon the exercise of all or part of this Warrant will, upon issuance in accordance with the terms hereof, be validly issued and free from all taxes, liens and charges with respect to the issue thereof.
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(b) The Company further covenants and agrees that if any Units to be reserved for the purpose of the issuance of Units upon the exercise of this Warrant require registration with, or approval of, any governmental authority under any federal or state law before such Units may be validly issued or delivered upon exercise, then the Company will promptly use its best efforts to effect such registration or obtain such approval, as the case may be.
3. Adjustments of Exercise Price, Number and Character of Warrant Units, and Number of Warrants .
The Exercise Price and the number and kind of securities purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the happening of the events enumerated in this Section 3.
(a) Distributions, Subdivisions and Combinations . In case the Company shall at any time on or before the Expiration Date:
(i) pay or make a distribution in Units or other securities of the Company to holders of all its outstanding Units;
(ii) subdivide or reclassify the outstanding Units into a greater number of Units;
(iii) combine the outstanding Units into a smaller number of Units; or
(iv) issue by reclassification of its Units other securities of the Company (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation),
then the number and kind of securities purchasable upon exercise of this Warrant outstanding immediately prior thereto shall be adjusted so that the Warrantholder shall be entitled to receive the kind and number of Units or other securities of the Company which the Warrantholder would have owned or have been entitled to receive after the happening of any of the events described above had this Warrant been exercised in full immediately prior to the earlier of the happening of such event or any record date in respect thereto. In the event of any adjustment of the number of Units or other securities of the Company purchasable upon the exercise of this Warrant pursuant to this Paragraph 3(a), the Exercise Price shall be adjusted to be the amount resulting from dividing the number of Units (including fractional Units) covered by this Warrant immediately after such adjustment into the total amount payable upon exercise of this Warrant in full immediately prior to such adjustment. An adjustment made pursuant to this Paragraph 3(a) shall become effective immediately after the effective date of such event retroactive to the record date for any such event. Such adjustment shall be made successively whenever any event listed above shall occur.
(b) Extraordinary Dividends . In case the Company shall at any time on or before the Expiration Date fix a record date for the issuance of rights, options, or warrants to all holders of its outstanding Units, entitling them (for a period expiring within 45 days after such record date) to subscribe for or purchase Units (or securities exchangeable for or convertible into Units) at a price per Unit (or having an exchange or conversion price per Unit, with respect to a security exchangeable for or convertible into Units) which is lower than the current Exercise Price per Unit (as defined in Paragraph 3(d) below) on such record date, then the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, of which (i) the numerator shall be the number of Units outstanding on such record date plus the number of Units which the aggregate offering price of the total number of Units so to be offered (or the aggregate initial exchange or conversion price of the exchangeable or convertible securities so to be offered) would purchase at such current Exercise Price and (ii) the denominator shall be the number of Units outstanding on such record date plus the number of additional Units to be offered for subscription or purchase (or into which the exchangeable or convertible securities so to be offered are initially exchangeable or convertible). Such adjustment shall become effective at the close of business on such record date; however, to the extent that Units (or securities exchangeable for or convertible into Units) are not delivered after the expiration of such rights, options, or warrants, the Exercise Price shall be readjusted (but only with respect to any portion of this Warrant exercised after such expiration) to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of Units (or securities exchangeable for or convertible into Units) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company and shall be described in a statement mailed to the Warrantholder. Units owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation.
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(c) Extraordinary Distributions . In case the Company shall at any time after the original date of issuance of this Warrant distribute to all holders of its Units (including any such distribution made in connection with a consolidation or merger in which the Company is the surviving corporation) evidences of its indebtedness or assets (excluding cash dividends and distributions payable out of consolidated net income or earned surplus in accordance with New York law and dividends or distributions payable in Units of stock described in Paragraph 3(a) above) or rights, options, or warrants or exchangeable or convertible securities containing the right to subscribe for or purchase Units (or securities exchangeable for or convertible into Units), then the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for such distribution by a fraction, of which (i) the numerator shall be the current Exercise Price per Unit of the portion of the evidences of indebtedness or assets so to be distributed or of such rights, options or warrants applicable to one Unit and (ii) the denominator shall be such current Exercise Price per Unit. Such adjustment shall be made whenever any such distribution is made, and shall become effective on the date of distribution retroactive to the record date for such transaction.
(d) Minimum Adjustment . Except as hereinafter provided, no adjustment of the Exercise Price hereunder shall be made if such adjustment results in a change of the Exercise Price then in effect of less than one dollar ($1.00) per unit. Any adjustment of less than one dollar ($1.00) per unit of any Exercise Price shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, together with adjustment or adjustments so carried forward, amounts to one dollar ($1.00) per unit or more. However, upon exercise of this Warrant, the Company shall make all necessary adjustments (to the nearest cent) not theretofore made to the Exercise Price up to and including the effective date upon which this Warrant is exercised.
(e) Notice of Adjustments . Whenever the Exercise Price shall be adjusted pursuant to this Section 3, the Company shall promptly deliver a certificate signed by the President or a Vice President and by the Chief Financial Officer, Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company, setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board of Directors of the Company made any determination hereunder), by first class mail postage prepaid to each Warrantholder.
(f) Capital Reorganizations and Other Reclassifications . In case of any capital reorganization of the Company, or of any reclassification of the Units (other than a reclassification, subdivision or combination of Units referred to in Paragraph 3(a)), this Warrant shall, after such capital reorganization, reclassification of Units, consolidation, merger, or sale, be immediately exercisable, upon the terms and conditions specified in this Warrant, for the kind, amount and number of Units or other securities, assets, or cash to which a holder of the number of Units purchasable (at the time of such capital reorganization, reclassification of Units, consolidation, merger or sale) upon exercise of this Warrant would have been entitled to receive upon such capital reorganization, reclassification of Units, consolidation, merger, or sale; and in any such case, if necessary, the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Warrantholder shall be appropriately adjusted so as to be applicable, as nearly equivalent as possible, to any Units or other securities, assets, or cash thereafter deliverable on the exercise of this Warrant. The Company shall not effect any such consolidation, merger, or sale, unless prior to or simultaneously with the consummation thereof the successor corporation or entity (if other than the Company) resulting from such consolidation or merger or the corporation or entity purchasing such assets or other appropriate corporation or entity shall assume, by written instrument, the obligation to deliver to the Warrantholder such Units, securities, assets, or cash as, in accordance with the foregoing provisions, such holders may be entitled to purchase and the other obligations hereunder. The subdivision or combination of Units at any time outstanding into a greater or lesser number of Units shall not be deemed to be a reclassification of the Units for purposes of this Paragraph 3(f).
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(g) Adjustments to Other Securities . In the event that at any time, as a result of an adjustment made pursuant to this Section 3, the Warrantholder shall become entitled to purchase any Units or securities of the Company other than the Units, thereafter the number of such other Units or securities so purchasable upon exercise of each Warrant and the exercise price for such Units or securities shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as possible to the provisions with respect to the Units contained in Paragraphs 3(a) through (d), inclusive.
(h) Deferral of Issuance of Additional Units in Certain Circumstances . In any case in which this Section 3 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event issuing to the Warrantholder exercised after such record date the Units, if any, issuable upon such exercise over and above the Units, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided , however , that the Company shall deliver as soon as practicable to such holder a due bill or other appropriate instrument provided by the Company evidencing such holder’s right to receive such additional Units upon the occurrence of the event requiring such adjustment.
(i) Initial Investment . Notwithstanding the foregoing, the number of Units for which this Warrant shall be exercisable and the Exercise Price shall not adjusted in connection with the initial investment of up to $500,000 by or on behalf of the member of the Company.
4. Replacement of Securities . If this Warrant shall be lost, stolen, mutilated or destroyed, the Company shall, on such terms as to indemnity or otherwise as the Company may in its discretion reasonably impose, issue a new warrant of like tenor or date representing in the aggregate the right to subscribe for and purchase the number of Units which may be subscribed for and purchased hereunder. Any such new warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed warrant shall be at any time enforceable by anyone.
5. Registration . This Warrant shall be numbered and shall be registered in a register (the “Warrant Register”) maintained at the Company Offices as they are issued. The Warrant Register shall list the name, address and Social Security or other Federal Identification Number, if any, of all warrantholders. The Company shall be entitled to treat the Warrantholder as set forth in the Warrant Register as the owner in fact of this Warrant as set forth therein for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Warrant on the part of any other person, and shall not be liable for any registration or transfer of this Warrant that is registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration of transfer, or with such knowledge of such facts that its participation therein amounts to bad faith.
6. Transfer . NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT HAS BEEN ACQUIRED, AND ANY UNITS OR ANY OTHER SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE REQUIRED TO BE ACQUIRED, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR THIS WARRANT AND/OR SUCH UNITS OR OTHER SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THIS WARRANT AND SUCH UNITS OR OTHER SECURITIES TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND SUCH STATE SECURITIES LAWS.
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7. Exchange of Warrant . This Warrant may be exchanged for another warrant entitling the Warrantholder thereof to purchase a like aggregate number of Units as this Warrant entitles such Warrantholder to purchase. A Warrantholder desiring to so exchange this Warrant shall make such request in writing delivered to the Company, and shall surrender this Warrant therewith. Thereupon, the Company shall execute and deliver to the person entitled thereto a new warrant or warrants, as the case may be, as so requested.
8. Notices . All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand, messenger or courier service addressed:
If to the Company:
TO PHARMACEUTICALS LLC
One Old Country Road
Carle Place, New York 11514
Fax: (646) 786–4005
Email: barryfarkas1@gmail.com
Attention: Barry Farkas
With a copy to:
Abrams, Fensterman, Fensterman,
Eisman, Formato, Ferrara & Wolf, LLP
1111 Marcus Avenue, Suite 107
Lake Success, New York 11042
Telephone: (516) 328-2300
Facsimile: (516) 328-6638
Attention: Neil M. Kaufman
Email: nkaufman@abramslaw.com
If to the Warrantholder:
Sidney Taubenfeld
247 West 87th Street, Apt. 7G
New York, New York 10024
Email: staub18@yahoo.com
With a copy to:
Michael Schneider, Esq.
11 East 44 th Street – 19 th Fl.
New York, New York 10017
Telephone: (212) 888-2100
Facsimile: (646) 461-1781
Email: michael@mslaw-us.com
Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one business day after deposit with the courier), or (ii) if sent via mail, at the earlier of its receipt or five (5) days after the same has been deposited in a regularly-maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile, upon confirmation of facsimile transfer, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day, or (iv) if sent via electronic mail, upon its delivery, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day.
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9. Miscellaneous . This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant is deemed to have been delivered in the State of New York and shall be construed and enforced in accordance with and governed by the laws of such State, without regard to its conflicts of laws principles. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.
10. Expiration . Unless as hereinafter provided, the right to exercise this Warrant shall expire at the Expiration Date.
[Signature Page Follows]
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TO PHARMACEUTICALS LLC
[SIGNATURE PAGE TO WARRANT TO PURCHASE UNITS
Dated: March 9, 2015
TO PHARMACUETICALS LLC | |||
B y: TO HOLDING GROUP LLC , Manager | |||
By: TO INVESTOR LLC , Manager | |||
By: | /s/ Berel Farkas | ||
Name: | Berel Farkas | ||
Title: | Authorize Signatory | ||
EMPLOYEE: | |||
/s/ Sidney Taubenfeld | |||
Sidney Taubenfeld |
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EXHIBIT A
EXERCISE FORM
Dated:____________________, ___ |
TO PHARMACEUTICALS LLC:
The undersigned hereby irrevocably elects to exercise the within Warrant, to the extent of purchasing __________________ Units, and hereby makes payment of the Exercise Price in payment of the actual Exercise Price therefor as follows:
¨ $_________________ by certified or official bank check payable to the order of the Company or by wire transfer.
¨ $_________________ by withholding Warrant Units issuable upon exercise of this Warrant;
¨ $_________________ by surrendering to the Company (x) $__________ for Warrant Units previously acquired by the Warrantholder, and/or (y) $_____________ for other securities of the Company.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name: | ||
(Please type or print in block letters) | ||
Taxpayer Identification Number: | ||
Address: | ||
Signature: | ||
(Signature must conform in all respects to the name of the Warrantholder as set forth on the face of this Warrant) |
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EXHIBIT B
JOINDER TO OPERATING AGREEMENT
OF TO PHARMACEUTICALS LLC
This JOINDER (the “ Joinder ”) to Operating Agreement of TO Pharmaceuticals LLC, a Delaware limited liability company (the “ Company ”), dated as of October 21, 2015, as amended or restated from time to time (the “ Agreement ”), is made and entered into as of the date below, by and between the Company and the unitholder listed below (“ Unitholder ”). Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Agreement.
WHEREAS, on the date hereof, Unitholder has acquired certain Units, and the Agreement and the Company require Unitholder, as a holder of such Interest, to become a party to the Agreement, and Unitholder agrees to do so in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Joinder hereby agree as follows:
A. Agreement to be Bound . Unitholder hereby (i) acknowledges that he/she/it has received and reviewed a complete copy of the Agreement and (ii) agrees that upon execution of this Joinder, he/she/it shall become a party to the Agreement and shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Agreement as though an original party thereto and shall be deemed, and is hereby admitted as, a Member for all purposes thereof and entitled to all the rights incidental thereto.
B. Governing Law . This Agreement and the rights of the parties hereunder shall be interpreted in accordance with the laws of the State of Delaware, and all rights and remedies shall be governed by such laws without regard to principles of conflicts of laws.
C. Headings; Counterparts . The headings of this Joinder are inserted for convenience only and do not constitute a part of this Joinder. This Joinder may be executed in multiple counterparts (and may be transmitted via facsimile or other electronic submission) each of which shall be deemed to be an original and all of which taken together shall constitute one and the same agreement
IN WITNESS WHEREOF, the parties hereto have executed this Joinder to the Operating Agreement of TO Pharmaceuticals LLC as of the date set forth below.
UNITHOLDER: | UNITHOLDER: | ||||
If an Entity: | If an Individual: | ||||
By: | |||||
Name: | Name: | ||||
Title: | Date: | ||||
Date: | Address: | ||||
Address: | |||||
TO PHARMACEUTICALS LLC: | FOR COMPANY USE ONLY: | ||||
By: | Number of Units: | ||||
Name: | Class of Units: | ||||
Title: | Capital Contribution: | ||||
Date: |
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Exhibit 10.20
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS.
VOID AFTER 5:00 P.M. ON NOVEMBER 1, 2023
TO PHARMACEUTICALS LLC
WARRANT TO PURCHASE UNITS
New York, New York
Certificate No. 2
THIS IS TO CERTIFY THAT, for value received, Bernard Sucher, an individual residing at 715 Sevilla Avenue, Coral Gables, Florida 33134-5627 (the “Warrantholder”), is entitled, subject to the provisions and upon the terms and conditions set forth herein, to purchase from TO Pharmaceuticals LLC, a Delaware limited liability (the “Company”), up to 5,593 Class A Units (the “Warrant Units”) of the Company (“Units”), at an exercise price equal to $15.11 per Unit (the “Exercise Price”) at the times and in the manner set forth below.
As provided herein, the Exercise Price and the number of Warrant Units which may be purchased upon the exercise of this Warrant are, upon the happening of certain events, subject to modification and adjustment.
The rights of the registered holder of this Warrant shall be subject to the following further terms and conditions:
1. | Exercise of Warrant; Payment of Exercise Price . |
(a) | Exercise of Warrant . |
(i) While this Warrant remains outstanding, this Warrant shall be fully exercisable, in whole or in part, as of the date hereof (the “Exercisability Date”), upon submission by the Warrantholder to the Company of the exercise form attached as Exhibit A hereto (the “Exercise Form”) duly executed by the Warrantholder or by the Warrantholder’s duly authorized attorney-in-fact, at the principal office of the Company, or at such other office or agency in the United States as the Company may designate by notice in writing to the Warrantholder (in either event, the “Company Offices”), accompanied by payment in accordance with Section 1(b), of the aggregate Exercise Price payable for the Warrant Units being purchased. If the Warrantholder exercises the Warrant for fewer than all of the Warrant Units issuable in accordance with this Warrant, the Company shall, upon each exercise prior to the Expiration Date, execute and deliver to the Warrantholder a new Warrant (dated as of the date hereof) evidencing the balance of the Units that remain subject to issuance upon the exercise of this Warrant. This Warrant shall expire on the fifth (5 th ) anniversary of the date hereof (the “Expiration Date”), and thereupon the Warrantholder shall surrender this Warrant.
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(ii) On the date of exercise of this Warrant, upon the Warrantholder exercising the same in compliance with the terms hereof, and if previous to such exercise the Warrantholder is not a party to the operating agreement of the Company, upon the execution and delivery to the Company of the joinder agreement in the form attached hereto as Exhibit B , the Warrantholder shall be deemed to have become the holder of record for all purposes of the Units to which the exercise relates.
(iii) As soon as practicable after the exercise of all or part of this Warrant, the Company, at its expense (including the payment by it of any applicable issue taxes), will cause to be issued in the name of and delivered to the Warrantholder a certificate or certificates evidencing the number of duly authorized, validly issued, fully paid and nonassessable Units to which the Warrantholder shall be entitled upon such exercise, if the units of membership interests of the Company are certificated as of such time.
(b) Payment of Exercise Price . Payment of the Exercise Price shall be made, at the option of the Warrantholder as expressed in the Exercise Form, by the following methods:
(i) by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such aggregate Exercise Price for Warrant Units being purchased hereunder;
(ii) by instructing the Company to withhold a number of Warrant Units then issuable upon exercise of this Warrant with an aggregate fair market value (“Fair Market Value”), as determined in good faith by the Board of Managers of the Company as of the Exercise Date, equal to the aggregate Exercise Price for Warrant Units being purchased hereunder;
(iii) by surrendering to the Company (x) Warrant Units previously acquired by the Warrantholder with an aggregate Fair Market Value as of the Exercise Date equal to the aggregate Exercise Price for Warrant Units being purchased hereunder and/or (y) other securities of the Company having a value as of the Exercise Date equal to the aggregate Exercise Price for Warrant Units being purchased hereunder (which value in the case of debt securities shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred units shall be the liquidation value thereof plus accumulated and unpaid distributions, and in the case of Units shall be the Fair Market Value thereof); or
(iv) any combination of the foregoing.
In the event of any withholding of Warrant Units or surrender of other equity securities pursuant to clause (b)(ii) or (iii) above where the number of Units whose value is equal to the aggregate Exercise Price is not a whole number, the number of Units withheld by or surrendered to the Company shall be rounded up to the nearest whole Unit and the Company shall make a cash payment to the Warrantholder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a Unit being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a Unit being so withheld or surrendered multiplied by (y) in the case of Units, the Fair Market Value per Warrant Unit as of the Exercise Date, and, in all other cases, the value thereof as of the Exercise Date determined in accordance with clause (iii)(y) above.
2. | Issuance of Units; Reservation of Units . |
(a) The Company covenants and agrees that all Units which may be issued upon the exercise of all or part of this Warrant will, upon issuance in accordance with the terms hereof, be validly issued and free from all taxes, liens and charges with respect to the issue thereof.
(b) The Company further covenants and agrees that if any Units to be reserved for the purpose of the issuance of Units upon the exercise of this Warrant require registration with, or approval of, any governmental authority under any federal or state law before such Units may be validly issued or delivered upon exercise, then the Company will promptly use its best efforts to effect such registration or obtain such approval, as the case may be.
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3. | Adjustments of Exercise Price, Number and Character of Warrant Units, and Number of Warrants . |
The Exercise Price and the number and kind of securities purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the happening of the events enumerated in this Section 3.
(a) Distributions, Subdivisions and Combinations . In case the Company shall at any time on or before the Expiration Date:
(i) pay or make a distribution in Units or other securities of the Company to holders of all its outstanding Units;
(ii) subdivide or reclassify the outstanding Units into a greater number of Units;
(iii) combine the outstanding Units into a smaller number of Units; or
(iv) issue by reclassification of its Units other securities of the Company (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation),
then the number and kind of securities purchasable upon exercise of this Warrant outstanding immediately prior thereto shall be adjusted so that the Warrantholder shall be entitled to receive the kind and number of Units or other securities of the Company which the Warrantholder would have owned or have been entitled to receive after the happening of any of the events described above had this Warrant been exercised in full immediately prior to the earlier of the happening of such event or any record date in respect thereto. In the event of any adjustment of the number of Units or other securities of the Company purchasable upon the exercise of this Warrant pursuant to this Paragraph 3(a), the Exercise Price shall be adjusted to be the amount resulting from dividing the number of Units (including fractional Units) covered by this Warrant immediately after such adjustment into the total amount payable upon exercise of this Warrant in full immediately prior to such adjustment. An adjustment made pursuant to this Paragraph 3(a) shall become effective immediately after the effective date of such event retroactive to the record date for any such event. Such adjustment shall be made successively whenever any event listed above shall occur.
(b) Extraordinary Distributions .
(i) In case the Company shall at any time on or before the Expiration Date fix a record date for the issuance of rights, options, or warrants to all holders of its outstanding Units, entitling them (for a period expiring within 45 days after such record date) to subscribe for or purchase Units (or securities exchangeable for or convertible into Units) at a price per Unit (or having an exchange or conversion price per Unit, with respect to a security exchangeable for or convertible into Units) which is lower than the current Exercise Price per Unit (as defined in Paragraph 3(d) below) on such record date, then the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, of which (i) the numerator shall be the number of Units outstanding on such record date plus the number of Units which the aggregate offering price of the total number of Units so to be offered (or the aggregate initial exchange or conversion price of the exchangeable or convertible securities so to be offered) would purchase at such current Exercise Price and (ii) the denominator shall be the number of Units outstanding on such record date plus the number of additional Units to be offered for subscription or purchase (or into which the exchangeable or convertible securities so to be offered are initially exchangeable or convertible). Such adjustment shall become effective at the close of business on such record date; however, to the extent that Units (or securities exchangeable for or convertible into Units) are not delivered after the expiration of such rights, options, or warrants, the Exercise Price shall be readjusted (but only with respect to any portion of this Warrant exercised after such expiration) to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of Units (or securities exchangeable for or convertible into Units) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Managers of the Company and shall be described in a statement mailed to the Warrantholder. Units owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation.
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(ii) In case the Company shall at any time after the original date of issuance of this Warrant distribute to all holders of its Units (including any such distribution made in connection with a consolidation or merger in which the Company is the surviving corporation) evidences of its indebtedness or assets (excluding distributions payable out of consolidated net income or earned surplus in accordance with New York law and distributions payable in Units described in Paragraph 3(a) above) or rights, options, or warrants or exchangeable or convertible securities containing the right to subscribe for or purchase Units (or securities exchangeable for or convertible into Units), then the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for such distribution by a fraction, of which (i) the numerator shall be the current Exercise Price per Unit of the portion of the evidences of indebtedness or assets so to be distributed or of such rights, options or warrants applicable to one Unit and (ii) the denominator shall be such current Exercise Price per Unit. Such adjustment shall be made whenever any such distribution is made, and shall become effective on the date of distribution retroactive to the record date for such transaction.
(c) Minimum Adjustment . Except as hereinafter provided, no adjustment of the Exercise Price hereunder shall be made if such adjustment results in a change of the Exercise Price then in effect of less than one dollar ($1.00) per Unit. Any adjustment of less than one dollar ($1.00) per Unit of any Exercise Price shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, together with adjustment or adjustments so carried forward, amounts to one dollar ($1.00) per Unit or more. However, upon exercise of this Warrant, the Company shall make all necessary adjustments (to the nearest cent) not theretofore made to the Exercise Price up to and including the effective date upon which this Warrant is exercised.
(d) Notice of Adjustments . Whenever the Exercise Price shall be adjusted pursuant to this Section 3, the Company shall promptly deliver a certificate signed by the Chief Executive Officer, President or a Vice President and by the Chief Financial Officer, Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company, setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board of Managers of the Company made any determination hereunder), in accordance with the provisions of Section 8 hereof.
(e) Capital Reorganizations and Other Reclassifications . In case of any capital reorganization of the Company, or of any reclassification of the Units (other than a reclassification, subdivision or combination of Units referred to in Paragraph 3(a)), this Warrant shall, after such capital reorganization, reclassification of Units, consolidation, merger, or sale, be immediately exercisable, upon the terms and conditions specified in this Warrant, for the kind, amount and number of Units or other securities, assets, or cash to which a holder of the number of Units purchasable (at the time of such capital reorganization, reclassification of Units, consolidation, merger or sale) upon exercise of this Warrant would have been entitled to receive upon such capital reorganization, reclassification of Units, consolidation, merger, or sale; and in any such case, if necessary, the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Warrantholder shall be appropriately adjusted so as to be applicable, as nearly equivalent as possible, to any Units or other securities, assets, or cash thereafter deliverable on the exercise of this Warrant. The Company shall not effect any such consolidation, merger, or sale, unless prior to or simultaneously with the consummation thereof the successor corporation or entity (if other than the Company) resulting from such consolidation or merger or the corporation or entity purchasing such assets or other appropriate corporation or entity shall assume, by written instrument, the obligation to deliver to the Warrantholder such Units, securities, assets, or cash as, in accordance with the foregoing provisions, such holders may be entitled to purchase and the other obligations hereunder. The subdivision or combination of Units at any time outstanding into a greater or lesser number of Units shall not be deemed to be a reclassification of the Units for purposes of this Paragraph 3(f).
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(f) Adjustments to Other Securities . In the event that at any time, as a result of an adjustment made pursuant to this Section 3, the Warrantholder shall become entitled to purchase any Units or securities of the Company other than the Units, thereafter the number of such other Units or securities so purchasable upon exercise of each Warrant and the exercise price for such Units or securities shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as possible to the provisions with respect to the Units contained in Paragraphs 3(a) through (c), inclusive.
(g) Deferral of Issuance of Additional Units in Certain Circumstances . In any case in which this Section 3 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event issuing to the Warrantholder exercised after such record date the Units, if any, issuable upon such exercise over and above the Units, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided , however , that the Company shall deliver as soon as practicable to such holder a due bill or other appropriate instrument provided by the Company evidencing such holder’s right to receive such additional Units upon the occurrence of the event requiring such adjustment.
4. Replacement of Securities . If this Warrant shall be lost, stolen, mutilated or destroyed, the Company shall, on such terms as to indemnity or otherwise as the Company may in its discretion reasonably impose, issue a new warrant of like tenor or date representing in the aggregate the right to subscribe for and purchase the number of Units which may be subscribed for and purchased hereunder. Any such new warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed warrant shall be at any time enforceable by anyone.
5. Registration . This Warrant shall be numbered and shall be registered in a register (the “Warrant Register”) maintained at the offices of the Company as they are issued. The Warrant Register shall list the name, address and Social Security or other Federal Identification Number, if any, of all warrantholders. The Company shall be entitled to treat the Warrantholder as set forth in the Warrant Register as the owner in fact of this Warrant as set forth therein for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Warrant on the part of any other person, and shall not be liable for any registration or transfer of this Warrant that is registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration of transfer, or with such knowledge of such facts that its participation therein amounts to bad faith.
6. Transfer . NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT HAS BEEN ACQUIRED, AND ANY UNITS OR ANY OTHER SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE REQUIRED TO BE ACQUIRED, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR THIS WARRANT AND/OR SUCH UNITS OR OTHER SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THIS WARRANT AND SUCH UNITS OR OTHER SECURITIES TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND SUCH STATE SECURITIES LAWS.
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7. Exchange of Warrant . This Warrant may be exchanged for another warrant entitling the Warrantholder thereof to purchase a like aggregate number of Units as this Warrant entitles such Warrantholder to purchase. A Warrantholder desiring to so exchange this Warrant shall make such request in writing delivered to the Company, and shall surrender this Warrant therewith. Thereupon, the Company shall execute and deliver to the person entitled thereto a new warrant or warrants, as the case may be, as so requested.
8. Notices . All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand, messenger or courier service addressed:
If to the Company:
TO PHARMACEUTICALS LLC
77 Water Street, 8 th Floor
New York, New York 10005
Email: seth@katanassociates.com
Attention: CEO
With a copy to:
Kaufman & Associates, LLC
190 Motor Parkway, Suite 202
Hauppauge, New York 11788
Telephone: (631) 972-0042
Facsimile: (631) 410-1007
Attention: Neil M. Kaufman
Email: nkaufman@kaufman-associates.com
If to the Warrantholder:
Bernard Sucher
715 Sevilla Avenue
Coral Gables, Florida 33134-5627
Email: bernie@tikunolam.com
Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one business day after deposit with the courier), or (ii) if sent via mail, at the earlier of its receipt or five (5) days after the same has been deposited in a regularly-maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile, upon confirmation of facsimile transfer, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day, or (iv) if sent via electronic mail, upon its delivery, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day.
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9. Miscellaneous . This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant is deemed to have been delivered in the State of New York and shall be construed and enforced in accordance with and governed by the laws of such State, without regard to its conflicts of laws principles. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.
10. Expiration . Unless as hereinafter provided, the right to exercise this Warrant shall expire at the Expiration Date.
[Signature Page Follows]
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Dated: November 1, 2018
TO PHARMACEUTICALS LLC | ||
By: | /s/ Seth Yakatan | |
Seth Yakatan | ||
Chief Executive Officer |
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EXHIBIT A
EXERCISE FORM
Dated:___________________________ |
TO: TO PHARMACEUTICALS LLC:
The undersigned hereby irrevocably elects to exercise the within Warrant, to the extent of purchasing _____________ Units, and hereby makes payment of the Exercise Price in payment of the actual Exercise Price therefor as follows:
¨ $___________________ by certified or official bank check payable to the order of the Company or by wire transfer.
¨ $________________ by withholding Warrant Units issuable upon exercise of this Warrant;
¨ $_____________ by surrendering to the Company (x) $__________ for Warrant Units previously acquired by the Warrantholder, and/or (y) $_______ for other securities of the Company.
INSTRUCTIONS FOR REGISTRATION OF UNITS
Name: | ||
(Please type or print in block letters) | ||
Taxpayer Identification Number: | ||
Address: | ||
Signature: | ||
(Signature must conform in all respects to the name of the Warrantholder as set forth on the face of this Warrant) |
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EXHIBIT B
JOINDER TO
OPERATING AGREEMENT
This JOINDER (the “ Joinder ”) to the Amended and Restated Operating Agreement of TO Pharmaceuticals LLC, a Delaware limited liability company (the “ Company ”), dated as of July 13, 2018, as amended or restated from time to time (the “ Agreement ”), is made and entered into as of the date below, by and between the Company and the undersigned (“ Holder ”). Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Agreement.
WHEREAS , on the date hereof, Holder has acquired ______ Class A Units and the Agreement and the Company require Holder, as a holder of such Interest, to become a party to the Agreement, and Holder agrees to do so in accordance with the terms hereof.
NOW, THEREFORE , in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Joinder hereby agree as follows:
A. | Agreement to be Bound . Holder hereby (i) acknowledges that he/she/it has received and reviewed a complete copy of the Agreement and (ii) agrees that upon execution of this Joinder, he/she/it shall become a party to the Agreement and shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Agreement as though an original party thereto and shall be deemed, and is hereby admitted as, a Member for all purposes thereof and entitled to all the rights incidental thereto. |
B. | Members Schedule . For purposes of Exhibit A to the Agreement, the name, address, capital account, Allocation Percentages and number of Membership Units of the Holder are as follows: |
Name of Member | Capital | Allocation | Membership | ||||||
and Address | Account | Percentage | Units | ||||||
[________________] | $ | ________ | __ | % | [_____] |
C. | Governing Law . This Agreement and the rights of the parties hereunder shall be interpreted in accordance with the laws of the State of Delaware, and all rights and remedies shall be governed by such laws without regard to principles of conflicts of laws. |
D. | Counterparts . This Joinder may be executed in multiple counterparts (and may be transmitted via facsimile or other electronic submission) each of which shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. |
E. | Descriptive Headings . The descriptive headings of this Joinder are inserted for convenience only and do not constitute a part of this Joinder. |
[ SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF , the parties hereto have executed this Joinder to the Operating Agreement of TO Pharmaceuticals LLC as of the date set forth in the introductory paragraph hereof.
TO Pharmaceuticals LLC | ||
By: | ||
Name: | ||
Title: | ||
Holder: | ||
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Exhibit 10.21
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS.
VOID AFTER 5:00 P.M. ON NOVEMBER 1, 2023
TO PHARMACEUTICALS LLC
WARRANT TO PURCHASE UNITS
New York, New York
Certificate No. 3
THIS IS TO CERTIFY THAT, for value received, Bernard Sucher, an individual residing at 715 Sevilla Avenue, Coral Gables, Florida 33134-5627 (the “Warrantholder”), is entitled, subject to the provisions and upon the terms and conditions set forth herein, to purchase from TO Pharmaceuticals LLC, a Delaware limited liability (the “Company”), up to 5,594 Class A Units (the “Warrant Units”) of the Company (“Units”), at an exercise price equal to $45.32 per Unit (the “Exercise Price”) at the times and in the manner set forth below.
As provided herein, the Exercise Price and the number of Warrant Units which may be purchased upon the exercise of this Warrant are, upon the happening of certain events, subject to modification and adjustment.
The rights of the registered holder of this Warrant shall be subject to the following further terms and conditions:
1. | Exercise of Warrant; Payment of Exercise Price . |
(a) | Exercise of Warrant . |
(i) While this Warrant remains outstanding, this Warrant shall be fully exercisable, in whole or in part, as of the date hereof (the “Exercisability Date”), upon submission by the Warrantholder to the Company of the exercise form attached as Exhibit A hereto (the “Exercise Form”) duly executed by the Warrantholder or by the Warrantholder’s duly authorized attorney-in-fact, at the principal office of the Company, or at such other office or agency in the United States as the Company may designate by notice in writing to the Warrantholder (in either event, the “Company Offices”), accompanied by payment in accordance with Section 1(b), of the aggregate Exercise Price payable for the Warrant Units being purchased. If the Warrantholder exercises the Warrant for fewer than all of the Warrant Units issuable in accordance with this Warrant, the Company shall, upon each exercise prior to the Expiration Date, execute and deliver to the Warrantholder a new Warrant (dated as of the date hereof) evidencing the balance of the Units that remain subject to issuance upon the exercise of this Warrant. This Warrant shall expire on the fifth (5 th ) anniversary of the date hereof (the “Expiration Date”), and thereupon the Warrantholder shall surrender this Warrant.
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(ii) On the date of exercise of this Warrant, upon the Warrantholder exercising the same in compliance with the terms hereof, and if previous to such exercise the Warrantholder is not a party to the operating agreement of the Company, upon the execution and delivery to the Company of the joinder agreement in the form attached hereto as Exhibit B , the Warrantholder shall be deemed to have become the holder of record for all purposes of the Units to which the exercise relates.
(iii) As soon as practicable after the exercise of all or part of this Warrant, the Company, at its expense (including the payment by it of any applicable issue taxes), will cause to be issued in the name of and delivered to the Warrantholder a certificate or certificates evidencing the number of duly authorized, validly issued, fully paid and nonassessable Units to which the Warrantholder shall be entitled upon such exercise, if the units of membership interests of the Company are certificated as of such time.
(b) Payment of Exercise Price . Payment of the Exercise Price shall be made, at the option of the Warrantholder as expressed in the Exercise Form, by the following methods:
(i) by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such aggregate Exercise Price for Warrant Units being purchased hereunder;
(ii) by instructing the Company to withhold a number of Warrant Units then issuable upon exercise of this Warrant with an aggregate fair market value (“Fair Market Value”), as determined in good faith by the Board of Managers of the Company as of the Exercise Date, equal to the aggregate Exercise Price for Warrant Units being purchased hereunder;
(iii) by surrendering to the Company (x) Warrant Units previously acquired by the Warrantholder with an aggregate Fair Market Value as of the Exercise Date equal to the aggregate Exercise Price for Warrant Units being purchased hereunder and/or (y) other securities of the Company having a value as of the Exercise Date equal to the aggregate Exercise Price for Warrant Units being purchased hereunder (which value in the case of debt securities shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred units shall be the liquidation value thereof plus accumulated and unpaid distributions, and in the case of Units shall be the Fair Market Value thereof); or
(iv) any combination of the foregoing.
In the event of any withholding of Warrant Units or surrender of other equity securities pursuant to clause (b)(ii) or (iii) above where the number of Units whose value is equal to the aggregate Exercise Price is not a whole number, the number of Units withheld by or surrendered to the Company shall be rounded up to the nearest whole Unit and the Company shall make a cash payment to the Warrantholder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a Unit being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a Unit being so withheld or surrendered multiplied by (y) in the case of Units, the Fair Market Value per Warrant Unit as of the Exercise Date, and, in all other cases, the value thereof as of the Exercise Date determined in accordance with clause (iii)(y) above.
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2. | Issuance of Units; Reservation of Units . |
(a) The Company covenants and agrees that all Units which may be issued upon the exercise of all or part of this Warrant will, upon issuance in accordance with the terms hereof, be validly issued and free from all taxes, liens and charges with respect to the issue thereof.
(b) The Company further covenants and agrees that if any Units to be reserved for the purpose of the issuance of Units upon the exercise of this Warrant require registration with, or approval of, any governmental authority under any federal or state law before such Units may be validly issued or delivered upon exercise, then the Company will promptly use its best efforts to effect such registration or obtain such approval, as the case may be.
3. | Adjustments of Exercise Price, Number and Character of Warrant Units, and Number of Warrants . |
The Exercise Price and the number and kind of securities purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the happening of the events enumerated in this Section 3.
(a) Distributions, Subdivisions and Combinations . In case the Company shall at any time on or before the Expiration Date:
(i) pay or make a distribution in Units or other securities of the Company to holders of all its outstanding Units;
(ii) subdivide or reclassify the outstanding Units into a greater number of Units;
(iii) combine the outstanding Units into a smaller number of Units; or
(iv) issue by reclassification of its Units other securities of the Company (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation),
then the number and kind of securities purchasable upon exercise of this Warrant outstanding immediately prior thereto shall be adjusted so that the Warrantholder shall be entitled to receive the kind and number of Units or other securities of the Company which the Warrantholder would have owned or have been entitled to receive after the happening of any of the events described above had this Warrant been exercised in full immediately prior to the earlier of the happening of such event or any record date in respect thereto. In the event of any adjustment of the number of Units or other securities of the Company purchasable upon the exercise of this Warrant pursuant to this Paragraph 3(a), the Exercise Price shall be adjusted to be the amount resulting from dividing the number of Units (including fractional Units) covered by this Warrant immediately after such adjustment into the total amount payable upon exercise of this Warrant in full immediately prior to such adjustment. An adjustment made pursuant to this Paragraph 3(a) shall become effective immediately after the effective date of such event retroactive to the record date for any such event. Such adjustment shall be made successively whenever any event listed above shall occur.
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(b) Extraordinary Distributions .
(i) In case the Company shall at any time on or before the Expiration Date fix a record date for the issuance of rights, options, or warrants to all holders of its outstanding Units, entitling them (for a period expiring within 45 days after such record date) to subscribe for or purchase Units (or securities exchangeable for or convertible into Units) at a price per Unit (or having an exchange or conversion price per Unit, with respect to a security exchangeable for or convertible into Units) which is lower than the current Exercise Price per Unit (as defined in Paragraph 3(d) below) on such record date, then the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, of which (i) the numerator shall be the number of Units outstanding on such record date plus the number of Units which the aggregate offering price of the total number of Units so to be offered (or the aggregate initial exchange or conversion price of the exchangeable or convertible securities so to be offered) would purchase at such current Exercise Price and (ii) the denominator shall be the number of Units outstanding on such record date plus the number of additional Units to be offered for subscription or purchase (or into which the exchangeable or convertible securities so to be offered are initially exchangeable or convertible). Such adjustment shall become effective at the close of business on such record date; however, to the extent that Units (or securities exchangeable for or convertible into Units) are not delivered after the expiration of such rights, options, or warrants, the Exercise Price shall be readjusted (but only with respect to any portion of this Warrant exercised after such expiration) to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options, or warrants been made upon the basis of delivery of only the number of Units (or securities exchangeable for or convertible into Units) actually issued. In case any subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Managers of the Company and shall be described in a statement mailed to the Warrantholder. Units owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation.
(ii) In case the Company shall at any time after the original date of issuance of this Warrant distribute to all holders of its Units (including any such distribution made in connection with a consolidation or merger in which the Company is the surviving corporation) evidences of its indebtedness or assets (excluding distributions payable out of consolidated net income or earned surplus in accordance with New York law and distributions payable in Units described in Paragraph 3(a) above) or rights, options, or warrants or exchangeable or convertible securities containing the right to subscribe for or purchase Units (or securities exchangeable for or convertible into Units), then the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date for such distribution by a fraction, of which (i) the numerator shall be the current Exercise Price per Unit of the portion of the evidences of indebtedness or assets so to be distributed or of such rights, options or warrants applicable to one Unit and (ii) the denominator shall be such current Exercise Price per Unit. Such adjustment shall be made whenever any such distribution is made, and shall become effective on the date of distribution retroactive to the record date for such transaction.
(c) Minimum Adjustment . Except as hereinafter provided, no adjustment of the Exercise Price hereunder shall be made if such adjustment results in a change of the Exercise Price then in effect of less than one dollar ($1.00) per Unit. Any adjustment of less than one dollar ($1.00) per Unit of any Exercise Price shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, together with adjustment or adjustments so carried forward, amounts to one dollar ($1.00) per Unit or more. However, upon exercise of this Warrant, the Company shall make all necessary adjustments (to the nearest cent) not theretofore made to the Exercise Price up to and including the effective date upon which this Warrant is exercised.
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(d) Notice of Adjustments . Whenever the Exercise Price shall be adjusted pursuant to this Section 3, the Company shall promptly deliver a certificate signed by the Chief Executive Officer, President or a Vice President and by the Chief Financial Officer, Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company, setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board of Managers of the Company made any determination hereunder), in accordance with the provisions of Section 8 hereof.
(e) Capital Reorganizations and Other Reclassifications . In case of any capital reorganization of the Company, or of any reclassification of the Units (other than a reclassification, subdivision or combination of Units referred to in Paragraph 3(a)), this Warrant shall, after such capital reorganization, reclassification of Units, consolidation, merger, or sale, be immediately exercisable, upon the terms and conditions specified in this Warrant, for the kind, amount and number of Units or other securities, assets, or cash to which a holder of the number of Units purchasable (at the time of such capital reorganization, reclassification of Units, consolidation, merger or sale) upon exercise of this Warrant would have been entitled to receive upon such capital reorganization, reclassification of Units, consolidation, merger, or sale; and in any such case, if necessary, the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Warrantholder shall be appropriately adjusted so as to be applicable, as nearly equivalent as possible, to any Units or other securities, assets, or cash thereafter deliverable on the exercise of this Warrant. The Company shall not effect any such consolidation, merger, or sale, unless prior to or simultaneously with the consummation thereof the successor corporation or entity (if other than the Company) resulting from such consolidation or merger or the corporation or entity purchasing such assets or other appropriate corporation or entity shall assume, by written instrument, the obligation to deliver to the Warrantholder such Units, securities, assets, or cash as, in accordance with the foregoing provisions, such holders may be entitled to purchase and the other obligations hereunder. The subdivision or combination of Units at any time outstanding into a greater or lesser number of Units shall not be deemed to be a reclassification of the Units for purposes of this Paragraph 3(f).
(f) Adjustments to Other Securities . In the event that at any time, as a result of an adjustment made pursuant to this Section 3, the Warrantholder shall become entitled to purchase any Units or securities of the Company other than the Units, thereafter the number of such other Units or securities so purchasable upon exercise of each Warrant and the exercise price for such Units or securities shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as possible to the provisions with respect to the Units contained in Paragraphs 3(a) through (c), inclusive.
(g) Deferral of Issuance of Additional Units in Certain Circumstances . In any case in which this Section 3 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event issuing to the Warrantholder exercised after such record date the Units, if any, issuable upon such exercise over and above the Units, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided , however , that the Company shall deliver as soon as practicable to such holder a due bill or other appropriate instrument provided by the Company evidencing such holder’s right to receive such additional Units upon the occurrence of the event requiring such adjustment.
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4. Replacement of Securities . If this Warrant shall be lost, stolen, mutilated or destroyed, the Company shall, on such terms as to indemnity or otherwise as the Company may in its discretion reasonably impose, issue a new warrant of like tenor or date representing in the aggregate the right to subscribe for and purchase the number of Units which may be subscribed for and purchased hereunder. Any such new warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed warrant shall be at any time enforceable by anyone.
5. Registration . This Warrant shall be numbered and shall be registered in a register (the “Warrant Register”) maintained at the offices of the Company as they are issued. The Warrant Register shall list the name, address and Social Security or other Federal Identification Number, if any, of all warrantholders. The Company shall be entitled to treat the Warrantholder as set forth in the Warrant Register as the owner in fact of this Warrant as set forth therein for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Warrant on the part of any other person, and shall not be liable for any registration or transfer of this Warrant that is registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration of transfer, or with such knowledge of such facts that its participation therein amounts to bad faith.
6. Transfer . NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT HAS BEEN ACQUIRED, AND ANY UNITS OR ANY OTHER SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE REQUIRED TO BE ACQUIRED, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR THIS WARRANT AND/OR SUCH UNITS OR OTHER SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THIS WARRANT AND SUCH UNITS OR OTHER SECURITIES TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND SUCH STATE SECURITIES LAWS.
7. Exchange of Warrant . This Warrant may be exchanged for another warrant entitling the Warrantholder thereof to purchase a like aggregate number of Units as this Warrant entitles such Warrantholder to purchase. A Warrantholder desiring to so exchange this Warrant shall make such request in writing delivered to the Company, and shall surrender this Warrant therewith. Thereupon, the Company shall execute and deliver to the person entitled thereto a new warrant or warrants, as the case may be, as so requested.
8. Notices . All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand, messenger or courier service addressed:
If to the Company:
TO PHARMACEUTICALS LLC
77 Water Street, 8 th Floor
New York, New York 10005
Email: seth@katanassociates.com
Attention: CEO
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With a copy to:
Kaufman & Associates, LLC
190 Motor Parkway, Suite 202
Hauppauge, New York 11788
Telephone: (631) 972-0042
Facsimile: (631) 410-1007
Attention: Neil M. Kaufman
Email: nkaufman@kaufman-associates.com
If to the Warrantholder:
Bernard Sucher
715 Sevilla Avenue
Coral Gables, Florida 33134-5627
Email: bernie@tikunolam.com
Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one business day after deposit with the courier), or (ii) if sent via mail, at the earlier of its receipt or five (5) days after the same has been deposited in a regularly-maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile, upon confirmation of facsimile transfer, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day, or (iv) if sent via electronic mail, upon its delivery, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day.
9. Miscellaneous . This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant is deemed to have been delivered in the State of New York and shall be construed and enforced in accordance with and governed by the laws of such State, without regard to its conflicts of laws principles. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.
10. Expiration . Unless as hereinafter provided, the right to exercise this Warrant shall expire at the Expiration Date.
[Signature Page Follows]
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Dated: November 1, 2018
TO PHARMACEUTICALS LLC | ||
By: | /s/ Seth Yakatan | |
Seth Yakatan | ||
Chief Executive Officer |
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EXHIBIT A
EXERCISE FORM
Dated:___________________________ |
TO: TO PHARMACEUTICALS LLC:
The undersigned hereby irrevocably elects to exercise the within Warrant, to the extent of purchasing _____________ Units, and hereby makes payment of the Exercise Price in payment of the actual Exercise Price therefor as follows:
¨ $___________________ by certified or official bank check payable to the order of the Company or by wire transfer.
¨ $________________ by withholding Warrant Units issuable upon exercise of this Warrant;
¨ $_____________ by surrendering to the Company (x) $__________ for Warrant Units previously acquired by the Warrantholder, and/or (y)$_______for other securities of the Company.
INSTRUCTIONS FOR REGISTRATION OF UNITS
Name: | ||
(Please type or print in block letters) | ||
Taxpayer Identification Number: | ||
Address: | ||
Signature: | ||
(Signature must conform in all respects to the name of the Warrantholder as set forth on the face of this Warrant) |
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EXHIBIT B
JOINDER TO
OPERATING AGREEMENT
This JOINDER (the “ Joinder ”) to the Amended and Restated Operating Agreement of TO Pharmaceuticals LLC, a Delaware limited liability company (the “ Company ”), dated as of July 13, 2018, as amended or restated from time to time (the “ Agreement ”), is made and entered into as of the date below, by and between the Company and the undersigned (“ Holder ”). Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Agreement.
WHEREAS , on the date hereof, Holder has acquired ______ Class A Units and the Agreement and the Company require Holder, as a holder of such Interest, to become a party to the Agreement, and Holder agrees to do so in accordance with the terms hereof.
NOW, THEREFORE , in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Joinder hereby agree as follows:
A. | Agreement to be Bound . Holder hereby (i) acknowledges that he/she/it has received and reviewed a complete copy of the Agreement and (ii) agrees that upon execution of this Joinder, he/she/it shall become a party to the Agreement and shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Agreement as though an original party thereto and shall be deemed, and is hereby admitted as, a Member for all purposes thereof and entitled to all the rights incidental thereto. |
B. | Members Schedule . For purposes of Exhibit A to the Agreement, the name, address, capital account, Allocation Percentages and number of Membership Units of the Holder are as follows: |
Name of Member | Capital | Allocation | Membership | ||||||
and Address | Account | Percentage | Units | ||||||
[________________] | $ | ________ | __ | % | [_____] |
C. | Governing Law . This Agreement and the rights of the parties hereunder shall be interpreted in accordance with the laws of the State of Delaware, and all rights and remedies shall be governed by such laws without regard to principles of conflicts of laws. |
D. | Counterparts . This Joinder may be executed in multiple counterparts (and may be transmitted via facsimile or other electronic submission) each of which shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. |
E. | Descriptive Headings . The descriptive headings of this Joinder are inserted for convenience only and do not constitute a part of this Joinder. |
[ SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF , the parties hereto have executed this Joinder to the Operating Agreement of TO Pharmaceuticals LLC as of the date set forth in the introductory paragraph hereof.
TO Pharmaceuticals LLC | ||
By: | ||
Name: | ||
Title: | ||
Holder: | ||
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Exhibit 10.22
AQUAMED TECHNOLOGIES, INC.
2019 LONG-TERM INCENTIVE PLAN
The AquaMed Technologies, Inc. 2019 Long-Term Incentive Plan (the “ Plan ”) was adopted by the Board of Directors of AquaMed Technologies, Inc., a Delaware corporation (the “ Company ”), effective as of _____________ (the “ Effective Date ”), subject to approval by the Company’s stockholders.
Article 1
PURPOSE
The purpose of the Plan is to attract and retain the services of key Employees, key Contractors, and Outside Directors of the Company and its Subsidiaries and to provide such persons with a proprietary interest in the Company through the granting of Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Awards, Dividend Equivalent Rights, and Other Awards, whether granted singly, or in combination, or in tandem, that will:
(a) increase the interest of such persons in the Company’s welfare;
(b) furnish an incentive to such persons to continue their services for the Company or its Subsidiaries; and
(c) provide a means through which the Company may attract able persons as Employees, Contractors, and Outside Directors.
With respect to Reporting Participants, the Plan and all transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 promulgated under the Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so comply, such provision or action shall be deemed null and void ab initio , to the extent permitted by law and deemed advisable by the Committee.
Article 2
DEFINITIONS
For the purpose of the Plan, unless the context requires otherwise, the following terms shall have the meanings indicated:
2.1 “ Applicable Law ” means all legal requirements relating to the administration of equity incentive plans and the issuance and distribution of shares of Common Stock, if any, under applicable corporate laws, applicable securities laws, the rules of any exchange or inter-dealer quotation system upon which the Company’s securities are listed or quoted, the rules of any foreign jurisdiction applicable to Incentives granted to residents therein, and any other applicable law, rule or restriction.
2.2 “ Authorized Officer ” is defined in Section 3.2(b) hereof.
2.3 “ Award ” means the grant of any Incentive Stock Option, Nonqualified Stock Option, Restricted Stock, SAR, Restricted Stock Unit, Performance Award, Dividend Equivalent Right or Other Award, whether granted singly or in combination or in tandem (each individually referred to herein as an “ Incentive ”).
2.4 “ Award Agreement ” means a written agreement between a Participant and the Company which sets out the terms of the grant of an Award.
2.5 “ Award Period ” means the period set forth in the Award Agreement during which one or more Incentives granted under an Award may be exercised.
2.6 “ Board ” means the board of directors of the Company.
2.7 “ Change in Control ” means any of the following, except as otherwise provided herein: (i) any consolidation, merger or share exchange of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company’s Common Stock would be converted into cash, securities or other property, other than a consolidation, merger or share exchange of the Company in which the holders of the Company’s Common Stock immediately prior to such transaction have the same proportionate ownership of Common Stock of the surviving corporation immediately after such transaction; (ii) any sale, lease, exchange or other transfer (excluding transfer by way of pledge or hypothecation) in one transaction or a series of related transactions, of all or substantially all of the assets of the Company; (iii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; (iv) the cessation of control (by virtue of their not constituting a majority of directors) of the Board by the individuals (the “ Continuing Directors ”) who (x) at the date of this Plan were directors or (y) become directors after the date of this Plan and whose election or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3 rds ) of the directors then in office who were directors at the date of this Plan or whose election or nomination for election was previously so approved; (v) the acquisition of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of an aggregate of fifty percent (50%) or more of the voting power of the Company’s outstanding voting securities by any person or group (as such term is used in Rule 13d-5 under the Exchange Act) who beneficially owned less than fifty percent (50%) of the voting power of the Company’s outstanding voting securities on the date of this Plan; provided , however , that notwithstanding the foregoing, an acquisition shall not constitute a Change in Control hereunder if the acquirer is (x) a trustee or other fiduciary holding securities under an employee benefit plan of the Company and acting in such capacity, (y) a Subsidiary of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of voting securities of the Company or (z) any other person whose acquisition of shares of voting securities is approved in advance by a majority of the Continuing Directors; or (vi) in a Title 11 bankruptcy proceeding, the appointment of a trustee or the conversion of a case involving the Company to a case under Chapter 7.
Notwithstanding the foregoing provisions of this Section 2.7 , if an Award issued under the Plan is subject to Section 409A of the Code, then an event shall not constitute a Change in Control for purposes of such Award under the Plan unless such event also constitutes a change in the Company’s ownership, its effective control or the ownership of a substantial portion of its assets within the meaning of Section 409A of the Code.
2.8 “ Claim ” means any claim, liability or obligation of any nature, arising out of or relating to this Plan or an alleged breach of this Plan or an Award Agreement.
2.9 “ Code ” means the United States Internal Revenue Code of 1986, as amended.
2.10 “ Committee ” means the committee appointed or designated by the Board to administer the Plan in accordance with Article 3 of this Plan.
2.11 “ Common Stock ” means the common stock, par value $0.001 per share, which the Company is currently authorized to issue or may in the future be authorized to issue, or any securities into which or for which the common stock of the Company may be converted or exchanged, as the case may be, pursuant to the terms of this Plan.
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2.12 “ Company ” means AquaMed Technologies, Inc., a Delaware corporation, and any successor entity.
2.13 “ Contractor ” means any natural person, who is not an Employee, rendering bona fide services to the Company or a Subsidiary, with compensation, pursuant to a written independent contractor agreement between such person (or any entity employing such person) and the Company or a Subsidiary, provided that such services are not rendered in connection with the offer or sale of securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.
2.14 “ Corporation ” means any entity that (i) is defined as a corporation under Section 7701 of the Code and (ii) is the Company or is in an unbroken chain of corporations (other than the Company) beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of stock in one of the other corporations in the chain. For purposes of clause (ii) hereof, an entity shall be treated as a “corporation” if it satisfies the definition of a corporation under Section 7701 of the Code.
2.15 “ Date of Grant ” means the effective date on which an Award is made to a Participant as set forth in the applicable Award Agreement; provided, however, that solely for purposes of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder, the Date of Grant of an Award shall be the date of stockholder approval of the Plan if such date is later than the effective date of such Award as set forth in the Award Agreement.
2.16 “ Dividend Equivalent Right ” means the right of the holder thereof to receive credits based on the cash dividends that would have been paid on the shares of Common Stock specified in the Award if such shares were held by the Participant to whom the Award is made.
2.17 “ Employee ” means a common law employee (as defined in accordance with the Regulations and Revenue Rulings then applicable under Section 3401(c) of the Code) of the Company or any Subsidiary of the Company; provided , however , that in the case of individuals whose employment status, by virtue of their employer or residence, is not determined under Section 3401(c) of the Code, “ Employee ” shall mean an individual treated as an employee for local payroll tax or employment purposes by the applicable employer under Applicable Law for the relevant period.
2.18 “ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended.
2.19 “ Executive Officer ” means an officer of the Company or a Subsidiary subject to Section 16 of the Exchange Act.
2.20 “ Exercise Date ” is defined in Section 8.3(b) hereof.
2.21 “ Exercise Notice ” is defined in Section 8.3(b) hereof.
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2.22 “ Fair Market Value ” means, as of a particular date, (a) if the shares of Common Stock are listed on any established national securities exchange, the closing sales price per share of Common Stock on the consolidated transaction reporting system for the principal securities exchange for the Common Stock on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported; (b) if the shares of Common Stock are not so listed, but are quoted on an automated quotation system, the closing sales price per share of Common Stock reported on the automated quotation system on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported; (c) if the Common Stock is not so listed or quoted, the mean between the closing bid and asked price on that date, or, if there are no quotations available for such date, on the last preceding date on which such quotations shall be available, as reported by the National Association of Securities Dealer, Inc.’s OTC Bulletin Board or the Pink OTC Markets, Inc. (previously known as the National Quotation Bureau, Inc.); or (d) if none of the above is applicable, such amount as may be determined by the Committee (acting on the advice of an Independent Third Party, should the Committee elect in its sole discretion to utilize an Independent Third Party for this purpose), in good faith, to be the fair market value per share of Common Stock. The determination of Fair Market Value shall, where applicable, be in compliance with Section 409A of the Code.
2.23 “ Immediate Family Members ” is defined in Section 15.8 hereof.
2.24 “ Incentive ” is defined in Section 2.3 hereof.
2.25 “ Incentive Stock Option ” means an incentive stock option within the meaning of Section 422 of the Code, granted pursuant to this Plan.
2.26 “ Independent Third Party ” means an individual or entity independent of the Company having experience in providing investment banking or similar appraisal or valuation services and with expertise generally in the valuation of securities or other property for purposes of this Plan. The Committee may utilize one or more Independent Third Parties.
2.27 “ Nonqualified Stock Option ” means a nonqualified stock option, granted pursuant to this Plan, which is not an Incentive Stock Option.
2.28 “ Option Price ” means the price which must be paid by a Participant upon exercise of a Stock Option to purchase a share of Common Stock.
2.29 “ Other Award ” means an Award issued pursuant to Section 6.9 hereof.
2.30 “ Outside Director ” means a director of the Company who is not an Employee or a Contractor.
2.31 “ Participant ” means an Employee, Contractor or an Outside Director to whom an Award is granted under this Plan.
2.32 “ Performance Award ” means an Award hereunder of cash, shares of Common Stock, units or rights based upon, payable in, or otherwise related to, Common Stock pursuant to Section 6.7 hereof.
2.33 “ Performance Goal ” means any of the Performance Criteria set forth in Section 6.10 hereof.
2.34 “ Plan ” means this AquaMed Technologies, Inc. 2019 Long-Term Incentive Plan, as amended from time to time.
2.35 “ Reporting Participant ” means a Participant who is subject to the reporting requirements of Section 16 of the Exchange Act.
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2.36 “ Restricted Stock ” means shares of Common Stock issued or transferred to a Participant pursuant to Section 6.4 of this Plan which are subject to restrictions or limitations set forth in this Plan and in the related Award Agreement.
2.37 “ Restricted Stock Units ” means units awarded to Participants pursuant to Section 6.6 hereof, which are convertible into Common Stock at such time as such units are no longer subject to restrictions as established by the Committee.
2.38 “ Restriction Period ” is defined in Section 6.4(b)(i) hereof.
2.39 “ Retirement ” means any Termination of Service solely due to retirement upon or after attainment of age sixty-five (65), or permitted early retirement as determined by the Committee.
2.40 “ SAR ” or “ S tock Appreciation Right ” means the right to receive an amount, in cash and/or Common Stock, equal to the excess of the Fair Market Value of a specified number of shares of Common Stock as of the date the SAR is exercised (or, as provided in the Award Agreement, converted) over the SAR Price for such shares.
2.41 “ SAR Price ” means the exercise price or conversion price of each share of Common Stock covered by a SAR, determined on the Date of Grant of the SAR.
2.42 “ Spread ” is defined in Section 12.4(b) hereof.
2.43 “ Stock Option ” means a Nonqualified Stock Option or an Incentive Stock Option.
2.44 “ Subsidiary ” means (i) any corporation in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of stock in one of the other corporations in the chain, (ii) any limited partnership, if the Company or any corporation described in item (i) above owns a majority of the general partnership interest and a majority of the limited partnership interests entitled to vote on the removal and replacement of the general partner, and (iii) any partnership or limited liability company, if the partners or members thereof are composed only of the Company, any corporation listed in item (i) above or any limited partnership listed in item (ii) above. “ Subsidiaries ” means more than one of any such corporations, limited partnerships, partnerships or limited liability companies.
2.45 “ Termination of Service ” occurs when a Participant who is (i) an Employee of the Company or any Subsidiary ceases to serve as an Employee of the Company and its Subsidiaries, for any reason; (ii) an Outside Director of the Company or a Subsidiary ceases to serve as a director of the Company and its Subsidiaries for any reason; or (iii) a Contractor of the Company or a Subsidiary ceases to serve as a Contractor of the Company and its Subsidiaries for any reason. Except as may be necessary or desirable to comply with applicable federal or state law, a “Termination of Service” shall not be deemed to have occurred when a Participant who is an Employee becomes an Outside Director or Contractor or vice versa. If, however, a Participant who is an Employee and who has an Incentive Stock Option ceases to be an Employee but does not suffer a Termination of Service, and if that Participant does not exercise the Incentive Stock Option within the time required under Section 422 of the Code upon ceasing to be an Employee, the Incentive Stock Option shall thereafter become a Nonqualified Stock Option. Notwithstanding the foregoing provisions of this Section 2.45 , in the event an Award issued under the Plan is subject to Section 409A of the Code, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of the Code, the definition of “Termination of Service” for purposes of such Award shall be the definition of “separation from service” provided for under Section 409A of the Code and the regulations or other guidance issued thereunder.
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2.46 “ Total and Permanent Disability ” means a Participant is qualified for long-term disability benefits under the Company’s or Subsidiary’s disability plan or insurance policy; or, if no such plan or policy is then in existence or if the Participant is not eligible to participate in such plan or policy, that the Participant, because of a physical or mental condition resulting from bodily injury, disease, or mental disorder, is unable to perform his or her duties of employment for a period of six (6) continuous months, as determined in good faith by the Committee, based upon medical reports or other evidence satisfactory to the Committee; provided that , with respect to any Incentive Stock Option, Total and Permanent Disability shall have the meaning given it under the rules governing Incentive Stock Options under the Code. Notwithstanding the foregoing provisions of this Section 2.46 , in the event an Award issued under the Plan is subject to Section 409A of the Code, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of the Code, the definition of “Total and Permanent Disability” for purposes of such Award shall be the definition of “disability” provided for under Section 409A of the Code and the regulations or other guidance issued thereunder.
Article 3
ADMINISTRATION
3.1 General Administration; Establishment of Committee. Subject to the terms of this Article 3 , the Plan shall be administered by the Board or such committee of the Board as is designated by the Board to administer the Plan (the “ Committee ”). The Committee shall consist of not fewer than two persons. Any member of the Committee may be removed at any time, with or without cause, by resolution of the Board. Any vacancy occurring in the membership of the Committee may be filled by appointment by the Board. At any time there is no Committee to administer the Plan, any references in this Plan to the Committee shall be deemed to refer to the Board.
Membership on the Committee shall be limited to those members of the Board who are “non-employee directors” as defined in Rule 16b-3 promulgated under the Exchange Act. The Committee shall select one of its members to act as its Chairman. A majority of the Committee shall constitute a quorum, and the act of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the act of the Committee.
3.2 Designation of Participants and Awards.
(a) The Committee or the Board shall determine and designate from time to time the eligible persons to whom Awards will be granted and shall set forth in each related Award Agreement, where applicable, the Award Period, the Date of Grant, and such other terms, provisions, limitations, and performance requirements, as are approved by the Committee, but not inconsistent with the Plan. The Committee shall determine whether an Award shall include one type of Incentive or two or more Incentives granted in combination or two or more Incentives granted in tandem (that is, a joint grant where exercise of one Incentive results in cancellation of all or a portion of the other Incentive). Although the members of the Committee shall be eligible to receive Awards, all decisions with respect to any Award, and the terms and conditions thereof, to be granted under the Plan to any member of the Committee shall be made solely and exclusively by the other members of the Committee, or if such member is the only member of the Committee, by the Board.
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(b) Notwithstanding Section 3.2(a) , to the extent permitted by Applicable Law, the Board may, in its discretion and by a resolution adopted by the Board, authorize one or more officers of the Company (an “ Authorized Officer ”) to (i) designate one or more Employees as eligible persons to whom Nonqualified Stock Options, Incentive Stock Options or SARs will be granted under the Plan, and (ii) determine the number of shares of Common Stock that will be subject to such Nonqualified Stock Options, Incentive Stock Options or SARs; provided , however , that the resolution of the Board granting such authority shall (x) specify the total number of shares of Common Stock that may be made subject to the Nonqualified Stock Options, Incentive Stock Options or SARs, (y) set forth the price or prices (or a formula by which such price or prices may be determined) to be paid for the purchase of the Common Stock subject to such Nonqualified Stock Options, Incentive Stock Options or SARs, and (z) not authorize an officer to designate himself as a recipient of any Award.
3.3 Authority of the Committee. The Committee, in its discretion, shall (i) interpret the Plan and Award Agreements, (ii) prescribe, amend, and rescind any rules and regulations and sub-plans (including sub-plans for Awards made to Participants who are not resident in the United States), as necessary or appropriate for the administration of the Plan, (iii) establish performance goals for an Award and certify the extent of their achievement, and (iv) make such other determinations or certifications and take such other action as it deems necessary or advisable in the administration of the Plan. Any interpretation, determination, or other action made or taken by the Committee shall be final, binding, and conclusive on all interested parties. The Committee’s discretion set forth herein shall not be limited by any provision of the Plan, including any provision which by its terms is applicable notwithstanding any other provision of the Plan to the contrary.
The Committee may delegate to officers of the Company, pursuant to a written delegation, the authority to perform specified functions under the Plan. Any actions taken by any officers of the Company pursuant to such written delegation of authority shall be deemed to have been taken by the Committee.
With respect to restrictions in the Plan that are based on the requirements of Rule 16b-3 promulgated under the Exchange Act, Section 422 of the Code, the rules of any exchange or inter-dealer quotation system upon which the Company’s securities are listed or quoted, or any other Applicable Law, to the extent that any such restrictions are no longer required by Applicable Law, the Committee shall have the sole discretion and authority to grant Awards that are not subject to such mandated restrictions and/or to waive any such mandated restrictions with respect to outstanding Awards.
Article 4
ELIGIBILITY
Any Employee (including an Employee who is also a director or an officer), Contractor or Outside Director of the Company whose judgment, initiative, and efforts contributed or may be expected to contribute to the successful performance of the Company is eligible to participate in the Plan; provided that only Employees of a Corporation shall be eligible to receive Incentive Stock Options. The Committee, upon its own action, may grant, but shall not be required to grant, an Award to any Employee, Contractor or Outside Director. Awards may be granted by the Committee at any time and from time to time to new Participants, or to then Participants, or to a greater or lesser number of Participants, and may include or exclude previous Participants, as the Committee shall determine. Except as required by this Plan, Awards need not contain similar provisions. The Committee’s determinations under the Plan (including without limitation determinations of which Employees, Contractors or Outside Directors, if any, are to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the agreements evidencing same) need not be uniform and may be made by it selectively among Participants who receive, or are eligible to receive, Awards under the Plan.
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Article 5
SHARES SUBJECT TO PLAN
5.1 Number Available for Awards. Subject to adjustment as provided in Articles 11 and 12 , the maximum number of shares of Common Stock that may be delivered pursuant to Awards granted under the Plan is two million (2,000,000) shares, of which one hundred percent (100%) may be delivered pursuant to Incentive Stock Options. Subject to adjustment pursuant to Articles 11 and 12 , the maximum number of shares of Common Stock with respect to which Stock Options or SARs may be granted to an Executive Officer during any calendar year is one hundred fifteen thousand (115,000) shares of Common Stock. Shares to be issued may be made available from authorized but unissued Common Stock, Common Stock held by the Company in its treasury, or Common Stock purchased by the Company on the open market or otherwise. During the term of this Plan, the Company will at all times reserve and keep available the number of shares of Common Stock that shall be sufficient to satisfy the requirements of this Plan.
5.2 Reuse of Shares. To the extent that any Award under this Plan shall be forfeited, shall expire or be canceled, in whole or in part, then the number of shares of Common Stock covered by the Award or stock option so forfeited, expired or canceled may again be awarded pursuant to the provisions of this Plan. In the event that previously acquired shares of Common Stock are delivered to the Company in full or partial payment of the exercise price for the exercise of a Stock Option granted under this Plan, the number of shares of Common Stock available for future Awards under this Plan shall be reduced only by the net number of shares of Common Stock issued upon the exercise of the Stock Option. Awards that may be satisfied either by the issuance of shares of Common Stock or by cash or other consideration shall be counted against the maximum number of shares of Common Stock that may be issued under this Plan only during the period that the Award is outstanding or to the extent the Award is ultimately satisfied by the issuance of shares of Common Stock. Awards will not reduce the number of shares of Common Stock that may be issued pursuant to this Plan if the settlement of the Award will not require the issuance of shares of Common Stock, as, for example, a SAR that can be satisfied only by the payment of cash. Notwithstanding any provisions of the Plan to the contrary, only shares forfeited back to the Company, shares canceled on account of termination, expiration or lapse of an Award, shares surrendered in payment of the exercise price of a Stock Option or shares withheld for payment of applicable employment taxes and/or withholding obligations resulting from the exercise of an option shall again be available for grant of Incentive Stock Options under the Plan, but shall not increase the maximum number of shares described in Section 5.1 above as the maximum number of shares of Common Stock that may be delivered pursuant to Incentive Stock Options.
Article 6
GRANT OF AWARDS
6.1 In General.
(a) The grant of an Award shall be authorized by the Committee and shall be evidenced by an Award Agreement setting forth the Incentive or Incentives being granted, the total number of shares of Common Stock subject to the Incentive(s), the Option Price (if applicable), the Award Period, the Date of Grant, and such other terms, provisions, limitations, and performance objectives, as are approved by the Committee, but (i) not inconsistent with the Plan, and (ii) to the extent an Award issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. The Company shall execute an Award Agreement with a Participant after the Committee approves the issuance of an Award. Any Award granted pursuant to this Plan must be granted within ten (10) years of the date of adoption of this Plan by the Board. The Plan shall be submitted to the Company’s stockholders for approval; however, the Committee may grant Awards under the Plan prior to the time of stockholder approval. Any such Award granted prior to such stockholder approval shall be made subject to such stockholder approval. The grant of an Award to a Participant shall not be deemed either to entitle the Participant to, or to disqualify the Participant from, receipt of any other Award under the Plan.
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(b) If the Committee establishes a purchase price for an Award, the Participant must accept such Award within a period of thirty (30) days (or such shorter period as the Committee may specify) after the Date of Grant by executing the applicable Award Agreement and paying such purchase price.
(c) Any Award under this Plan that is settled in whole or in part in cash on a deferred basis may provide for interest equivalents to be credited with respect to such cash payment. Interest equivalents may be compounded and shall be paid upon such terms and conditions as may be specified by the grant.
6.2 Option Price. The Option Price for any share of Common Stock which may be purchased under a Nonqualified Stock Option for any share of Common Stock must be equal to or greater than the Fair Market Value of the share on the Date of Grant. The Option Price for any share of Common Stock which may be purchased under an Incentive Stock Option must be at least equal to the Fair Market Value of the share on the Date of Grant; if an Incentive Stock Option is granted to an Employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary), the Option Price shall be at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the Date of Grant.
6.3 Maximum ISO Grants. The Committee may not grant Incentive Stock Options under the Plan to any Employee which would permit the aggregate Fair Market Value (determined on the Date of Grant) of the Common Stock with respect to which Incentive Stock Options (under this and any other plan of the Company and its Subsidiaries) are exercisable for the first time by such Employee during any calendar year to exceed $100,000. To the extent any Stock Option granted under this Plan which is designated as an Incentive Stock Option exceeds this limit or otherwise fails to qualify as an Incentive Stock Option, such Stock Option (or any such portion thereof) shall be a Nonqualified Stock Option. In such case, the Committee shall designate which stock will be treated as Incentive Stock Option stock by causing the issuance of a separate stock certificate and identifying such stock as Incentive Stock Option stock on the Company’s stock transfer records.
6.4 Restricted Stock. If Restricted Stock is granted to or received by a Participant under an Award (including a Stock Option), the Committee shall set forth in the related Award Agreement: (i) the number of shares of Common Stock awarded, (ii) the price, if any, to be paid by the Participant for such Restricted Stock and the method of payment of the price, (iii) the time or times within which such Award may be subject to forfeiture, (iv) specified Performance Goals of the Company, a Subsidiary, any division thereof or any group of Employees of the Company, or other criteria, which the Committee determines must be met in order to remove any restrictions (including vesting) on such Award, and (v) all other terms, limitations, restrictions, and conditions of the Restricted Stock, which shall be consistent with this Plan, to the extent applicable and, to the extent Restricted Stock granted under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. The provisions of Restricted Stock need not be the same with respect to each Participant.
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(a) Legend on Shares. The Company shall electronically register the Restricted Stock awarded to a Participant in the name of such Participant, which shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, substantially as provided in Section 15.10 of the Plan. No stock certificate or certificates shall be issued with respect to such shares of Common Stock, unless, following the expiration of the Restriction Period (as defined in Section 6.4(b)(i) ) without forfeiture in respect of such shares of Common Stock, the Participant requests delivery of the certificate or certificates by submitting a written request to the Committee (or such party designated by the Company) requesting delivery of the certificates. The Company shall deliver the certificates requested by the Participant to the Participant as soon as administratively practicable following the Company’s receipt of such request.
(b) Restrictions and Conditions. Shares of Restricted Stock shall be subject to the following restrictions and conditions:
(i) Subject to the other provisions of this Plan and the terms of the particular Award Agreements, during such period as may be determined by the Committee commencing on the Date of Grant or the date of exercise of an Award (the “ Restriction Period ”), the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock. Except for these limitations, the Committee may in its sole discretion, remove any or all of the restrictions on such Restricted Stock whenever it may determine that, by reason of changes in Applicable Laws or other changes in circumstances arising after the date of the Award, such action is appropriate.
(ii) Except as provided in sub-paragraph (i) above or in the applicable Award Agreement, the Participant shall have, with respect to his or her Restricted Stock, all of the rights of a stockholder of the Company, including the right to vote the shares, and the right to receive any dividends thereon. Certificates for shares of Common Stock free of restriction under this Plan shall be delivered to the Participant promptly after, and only after, the Restriction Period shall expire without forfeiture in respect of such shares of Common Stock or after any other restrictions imposed on such shares of Common Stock by the applicable Award Agreement or other agreement have expired. Certificates for the shares of Common Stock forfeited under the provisions of the Plan and the applicable Award Agreement shall be promptly returned to the Company by the forfeiting Participant. Each Award Agreement shall require that each Participant, in connection with the issuance of a certificate for Restricted Stock, shall endorse such certificate in blank or execute a stock power in form satisfactory to the Company in blank and deliver such certificate and executed stock power to the Company.
(iii) The Restriction Period of Restricted Stock shall commence on the Date of Grant or the date of exercise of an Award, as specified in the Award Agreement, and, subject to Article 12 of the Plan, unless otherwise established by the Committee in the Award Agreement setting forth the terms of the Restricted Stock, shall expire upon satisfaction of the conditions set forth in the Award Agreement; such conditions may provide for vesting based on length of continuous service or such Performance Goals, as may be determined by the Committee in its sole discretion.
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(iv) Except as otherwise provided in the particular Award Agreement, upon Termination of Service for any reason during the Restriction Period, the nonvested shares of Restricted Stock shall be forfeited by the Participant. In the event a Participant has paid any consideration to the Company for such forfeited Restricted Stock, the Committee shall specify in the Award Agreement that either (i) the Company shall be obligated to, or (ii) the Company may, in its sole discretion, elect to, pay to the Participant, as soon as practicable after the event causing forfeiture, in cash, an amount equal to the lesser of the total consideration paid by the Participant for such forfeited shares or the Fair Market Value of such forfeited shares as of the date of Termination of Service, as the Committee, in its sole discretion shall select. Upon any forfeiture, all rights of a Participant with respect to the forfeited shares of the Restricted Stock shall cease and terminate, without any further obligation on the part of the Company.
6.5 SARs. The Committee may grant SARs to any Participant, either as a separate Award or in connection with a Stock Option. SARs shall be subject to such terms and conditions as the Committee shall impose, provided that such terms and conditions are (i) not inconsistent with the Plan, and (ii) to the extent a SAR issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. The grant of the SAR may provide that the holder may be paid for the value of the SAR either in cash or in shares of Common Stock, or a combination thereof. In the event of the exercise of a SAR payable in shares of Common Stock, the holder of the SAR shall receive that number of whole shares of Common Stock having an aggregate Fair Market Value on the date of exercise equal to the value obtained by multiplying (i) the difference between the Fair Market Value of a share of Common Stock on the date of exercise over the SAR Price as set forth in such SAR (or other value specified in the agreement granting the SAR), by (ii) the number of shares of Common Stock as to which the SAR is exercised, with a cash settlement to be made for any fractional shares of Common Stock. The SAR Price for any share of Common Stock subject to a SAR may be equal to or greater than the Fair Market Value of the share on the Date of Grant. The Committee, in its sole discretion, may place a ceiling on the amount payable upon exercise of a SAR, but any such limitation shall be specified at the time that the SAR is granted.
6.6 Restricted Stock Units. Restricted Stock Units may be awarded or sold to any Participant under such terms and conditions as shall be established by the Committee, provided, however, that such terms and conditions are (i) not inconsistent with the Plan, and (ii) to the extent a Restricted Stock Unit issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. Restricted Stock Units shall be subject to such restrictions as the Committee determines, including, without limitation, (a) a prohibition against sale, assignment, transfer, pledge, hypothecation or other encumbrance for a specified period; or (b) a requirement that the holder forfeit (or in the case of shares of Common Stock or units sold to the Participant, resell to the Company at cost) such shares or units in the event of Termination of Service during the period of restriction.
6.7 Performance Awards.
(a) The Committee may grant Performance Awards to one or more Participants. The terms and conditions of Performance Awards shall be specified at the time of the grant and may include provisions establishing the performance period, the Performance Goals to be achieved during a performance period, and the maximum or minimum settlement values, provided that such terms and conditions are (i) not inconsistent with the Plan and (ii) to the extent a Performance Award issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. If the Performance Award is to be in shares of Common Stock, the Performance Awards may provide for the issuance of the shares of Common Stock at the time of the grant of the Performance Award or at the time of the certification by the Committee that the Performance Goals for the performance period have been met; provided , however , if shares of Common Stock are issued at the time of the grant of the Performance Award and if, at the end of the performance period, the Performance Goals are not certified by the Committee to have been fully satisfied, then, notwithstanding any other provisions of this Plan to the contrary, the Common Stock shall be forfeited in accordance with the terms of the grant to the extent the Committee determines that the Performance Goals were not met. The forfeiture of shares of Common Stock issued at the time of the grant of the Performance Award due to failure to achieve the established Performance Goals shall be separate from and in addition to any other restrictions provided for in this Plan that may be applicable to such shares of Common Stock. Each Performance Award granted to one or more Participants shall have its own terms and conditions.
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If the Committee determines, in its sole discretion, that the established performance measures or objectives are no longer suitable because of a change in the Company’s business, operations, corporate structure, or for other reasons that the Committee deemed satisfactory, the Committee may modify the performance measures or objectives and/or the performance period.
(b) Performance Awards may be valued by reference to the Fair Market Value of a share of Common Stock or according to any formula or method deemed appropriate by the Committee, in its sole discretion, including, but not limited to, achievement of Performance Goals or other specific financial, production, sales or cost performance objectives that the Committee believes to be relevant to the Company’s business and/or remaining in the employ of the Company or a Subsidiary for a specified period of time. Performance Awards may be paid in cash, shares of Common Stock, or other consideration, or any combination thereof. If payable in shares of Common Stock, the consideration for the issuance of such shares may be the achievement of the performance objective established at the time of the grant of the Performance Award. Performance Awards may be payable in a single payment or in installments and may be payable at a specified date or dates or upon attaining the performance objective. The extent to which any applicable performance objective has been achieved shall be conclusively determined by the Committee.
6.8 Dividend Equivalent Rights. The Committee may grant a Dividend Equivalent Right to any Participant, either as a component of another Award or as a separate Award. The terms and conditions of the Dividend Equivalent Right shall be specified by the grant. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in additional shares of Common Stock (which may thereafter accrue additional dividend equivalents). Any such reinvestment shall be at the Fair Market Value at the time thereof. Dividend Equivalent Rights may be settled in cash or shares of Common Stock, or a combination thereof, in a single payment or in installments. A Dividend Equivalent Right granted as a component of another Award may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other Award, and that such Dividend Equivalent Right granted as a component of another Award may also contain terms and conditions different from such other Award.
6.9 Other Awards. The Committee may grant to any Participant other forms of Awards, based upon, payable in, or otherwise related to, in whole or in part, shares of Common Stock, if the Committee determines that such other form of Award is consistent with the purpose and restrictions of this Plan. The terms and conditions of such other form of Award shall be specified by the grant. Such Other Awards may be granted for no cash consideration, for such minimum consideration as may be required by Applicable Law, or for such other consideration as may be specified by the grant.
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6.10 Performance Goals. Awards of Restricted Stock, Restricted Stock Units, Performance Award and Other Awards (whether relating to cash or shares of Common Stock) under the Plan may be made subject to the attainment of Performance Goals relating to one or more business criteria which may consist of one or more or any combination of the following criteria: cash flow; cost; revenues; sales; ratio of debt to debt plus equity; net borrowing, credit quality or debt ratings; profit before tax; economic profit; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; gross margin; earnings per share (whether on a pre-tax, after-tax, operational or other basis); operating earnings; capital expenditures; expenses or expense levels; economic value added; ratio of operating earnings to capital spending or any other operating ratios; free cash flow; net profit; net sales; net asset value per share; the accomplishment of mergers, acquisitions, dispositions, public offerings or similar extraordinary business transactions; sales growth; price of the Company’s Common Stock; return on assets, equity or stockholders’ equity; market share; inventory levels, inventory turn or shrinkage; or total return to stockholders (“ Performance Criteria ”). Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the Company and may be measured relative to a peer group or index. Any Performance Criteria may include or exclude (i) events that are of an unusual nature or indicate infrequency of occurrence, (ii) gains or losses on the disposition of a business, (iii) changes in tax or accounting regulations or laws, (iv) the effect of a merger or acquisition, as identified in the Company’s quarterly and annual earnings releases, or (v) other similar occurrences. In all other respects, Performance Criteria shall be calculated in accordance with the Company’s financial statements, under generally accepted accounting principles, or under a methodology established by the Committee prior to the issuance of an Award which is consistently applied and identified in the audited financial statements, including footnotes, or the Compensation Discussion and Analysis section of the Company’s annual report.
6.11 Tandem Awards. The Committee may grant two or more Incentives in one Award in the form of a “tandem Award,” so that the right of the Participant to exercise one Incentive shall be canceled if, and to the extent, the other Incentive is exercised. For example, if a Stock Option and a SAR are issued in a tandem Award, and the Participant exercises the SAR with respect to one hundred (100) shares of Common Stock, the right of the Participant to exercise the related Stock Option shall be canceled to the extent of one hundred (100) shares of Common Stock.
Article 7
AWARD PERIOD; VESTING
7.1 Award Period. Subject to the other provisions of this Plan, the Committee may, in its discretion, provide that an Incentive may not be exercised in whole or in part for any period or periods of time or beyond any date specified in the Award Agreement. Except as provided in the Award Agreement, an Incentive may be exercised in whole or in part at any time during its term. The Award Period for an Incentive shall be reduced or terminated upon Termination of Service. No Incentive granted under the Plan may be exercised at any time after the end of its Award Period. No portion of any Incentive may be exercised after the expiration of ten (10) years from its Date of Grant. However, if an Employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary) and an Incentive Stock Option is granted to such Employee, the term of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no more than five (5) years from the Date of Grant.
7.2 Vesting. The Committee, in its sole discretion, may determine that an Incentive will be immediately vested in whole or in part, or that all or any portion may not be vested until a date, or dates, subsequent to its Date of Grant, or until the occurrence of one or more specified events, subject in any case to the terms of the Plan. If the Committee imposes conditions upon vesting, then, subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the Incentive may be vested.
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Article 8
EXERCISE OR CONVERSION OF INCENTIVE
8.1 In General. A vested Incentive may be exercised or converted, during its Award Period, subject to limitations and restrictions set forth in the Award Agreement.
8.2 Securities Law and Exchange Restrictions. In no event may an Incentive be exercised or shares of Common Stock issued pursuant to an Award if a necessary listing or quotation of the shares of Common Stock on a stock exchange or inter-dealer quotation system or any registration under state or federal securities laws required under the circumstances has not been accomplished.
8.3 Exercise of Stock Option.
(a) In General. If a Stock Option is exercisable prior to the time it is vested, the Common Stock obtained on the exercise of the Stock Option shall be Restricted Stock which is subject to the applicable provisions of the Plan and the Award Agreement. If the Committee imposes conditions upon exercise, then subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the Stock Option may be exercised. No Stock Option may be exercised for a fractional share of Common Stock. The granting of a Stock Option shall impose no obligation upon the Participant to exercise that Stock Option.
(b) Notice and Payment. Subject to such administrative regulations as the Committee may from time to time adopt, a Stock Option may be exercised by the delivery of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the Stock Option is to be exercised (the “ Exercise Notice ”) and the date of exercise thereof (the “ Exercise Date ”) with respect to any Stock Option shall be the date that the Participant has delivered both the Exercise Notice and consideration to the Company with a value equal to the total Option Price of the shares to be purchased (plus any employment tax withholding or other tax payment due with respect to such Award), payable as provided in the Award Agreement, which may provide for payment in any one or more of the following ways: (a) cash or check, bank draft, or money order payable to the order of the Company, (b) Common Stock (including Restricted Stock) owned by the Participant on the Exercise Date, valued at its Fair Market Value on the Exercise Date, and which the Participant has not acquired from the Company within six (6) months prior to the Exercise Date, (c) by delivery (including by FAX or electronic transmission) to the Company or its designated agent of an executed irrevocable option exercise form (or, to the extent permitted by the Company, exercise instructions, which may be communicated in writing, telephonically, or electronically) together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price, and/or (d) in any other form of valid consideration that is acceptable to the Committee in its sole discretion. In the event that shares of Restricted Stock are tendered as consideration for the exercise of a Stock Option, a number of shares of Common Stock issued upon the exercise of the Stock Option equal to the number of shares of Restricted Stock used as consideration therefor shall be subject to the same restrictions and provisions as the Restricted Stock so tendered. If the Participant fails to deliver the consideration described in this Section 8.3(b) within three (3) business days of the date of the Exercise Notice, then the Exercise Notice shall be null and void and the Company will have no obligation to deliver any shares of Common Stock to the Participant in connection with such Exercise Notice.
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(c) Issuance of Certificate. Except as otherwise provided in Section 6.4 hereof (with respect to shares of Restricted Stock) or in the applicable Award Agreement, upon payment of all amounts due from the Participant, the Company shall cause the Common Stock then being purchased to be registered in the Participant’s name (or the person exercising the Participant’s Stock Option in the event of his or her death), but shall not issue certificates for the Common Stock unless the Participant or such other person requests delivery of the certificates for the Common Stock, in writing in accordance with the procedures established by the Committee. The Company shall deliver certificates to the Participant (or the person exercising the Participant’s Stock Option in the event of his or her death) as soon as administratively practicable following the Company’s receipt of a written request from the Participant or such other person for delivery of the certificates. Notwithstanding the forgoing, if the Participant has exercised an Incentive Stock Option, the Company may at its option retain physical possession of the certificate evidencing the shares acquired upon exercise until the expiration of the holding periods described in Section 422(a)(1) of the Code. The obligation of the Company to deliver shares of Common Stock shall, however, be subject to the condition that, if at any time the Committee shall determine in its discretion that the listing, registration, or qualification of the Stock Option or the Common Stock upon any securities exchange or inter-dealer quotation system or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with, the Stock Option or the issuance or purchase of shares of Common Stock thereunder, the Stock Option may not be exercised in whole or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not reasonably acceptable to the Committee.
(d) Failure to Pay. Except as may otherwise be provided in an Award Agreement, if the Participant fails to pay for any of the Common Stock specified in such notice or fails to accept delivery thereof, that portion of the Participant’s Stock Option and right to purchase such Common Stock may be forfeited by the Participant.
8.4 SARs. Subject to the conditions of this Section 8.4 and such administrative regulations as the Committee may from time to time adopt, a SAR may be exercised by the delivery (including by FAX) of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the SAR is to be exercised and the Exercise Date, which shall be at least three (3) days after giving such notice unless an earlier time shall have been mutually agreed upon. Subject to the terms of the Award Agreement and only if permissible under Section 409A of the Code and the regulations or other guidance issued thereunder (or, if not so permissible, at such time as permitted by Section 409A of the Code and the regulations or other guidance issued thereunder), the Participant shall receive from the Company in exchange therefor in the discretion of the Committee, and subject to the terms of the Award Agreement:
(a) cash in an amount equal to the excess (if any) of the Fair Market Value (as of the Exercise Date, or if provided in the Award Agreement, conversion, of the SAR) per share of Common Stock over the SAR Price per share specified in such SAR, multiplied by the total number of shares of Common Stock of the SAR being surrendered;
(b) that number of shares of Common Stock having an aggregate Fair Market Value (as of the Exercise Date, or if provided in the Award Agreement, conversion, of the SAR) equal to the amount of cash otherwise payable to the Participant, with a cash settlement to be made for any fractional share interests; or
(c) the Company may settle such obligation in part with shares of Common Stock and in part with cash.
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The distribution of any cash or Common Stock pursuant to the foregoing sentence shall be made at such time as set forth in the Award Agreement.
8.5 Disqualifying Disposition of Incentive Stock Option. If shares of Common Stock acquired upon exercise of an Incentive Stock Option are disposed of by a Participant prior to the expiration of either two (2) years from the Date of Grant of such Stock Option or one (1) year from the transfer of shares of Common Stock to the Participant pursuant to the exercise of such Stock Option, or in any other disqualifying disposition within the meaning of Section 422 of the Code, such Participant shall notify the Company in writing of the date and terms of such disposition. A disqualifying disposition by a Participant shall not affect the status of any other Stock Option granted under the Plan as an Incentive Stock Option within the meaning of Section 422 of the Code.
Article 9
AMENDMENT OR DISCONTINUANCE
Subject to the limitations set forth in this Article 9 , the Board may at any time and from time to time, without the consent of the Participants, alter, amend, revise, suspend, or discontinue the Plan in whole or in part; provided, however, that no amendment for which stockholder approval is required either (i) by any securities exchange or inter-dealer quotation system on which the Common Stock is listed or traded or (ii) in order for the Plan and Incentives awarded under the Plan to continue to comply with Sections 421 and 422 of the Code, including any successors to such Sections, or other Applicable Law, shall be effective unless such amendment shall be approved by the requisite vote of the stockholders of the Company entitled to vote thereon. Any such amendment shall, to the extent deemed necessary or advisable by the Committee, be applicable to any outstanding Incentives theretofore granted under the Plan, notwithstanding any contrary provisions contained in any Award Agreement. In the event of any such amendment to the Plan, the holder of any Incentive outstanding under the Plan shall, upon request of the Committee and as a condition to the exercisability thereof, execute a conforming amendment in the form prescribed by the Committee to any Award Agreement relating thereto. Notwithstanding anything contained in this Plan to the contrary, unless required by law, no action contemplated or permitted by this Article 9 shall adversely affect any rights of Participants or obligations of the Company to Participants with respect to any Incentive theretofore granted under the Plan without the consent of the affected Participant.
Article 10
TERM
The Plan shall be effective from the date that this Plan is adopted by the Board. Unless sooner terminated by action of the Board, the Plan will terminate on the tenth anniversary of the Effective Date, but Incentives granted before that date will continue to be effective in accordance with their terms and conditions.
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Article 11
CAPITAL ADJUSTMENTS
In the event that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, stock split, reverse stock split, rights offering, reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision, repurchase, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event affects the fair value of an Award, then the Committee shall adjust any or all of the following so that the fair value of the Award immediately after the transaction or event is equal to the fair value of the Award immediately prior to the transaction or event (i) the number of shares and type of Common Stock (or the securities or property) which thereafter may be made the subject of Awards, (ii) the number of shares and type of Common Stock (or other securities or property) subject to outstanding Awards, (iii) the number of shares and type of Common Stock (or other securities or property) specified as the annual per-participant limitation under Section 5.1 of the Plan, (iv) the Option Price of each outstanding Award, (v) the amount, if any, the Company pays for forfeited shares of Common Stock in accordance with Section 6.4 , and (vi) the number of or SAR Price of shares of Common Stock then subject to outstanding SARs previously granted and unexercised under the Plan, to the end that the same proportion of the Company’s issued and outstanding shares of Common Stock in each instance shall remain subject to exercise at the same aggregate SAR Price; provided however, that the number of shares of Common Stock (or other securities or property) subject to any Award shall always be a whole number. Notwithstanding the foregoing, no such adjustment shall be made or authorized to the extent that such adjustment would cause the Plan or any Stock Option to violate Section 422 of the Code or Section 409A of the Code. Such adjustments shall be made in accordance with the rules of any securities exchange, stock market, or stock quotation system to which the Company is subject.
Upon the occurrence of any such adjustment, the Company shall provide notice to each affected Participant of its computation of such adjustment which shall be conclusive and shall be binding upon each such Participant.
Article 12
RECAPITALIZATION, MERGER AND CONSOLIDATION
12.1 No Effect on Company’s Authority. The existence of this Plan and Incentives granted hereunder shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s capital structure and its business, or any Change in Control, or any merger or consolidation of the Company, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights, options, or warrants to purchase same), or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
12.2 Conversion of Incentives Where Company Survives. Subject to any required action by the stockholders and except as otherwise provided by Section 12.4 hereof or as may be required to comply with Section 409A of the Code and the regulations or other guidance issued thereunder, if the Company shall be the surviving or resulting corporation in any merger, consolidation or share exchange, any Incentive granted hereunder shall pertain to and apply to the securities or rights (including cash, property, or assets) to which a holder of the number of shares of Common Stock subject to the Incentive would have been entitled.
12.3 Exchange or Cancellation of Incentives Where Company Does Not Survive. Except as otherwise provided by Section 12.4 hereof or as may be required to comply with Section 409A of the Code and the regulations or other guidance issued thereunder, in the event of any merger, consolidation or share exchange pursuant to which the Company is not the surviving or resulting corporation, there shall be substituted for each share of Common Stock subject to the unexercised portions of outstanding Incentives, that number of shares of each class of stock or other securities or that amount of cash, property, or assets of the surviving, resulting or consolidated company which were distributed or distributable to the stockholders of the Company in respect to each share of Common Stock held by them, such outstanding Incentives to be thereafter exercisable for such stock, securities, cash, or property in accordance with their terms.
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12.4 Cancellation of Incentives. Notwithstanding the provisions of Sections 12.2 and 12.3 hereof, and except as may be required to comply with Section 409A of the Code and the regulations or other guidance issued thereunder, all Incentives granted hereunder may be canceled by the Company, in its sole discretion, as of the effective date of any Change in Control, merger, consolidation or share exchange, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights, options, or warrants to purchase same), or of any proposed sale of all or substantially all of the assets of the Company, or of any dissolution or liquidation of the Company, by either:
(a) giving notice to each holder thereof or his personal representative of its intention to cancel those Incentives for which the issuance of shares of Common Stock involved payment by the Participant for such shares, and permitting the purchase during the thirty (30) day period next preceding such effective date of any or all of the shares of Common Stock subject to such outstanding Incentives, including in the Board’s discretion some or all of the shares as to which such Incentives would not otherwise be vested and exercisable; or
(b) in the case of Incentives that are either (i) settled only in shares of Common Stock, or (ii) at the election of the Participant, settled in shares of Common Stock, paying the holder thereof an amount equal to a reasonable estimate of the difference between the net amount per share payable in such transaction or as a result of such transaction, and the price per share of such Incentive to be paid by the Participant (hereinafter the “ Spread ”), multiplied by the number of shares subject to the Incentive. In cases where the shares constitute, or would after exercise, constitute Restricted Stock, the Company, in its discretion, may include some or all of those shares in the calculation of the amount payable hereunder. In estimating the Spread, appropriate adjustments to give effect to the existence of the Incentives shall be made, such as deeming the Incentives to have been exercised, with the Company receiving the exercise price payable thereunder, and treating the shares receivable upon exercise of the Incentives as being outstanding in determining the net amount per share. In cases where the proposed transaction consists of the acquisition of assets of the Company, the net amount per share shall be calculated on the basis of the net amount receivable with respect to shares of Common Stock upon a distribution and liquidation by the Company after giving effect to expenses and charges, including but not limited to taxes, payable by the Company before such liquidation could be completed.
(c) An Award that by its terms would be fully vested or exercisable upon a Change in Control will be considered vested or exercisable for purposes of Section 12.4(a) hereof.
Article 13
LIQUIDATION OR DISSOLUTION
Subject to Section 12.4 hereof, in case the Company shall, at any time while any Incentive under this Plan shall be in force and remain unexpired, (i) sell all or substantially all of its property, or (ii) dissolve, liquidate, or wind up its affairs, then each Participant shall be entitled to receive, in lieu of each share of Common Stock of the Company which such Participant would have been entitled to receive under the Incentive, the same kind and amount of any securities or assets as may be issuable, distributable, or payable upon any such sale, dissolution, liquidation, or winding up with respect to each share of Common Stock of the Company. If the Company shall, at any time prior to the expiration of any Incentive, make any partial distribution of its assets, in the nature of a partial liquidation, whether payable in cash or in kind (but excluding the distribution of a cash dividend payable out of earned surplus and designated as such) and an adjustment is determined by the Committee to be appropriate to prevent the dilution of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, make such adjustment in accordance with the provisions of Article 11 hereof.
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Article 14
INCENTIVES IN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER ENTITIES
Incentives may be granted under the Plan from time to time in substitution for similar instruments held by employees, independent contractors or directors of a corporation, partnership, or limited liability company who become or are about to become Employees, Contractors or Outside Directors of the Company or any Subsidiary as a result of a merger or consolidation of the employing corporation with the Company, the acquisition by the Company of equity of the employing entity, or any other similar transaction pursuant to which the Company becomes the successor employer. The terms and conditions of the substitute Incentives so granted may vary from the terms and conditions set forth in this Plan to such extent as the Committee at the time of grant may deem appropriate to conform, in whole or in part, to the provisions of the Incentives in substitution for which they are granted.
Article 15
MISCELLANEOUS PROVISIONS
15.1 Investment Intent. The Company may require that there be presented to and filed with it by any Participant under the Plan, such evidence as it may deem necessary to establish that the Incentives granted or the shares of Common Stock to be purchased or transferred are being acquired for investment and not with a view to their distribution.
15.2 No Right to Continued Employment. Neither the Plan nor any Incentive granted under the Plan shall confer upon any Participant any right with respect to continuance of employment by the Company or any Subsidiary.
15.3 Indemnification of Board and Committee. No member of the Board or the Committee, nor any officer or Employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board and the Committee, each officer of the Company, and each Employee of the Company acting on behalf of the Board or the Committee shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination, or interpretation to the fullest extent provided by law. Except to the extent required by any unwaiveable requirement under applicable law, no member of the Board or the Committee (and no Subsidiary of the Company) shall have any duties or liabilities, including without limitation any fiduciary duties, to any Participant (or any Person claiming by and through any Participant) as a result of this Plan, any Award Agreement or any Claim arising hereunder and, to the fullest extent permitted under applicable law, each Participant (as consideration for receiving and accepting an Award Agreement) irrevocably waives and releases any right or opportunity such Participant might have to assert (or participate or cooperate in) any Claim against any member of the Board or the Committee and any Subsidiary of the Company arising out of this Plan.
15.4 Effect of the Plan. Neither the adoption of this Plan nor any action of the Board or the Committee shall be deemed to give any person any right to be granted an Award or any other rights except as may be evidenced by an Award Agreement, or any amendment thereto, duly authorized by the Committee and executed on behalf of the Company, and then only to the extent and upon the terms and conditions expressly set forth therein.
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15.5 Compliance with Other Laws and Regulations. Notwithstanding anything contained herein to the contrary, the Company shall not be required to sell or issue shares of Common Stock under any Incentive if the issuance thereof would constitute a violation by the Participant or the Company of any provisions of any law or regulation of any governmental authority or any national securities exchange or inter-dealer quotation system or other forum in which shares of Common Stock are quoted or traded (including without limitation Section 16 of the Exchange Act); and, as a condition of any sale or issuance of shares of Common Stock under an Incentive, the Committee may require such agreements or undertakings, if any, as the Committee may deem necessary or advisable to assure compliance with any such law or regulation. The Plan, the grant and exercise of Incentives hereunder, and the obligation of the Company to sell and deliver shares of Common Stock, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required.
15.6 Foreign Participation. To assure the viability of Awards granted to Participants employed in foreign countries, the Committee may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Committee may approve such supplements to, or amendments, restatements or alternative versions of, this Plan as it determines is necessary or appropriate for such purposes. Any such amendment, restatement or alternative versions that the Committee approves for purposes of using this Plan in a foreign country will not affect the terms of this Plan for any other country.
15.7 Tax Requirements. The Company or, if applicable, any Subsidiary (for purposes of this Section 15.7 , the term “ Company ” shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form in connection with the Plan, any federal, state, local, or other taxes required by law to be withheld in connection with an Award granted under this Plan. The Company may, in its sole discretion, also require the Participant receiving shares of Common Stock issued under the Plan to pay the Company the amount of any taxes that the Company is required to withhold in connection with the Participant’s income arising with respect to the Award. Such payments shall be required to be made when requested by the Company and may be required to be made prior to the delivery of any certificate representing shares of Common Stock. Such payment may be made by (i) the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding obligations of the Company; (ii) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising Participant to the Company of shares of Common Stock that the Participant has not acquired from the Company within six (6) months prior to the date of exercise, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding payment; (iii) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the exercise of the Stock Option, which shares so withheld have an aggregate fair market value that equals (but does not exceed) the required tax withholding payment; or (iv) any combination of (i), (ii), or (iii). The Company may, in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant. The Committee may in the Award Agreement impose any additional tax requirements or provisions that the Committee deems necessary or desirable.
15.8 Assignability. Incentive Stock Options may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution and may be exercised during the lifetime of the Participant only by the Participant or the Participant’s legally authorized representative, and each Award Agreement in respect of an Incentive Stock Option shall so provide. The designation by a Participant of a beneficiary will not constitute a transfer of the Stock Option. The Committee may waive or modify any limitation contained in the preceding sentences of this Section 15.8 that is not required for compliance with Section 422 of the Code.
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Except as otherwise provided herein, Awards may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution. Notwithstanding the foregoing, the Committee may, in its discretion, authorize all or a portion of a Nonqualified Stock Option or SAR to be granted to a Participant on terms which permit transfer by such Participant to (i) the spouse (or former spouse), children or grandchildren of the Participant (“ Immediate Family Members ”), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, (iii) a partnership in which the only partners are (1) such Immediate Family Members and/or (2) entities which are controlled by the Participant and/or Immediate Family Members, (iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any successor provision, or (v) a split interest trust or pooled income fund described in Section 2522(c)(2) of the Code or any successor provision, provided that (x) there shall be no consideration for any such transfer, (y) the Award Agreement pursuant to which such Nonqualified Stock Option or SAR is granted must be approved by the Committee and must expressly provide for transferability in a manner consistent with this Section, and (z) subsequent transfers of transferred Nonqualified Stock Options or SARs shall be prohibited except those by will or the laws of descent and distribution.
Following any transfer, any such Nonqualified Stock Option and SAR shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Articles 8, 9, 11, 13 and 15 hereof the term “ Participant ” shall be deemed to include the transferee. The events of Termination of Service shall continue to be applied with respect to the original Participant, following which the Nonqualified Stock Options and SARs shall be exercisable or convertible by the transferee only to the extent and for the periods specified in the Award Agreement. The Committee and the Company shall have no obligation to inform any transferee of a Nonqualified Stock Option or SAR of any expiration, termination, lapse or acceleration of such Stock Option or SAR. The Company shall have no obligation to register with any federal or state securities commission or agency any Common Stock issuable or issued under a Nonqualified Stock Option or SAR that has been transferred by a Participant under this Section 15.8 .
15.9 Use of Proceeds. Proceeds from the sale of shares of Common Stock pursuant to Incentives granted under this Plan shall constitute general funds of the Company.
15.10 Legend. Each certificate representing shares of Restricted Stock issued to a Participant shall bear the following legend, or a similar legend deemed by the Company to constitute an appropriate notice of the provisions hereof (any such certificate not having such legend shall be surrendered upon demand by the Company and so endorsed):
On the face of the certificate:
“Transfer of this stock is restricted in accordance with conditions printed on the reverse of this certificate.”
On the reverse:
“The shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain AquaMed Technologies, Inc. 2019 Long-Term Incentive Plan, a copy of which is on file at the principal office of the Company in Langhorne, Pennsylvania. No transfer or pledge of the shares evidenced hereby may be made except in accordance with and subject to the provisions of said Plan. By acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Plan.”
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The following legend shall be inserted on a certificate evidencing Common Stock issued under the Plan if the shares were not issued in a transaction registered under the applicable federal and state securities laws:
“Shares of stock represented by this certificate have been acquired by the holder for investment and not for resale, transfer or distribution, have been issued pursuant to exemptions from the registration requirements of applicable state and federal securities laws, and may not be offered for sale, sold or transferred other than pursuant to effective registration under such laws, or in transactions otherwise in compliance with such laws, and upon evidence satisfactory to the Company of compliance with such laws, as to which the Company may rely upon an opinion of counsel satisfactory to the Company.”
15.11 Governing Law. The Plan shall be governed by, construed, and enforced in accordance with the laws of the State of Delaware (excluding any conflict of laws, rule or principle of Delaware law that might refer the governance, construction, or interpretation of this Plan to the laws of another state). A Participant’s sole remedy for any Claim shall be against the Company, and no Participant shall have any claim or right of any nature against any Subsidiary of the Company or any stockholder or existing or former director, officer or Employee of the Company or any Subsidiary of the Company. The individuals and entities described above in this Section 15.11 (other than the Company) shall be third-party beneficiaries of this Plan for purposes of enforcing the terms of this Section 15.11 .
A copy of this Plan shall be kept on file in the principal office of the Company in Langhorne, Pennsylvania.
*********
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IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of March 8, 2019, by an authorized officer pursuant to prior action taken by the Board.
AQUAMED TECHNOLOGIES, INC. |
By: | ||
Name: | ||
Title: |
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Exhibit 10.23
INCENTIVE STOCK OPTION AGREEMENT
AQUAMED TECHNOLOGIES, INC.
2019 LONG-TERM INCENTIVE PLAN
1. Grant of Option . Pursuant to the AquaMed Technologies, Inc. 2019 Long-Term Incentive Plan (the “ Plan ”), as adopted by AquaMed Technologies, Inc., a Delaware corporation (the “ Company ”), the Company grants to
_________________________
(the “ Participant ”),
who is an Employee of the Company, an option (the “ Stock Option ”) to purchase a total of _________________ (____________) full shares of Common Stock of the Company (the “ Optioned Shares ”) at an “ Option Price ” equal to $_________ per share (being equal to the Fair Market Value per share of the Common Stock on the Date of Grant or 110% of such Fair Market Value, in the case of a ten percent (10%) or more stockholder as provided in Section 422 of the Code), in the amounts, during the periods and upon the terms and conditions set forth in this Incentive Stock Option Agreement (this “ Agreement ”).
The “ Date of Grant ” of this Stock Option is ______________, 20____. The “ Option Period ” shall commence on the Date of Grant and shall expire on the date immediately preceding the tenth (10 th ) anniversary of the Date of Grant (or the date immediately preceding the fifth (5 th ) anniversary of the Date of Grant, in the case of a ten percent (10%) or more stockholder as provided in Section 422 of the Code) unless terminated earlier in accordance with Section 4 below. The Stock Option is intended to be an Incentive Stock Option.
2. Subject to Plan . The Stock Option and its exercise are subject to the terms and conditions of the Plan, and the terms of the Plan shall control to the extent not otherwise inconsistent with the provisions of this Agreement. The capitalized terms used herein that are defined in the Plan shall have the same meanings assigned to them in the Plan. The Stock Option is subject to any rules promulgated pursuant to the Plan by the Board or the Committee and communicated to the Participant in writing. In addition, if the Plan previously has not been approved by the Company’s stockholders, the Stock Option is granted subject to such stockholder approval.
3. Vesting; Time of Exercise . Except as specifically provided in this Agreement and subject to certain restrictions and conditions set forth in the Plan, the Optioned Shares shall be vested and the Stock Option shall be exercisable as follows:
a. ________________ (_______) of the total Optioned Shares shall vest and that portion of the Stock Option shall become exercisable on ___________________, provided the Participant is employed by the Company or a Subsidiary on that date.
b. ________________ (_______) of the total Optioned Shares shall vest and that portion of the Stock Option shall become exercisable on ___________________, provided the Participant is employed by the Company or a Subsidiary on that date.
c. ________________ (_______) of the total Optioned Shares shall vest and that portion of the Stock Option shall become exercisable on ___________________, provided the Participant is employed by the Company or a Subsidiary on that date.
d. _______________ (_______) of the total Optioned Shares shall vest and that portion of the Stock Option shall become exercisable on ___________________, provided the Participant is employed by the Company or a Subsidiary on that date.
4. Term; Forfeiture .
a. Except as otherwise provided in this Agreement, to the extent the unexercised portion of the Stock Option relates to Optioned Shares which are not vested on the date of the Participant’s Termination of Service, the Stock Option will be terminated on that date. The unexercised portion of the Stock Option that relates to Optioned Shares which are vested will terminate at the first of the following to occur:
i. 5 p.m. on the date the Option Period terminates;
ii. 5 p.m. on the date which is twelve (12) months following the date of the Participant’s Termination of Service due to death or Total and Permanent Disability;
iii. immediately upon the Participant’s Termination of Service by the Company for Cause (as defined herein);
iv. immediately upon the Participant’s violation of any non-compete or non-solicitation agreement entered into between the Company and the Participant;
v. 5 p.m. on the date which is three (3) months following the date of the Participant’s Termination of Service for any reason not otherwise specified in this Section 4.a. ; or
vi. 5 p.m. on the date the Company causes any portion of the Stock Option to be forfeited pursuant to Section 7 hereof.
b. For purposes hereof, “ Cause ” shall have the meaning ascribed to such term in any employment, consulting, or other service agreement in effect by and between the Company and the Participant; provided , however , at any time there is no such agreement in effect, or if such agreement does not define such term, the term “Cause” shall mean (i) the Participant’s commission of a dishonest or fraudulent act in connection with the Participant’s employment with or service to the Company, or the misappropriation of Company property; (ii) the Participant’s conviction of, or plea of nolo contendere to, a felony or crime involving dishonesty; (iii) the Participant’s inattention to duties, unsatisfactory performance, or failure to perform the Participant’s duties hereunder, provided in each case the Company gives the Participant written notice and thirty (30) days to correct the Participant’s performance to the Company’s satisfaction; (iv) a substantial failure to comply with the Company’s policies; (v) a material and willful breach of the Participant’s fiduciary duties in any material respect, provided in each case the Company gives the Participant written notice and thirty (30) days to correct the breach to the Company’s satisfaction; (vi) the Participant’s failure to comply in any material respect with any legal written directive of the Board; or (vii) any act or omission of the Participant which is of substantial detriment to the Company because of the Participant’s intentional failure to comply with any statute, rule, or regulation, except any act or omission believed by the Participant in good faith to have been in or not opposed to the best interests of the Company (without intent of the Participant to gain, directly or indirectly, a profit to which the Participant was not legally entitled). Any determination of whether the Participant should be terminated for Cause pursuant to this Agreement shall be made in the sole, good faith discretion of the Board, and shall be binding upon all parties affected thereby.
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5. Who May Exercise . Subject to the terms and conditions set forth in Sections 3 and 4 above, during the lifetime of the Participant, the Stock Option may be exercised only by the Participant, or by the Participant’s guardian or personal or legal representative. If the Participant’s Termination of Service is due to his death prior to the dates specified in Section 4.a. hereof, and the Participant has not exercised the Stock Option as to the maximum number of vested Optioned Shares as set forth in Section 3 hereof as of the date of death, the following persons may exercise the exercisable portion of the Stock Option on behalf of the Participant at any time prior to the earliest of the dates specified in Section 4.a. hereof: the personal representative of his estate or the person who acquired the right to exercise the Stock Option by bequest or inheritance or by reason of the death of the Participant, provided that the Stock Option shall remain subject to the other terms of this Agreement, the Plan, and all Applicable Laws, rules, and regulations.
6. No Fractional Shares . The Stock Option may be exercised only with respect to full shares, and no fractional share of Common Stock shall be issued.
7. Manner of Exercise . Subject to such administrative regulations as the Committee may from time to time adopt, the Stock Option may be exercised by the delivery of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the Stock Option is to be exercised, the date of exercise thereof (the “ Exercise Date ”), and whether the Optioned Shares to be exercised will be considered as deemed granted under an Incentive Stock Option as provided in Section 11 . On the Exercise Date, the Participant shall deliver to the Company consideration with a value equal to the total Option Price of the shares to be purchased, payable as follows: (a) cash, check, bank draft, or money order payable to the order of the Company; (b) if the Company, in its sole discretion, so consents in writing, Common Stock (including Restricted Stock) owned by the Participant on the Exercise Date, valued at its Fair Market Value on the Exercise Date, and which the Participant has not acquired from the Company within six (6) months prior to the Exercise Date; (c) if the Company, in its sole discretion, so consents in writing, by delivery (including by FAX) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price; and/or (d) in any other form of valid consideration that is acceptable to the Committee in its sole discretion. In the event that shares of Restricted Stock are tendered as consideration for the exercise of a Stock Option, a number of shares of Common Stock issued upon the exercise of the Stock Option equal to the number of shares of Restricted Stock used as consideration therefor shall be subject to the same restrictions and provisions as the Restricted Stock so tendered. If the Participant fails to deliver the consideration described herein within three (3) business days of the date of the Exercise Notice, then the Exercise Notice shall be null and void, and the Company will have no obligation to deliver any shares of Common Stock to the Participant in connection with such Exercise Notice
Upon payment of all amounts due from the Participant, the Company shall cause the Common Stock then being purchased to be electronically registered in the Participant’s name (or the name of the person exercising the Participant’s Stock Option in the event of his death), promptly after the Exercise Date. The Company shall not issue certificates for Common Stock unless the Participant (or the person exercising the Participant’s Stock Option in the event of his death) requests delivery of the certificates for the Common Stock in writing and in accordance with the procedures established by the Committee. The Company shall deliver the certificates as soon as administratively practicable following the Company’s receipt of the written request from the Participant (or the person exercising the Participant’s Stock Option in the event of his death) for delivery of the certificates.
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The obligation of the Company to register or deliver such shares of Common Stock shall, however, be subject to the condition that, if at any time the Company shall determine in its discretion that the listing, registration, or qualification of the Stock Option or the Common Stock upon any securities exchange or inter-dealer quotation system or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with, the Stock Option or the issuance or purchase of shares of Common Stock thereunder, then the Stock Option may not be exercised in whole or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not reasonably acceptable to the Committee.
If the Participant fails to pay for any of the Optioned Shares specified in such notice or fails to accept delivery thereof, that portion of the Participant’s Stock Option and the right to purchase such Optioned Shares may be forfeited by the Participant.
8. Nonassignability . The Stock Option is not assignable or transferable by the Participant except by will or by the laws of descent and distribution.
9. Rights as Stockholder . The Participant will have no rights as a stockholder with respect to any of the Optioned Shares until the issuance of a certificate or certificates to the Participant or the registration of such shares in the Participant’s name for the shares of Common Stock. The Optioned Shares shall be subject to the terms and conditions of this Agreement. Except as otherwise provided in Section 10 hereof, no adjustment shall be made for dividends or other rights for which the record date is prior to the issuance of such certificate or certificates or the registration of such shares in the Participant’s name. The Participant, by his execution of this Agreement, agrees to execute any documents requested by the Company in connection with the issuance of the shares of Common Stock.
10. Adjustment of Number of Optioned Shares and Related Matters . The number of shares of Common Stock covered by the Stock Option, and the Option Prices thereof, shall be subject to adjustment in accordance with Articles 11 – 13 of the Plan.
11. Incentive Stock Option . Subject to the provisions of the Plan, the Stock Option is intended to be an Incentive Stock Option. To the extent the number of Optioned Shares exceeds the limit set forth in Section 6.3 of the Plan, such Optioned Shares shall be deemed granted pursuant to a Nonqualified Stock Option. Unless otherwise indicated by the Participant in the Exercise Notice pursuant to Section 7 , upon any exercise of this Stock Option, the number of exercised Optioned Shares that shall be deemed to be exercised pursuant to an Incentive Stock Option shall equal the total number of Optioned Shares so exercised multiplied by a fraction, (a) the numerator of which is the number of unexercised Optioned Shares that could then be exercised pursuant to an Incentive Stock Option, and (b) the denominator of which is the then total number of unexercised Optioned Shares.
12. Disqualifying Disposition . In the event that Common Stock acquired upon exercise of this Stock Option is disposed of by the Participant in a “Disqualifying Disposition,” such Participant shall notify the Company in writing within thirty (30) days after such disposition of the date and terms of such disposition. For purposes hereof, “ Disqualifying Disposition ” shall mean a disposition of Common Stock that is acquired upon the exercise of this Stock Option (and that is not deemed granted pursuant to a Nonqualified Stock Option under Section 11 ) prior to the expiration of either two (2) years from the Date of Grant of this Stock Option or one (1) year from the transfer of shares to the Participant pursuant to the exercise of the Stock Option.
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13. Voting . The Participant, as record holder of some or all of the Optioned Shares following exercise of this Stock Option, has the exclusive right to vote, or consent with respect to, such Optioned Shares until such time as the Optioned Shares are transferred in accordance with this Agreement; provided , however , that this Section shall not create any voting right where the holders of such Optioned Shares otherwise have no such right.
14. Specific Performance . The parties acknowledge that remedies at law will be inadequate remedies for breach of this Agreement and consequently agree that this Agreement shall be enforceable by specific performance. The remedy of specific performance shall be cumulative of all of the rights and remedies at law or in equity of the parties under this Agreement.
15. Participant’s Representations . Notwithstanding any of the provisions hereof, the Participant hereby agrees that he will not exercise the Stock Option granted hereby, and that the Company will not be obligated to issue any shares to the Participant hereunder, if the exercise thereof or the registration or issuance of such shares shall constitute a violation by the Participant or the Company of any provision of any law or regulation of any governmental authority. Any determination in this connection by the Company shall be final, binding, and conclusive. The obligations of the Company and the rights of the Participant are subject to all Applicable Laws, rules, and regulations.
16. Investment Representation . Unless the shares of Common Stock are issued to the Participant in a transaction registered under applicable federal and state securities laws, by his execution hereof, the Participant represents and warrants to the Company that all Common Stock which may be purchased hereunder will be acquired by the Participant for investment purposes for his own account and not with any intent for resale or distribution in violation of federal or state securities laws. Unless the Common Stock is issued to him in a transaction registered under the applicable federal and state securities laws, all certificates issued with respect to the Common Stock shall bear an appropriate restrictive investment legend and shall be held indefinitely, unless they are subsequently registered under the applicable federal and state securities laws or the Participant obtains an opinion of counsel, in form and substance satisfactory to the Company and its counsel, that such registration is not required.
17. Participant’s Acknowledgments . The Participant acknowledges that a copy of the Plan has been made available for his review by the Company, and represents that he is familiar with the terms and provisions thereof, and hereby accepts this Stock Option subject to all the terms and provisions thereof. The Participant hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee or the Board, as appropriate, upon any questions arising under the Plan or this Agreement.
18. Law Governing . This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Delaware (excluding any conflict of laws rule or principle of Delaware law that might refer the governance, construction, or interpretation of this Agreement to the laws of another state).
19. No Right to Continue Employment . Nothing herein shall be construed to confer upon the Participant the right to continue in the employment of the Company or to interfere with or restrict in any way the right of the Company to discharge the Participant at any time (subject to any contract rights of the Participant).
20. Legal Construction. In the event that any one or more of the terms, provisions, or agreements that are contained in this Agreement shall be held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect for any reason, the invalid, illegal, or unenforceable term, provision, or agreement shall not affect any other term, provision, or agreement that is contained in this Agreement, and this Agreement shall be construed in all respects as if the invalid, illegal, or unenforceable term, provision, or agreement had never been contained herein.
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21. Covenants and Agreements as Independent Agreements . Each of the covenants and agreements that is set forth in this Agreement shall be construed as a covenant and agreement independent of any other provision of this Agreement. The existence of any claim or cause of action of the Participant against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements that are set forth in this Agreement.
22. Entire Agreement . This Agreement together with the Plan supersede any and all other prior understandings and agreements, either oral or in writing, between the parties with respect to the subject matter hereof and constitute the sole and only agreements between the parties with respect to the said subject matter. All prior negotiations and agreements between the parties with respect to the subject matter hereof are merged into this Agreement. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement or the Plan and that any agreement, statement, or promise that is not contained in this Agreement or the Plan shall not be valid or binding or of any force or effect.
23. Parties Bound . The terms, provisions, and agreements that are contained in this Agreement shall apply to, be binding upon, and inure to the benefit of the parties and their respective heirs, executors, administrators, legal representatives, and permitted successors and assigns, subject to the limitation on assignment expressly set forth herein.
24. Modification . No change or modification of this Agreement shall be valid or binding upon the parties unless the change or modification is in writing and signed by the parties. Notwithstanding the preceding sentence, the Company may amend the Plan to the extent permitted by the Plan.
25. Headings . The headings that are used in this Agreement are used for reference and convenience purposes only and do not constitute substantive matters to be considered in construing the terms and provisions of this Agreement.
26. Gender and Number . Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise.
27. Notice . Any notice required or permitted to be delivered hereunder shall be deemed to be delivered only when actually received by the Company or by the Participant, as the case may be, at the addresses set forth below, or at such other addresses as they have theretofore specified by written notice delivered in accordance herewith:
a. Notice to the Company shall be addressed and delivered as follows:
AquaMed Technologies, Inc. | |||
[Address] | |||
Attn: | |||
Facsimile: |
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b. Notice to the Participant shall be addressed and delivered as set forth on the signature page.
28. Tax Requirements . The Participant is hereby advised to consult immediately with his own tax advisor regarding the tax consequences of this Agreement. The Company or, if applicable, any Subsidiary (for purposes of this Section 28 , the term “ Company ” shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form in connection with the Plan and this Agreement, any federal, state, local, or other taxes required by law to be withheld in connection with this Award. The Company may, in its sole discretion, also require the Participant receiving shares of Common Stock issued under the Plan to pay the Company the amount of any taxes that the Company is required to withhold in connection with the Participant’s income arising with respect to this Award. Such payments shall be required to be made when requested by the Company and may be required to be made prior to the registration of such shares in the Participant’s name or the delivery of any certificate representing shares of Common Stock, if such certificate is requested by the Participant in accordance with Section 8.3(c) of the Plan. Such payment may be made by (a) the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the required tax withholding obligations of the Company; (b) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising Participant to the Company of shares of Common Stock that the Participant has not acquired from the Company within six (6) months prior to the date of exercise, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the required tax withholding payment; (c) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the exercise of the Stock Option, which shares so withheld have an aggregate Fair Market Value that equals (but does not exceed) the required tax withholding payment; or (d) any combination of (a), (b), or (c). The Company may, in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant.
[ Remainder of Page Intentionally Left Blank;
Signature Page Follows .]
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Participant, to evidence his consent and approval of all the terms hereof, has duly executed this Agreement, as of the date specified in Section 1 hereof.
COMPANY: | ||
AQUAMED TECHNOLOGIES, INC. | ||
By: | ||
Name: | ||
Title: |
PARTICIPANT: | ||
Signature | ||
Name: | ||
Address: | ||
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Exhibit 10.24
NONQUALIFIED STOCK OPTION AGREEMENT
AQUAMED TECHNOLOGIES, INC.
2019 LONG-TERM INCENTIVE PLAN
1. Grant of Option . Pursuant to the AquaMed Technologies, Inc. 2019 Long-Term Incentive Plan (the “ Plan ”) for Employees, Contractors, and Outside Directors of AquaMed Technologies, Inc., a Delaware corporation (the “ Company ”), the Company grants to
_________________________
(the “ Participant ”),
an option (the “ Stock Option ”) to purchase a total of ___________________ (__________) full shares of Common Stock of the Company (the “ Optioned Shares ”) at an “ Option Price ” equal to $________ per share (being equal to the Fair Market Value per share of the Common Stock on the Date of Grant).
The “ Date of Grant ” of this Stock Option is _________________, 20__. The “ Option Period ” shall commence on the Date of Grant and shall expire on the tenth (10 th ) anniversary of the Date of Grant, unless terminated earlier in accordance with Section 4 below. The Stock Option is a Nonqualified Stock Option. This Stock Option is intended to comply with the provisions governing nonqualified stock options under the final Treasury Regulations issued on April 17, 2007, in order to exempt this Stock Option from application of Section 409A of the Code.
2. Subject to Plan . The Stock Option and its exercise are subject to the terms and conditions of the Plan, and the terms of the Plan shall control to the extent not otherwise inconsistent with the provisions of this Nonqualified Stock Option Agreement (this “ Agreement ”). The capitalized terms used herein that are defined in the Plan shall have the same meanings assigned to them in the Plan. The Stock Option is subject to any rules promulgated pursuant to the Plan by the Board or the Committee and communicated to the Participant in writing. In addition, if the Plan previously has not been approved by the Company’s stockholders, the Stock Option is granted subject to such stockholder approval.
3. Vesting; Time of Exercise . Except as specifically provided in this Agreement and subject to certain restrictions and conditions set forth in the Plan, the Optioned Shares shall be vested and the Stock Option shall be exercisable as follows:
a. ________________ (_______) of the total Optioned Shares shall vest and that portion of the Stock Option shall be exercisable on the Date of Grant.
b. ________________ (_______) of the total Optioned Shares shall vest and that portion of the Stock Option shall become exercisable on __________________, provided the Participant is employed by (or, if the Participant is a Contractor or an Outside Director, is providing services to) the Company or a Subsidiary on that date.
c. ________________ (_______) of the total Optioned Shares shall vest and that portion of the Stock Option shall become exercisable on __________________, provided the Participant is employed by (or, if the Participant is a Contractor or an Outside Director, is providing services to) the Company or a Subsidiary on that date.
d. ________________ (_______) of the total Optioned Shares shall vest and that portion of the Stock Option shall become exercisable on __________________, provided the Participant is employed by (or, if the Participant is a Contractor or an Outside Director, is providing services to) the Company or a Subsidiary on that date.
4. Term; Forfeiture .
a. Except as otherwise provided in this Agreement, to the extent the unexercised portion of the Stock Option relates to Optioned Shares which are not vested on the date of the Participant’s Termination of Service, the Stock Option will be terminated on that date. The unexercised portion of the Stock Option that relates to Optioned Shares which are vested will terminate at the first of the following to occur:
i. 5 p.m. on the date the Option Period terminates;
ii. 5 p.m. on the date which is twelve (12) months following the date of the Participant’s Termination of Service due to death or Total and Permanent Disability;
iii. immediately upon the Participant’s Termination of Service by the Company for Cause (as defined herein);
iv. immediately upon the Participant’s violation of any non-compete or non-solicitation agreement entered into between the Company and the Participant;
v. 5 p.m. on the date which is twelve (12) months following the date of the Participant’s Termination of Service for any reason not otherwise specified in this Section 4.a. ; or
vi. 5 p.m. on the date the Company causes any portion of the Stock Option to be forfeited pursuant to Section 7 hereof.
b. For purposes hereof, “ Cause ” shall have the meaning ascribed to such term in any employment, consulting, or other service agreement in effect by and between the Company and the Participant; provided , however , at any time there is no such agreement in effect, or if such agreement does not define such term, the term “Cause” shall mean (i) the Participant’s commission of a dishonest or fraudulent act in connection with the Participant’s employment with or service to the Company, or the misappropriation of Company property; (ii) the Participant’s conviction of, or plea of nolo contendere to, a felony or crime involving dishonesty; (iii) the Participant’s inattention to duties, unsatisfactory performance, or failure to perform the Participant’s duties hereunder, provided in each case the Company gives the Participant written notice and thirty (30) days to correct the Participant’s performance to the Company’s satisfaction; (iv) a substantial failure to comply with the Company’s policies; (v) a material and willful breach of the Participant’s fiduciary duties in any material respect, provided in each case the Company gives the Participant written notice and thirty (30) days to correct the breach to the Company’s satisfaction; (vi) the Participant’s failure to comply in any material respect with any legal written directive of the Board; or (vii) any act or omission of the Participant which is of substantial detriment to the Company because of the Participant’s intentional failure to comply with any statute, rule, or regulation, except any act or omission believed by the Participant in good faith to have been in or not opposed to the best interests of the Company (without intent of the Participant to gain, directly or indirectly, a profit to which the Participant was not legally entitled). Any determination of whether the Participant should be terminated for Cause pursuant to this Agreement shall be made in the sole, good faith discretion of the Board, and shall be binding upon all parties affected thereby.
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5. Who May Exercise . Subject to the terms and conditions set forth in Sections 3 and 4 above, during the lifetime of the Participant, the Stock Option may be exercised only by the Participant, or by the Participant’s guardian or personal or legal representative. If the Participant’s Termination of Service is due to his death prior to the dates specified in Section 4.a. hereof, and the Participant has not exercised the Stock Option as to the maximum number of vested Optioned Shares as set forth in Section 3 hereof as of the date of death, the following persons may exercise the exercisable portion of the Stock Option on behalf of the Participant at any time prior to the earliest of the dates specified in Section 4.a. hereof: the personal representative of his estate or the person who acquired the right to exercise the Stock Option by bequest or inheritance or by reason of the death of the Participant, provided that the Stock Option shall remain subject to the other terms of this Agreement, the Plan, and all Applicable Laws.
6. No Fractional Shares . The Stock Option may be exercised only with respect to full shares, and no fractional share of Common Stock shall be issued.
7. Manner of Exercise . Subject to such administrative regulations as the Committee may from time to time adopt, the Stock Option may be exercised by the delivery of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the Stock Option is to be exercised and the date of exercise thereof (the “ Exercise Date ”). On the Exercise Date, the Participant shall deliver to the Company consideration with a value equal to the total Option Price of the shares to be purchased, payable as follows: (a) cash, check, bank draft, or money order payable to the order of the Company; (b) if the Company, in its sole discretion, so consents in writing, Common Stock (including Restricted Stock) owned by the Participant on the Exercise Date, valued at its Fair Market Value on the Exercise Date, and which the Participant has not acquired from the Company within six (6) months prior to the Exercise Date; (c) if the Company, in its sole discretion, so consents in writing, by delivery (including by FAX) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price; and/or (d) in any other form of valid consideration that is acceptable to the Committee in its sole discretion. In the event that shares of Restricted Stock are tendered as consideration for the exercise of a Stock Option, a number of shares of Common Stock issued upon the exercise of the Stock Option equal to the number of shares of Restricted Stock used as consideration therefor shall be subject to the same restrictions and provisions as the Restricted Stock so tendered. If the Participant fails to deliver the consideration described herein within three (3) business days of the date of the Exercise Notice, then the Exercise Notice shall be null and void, and the Company will have no obligation to deliver any shares of Common Stock to the Participant in connection with such Exercise Notice.
Upon payment of all amounts due from the Participant, the Company shall cause the Common Stock then being purchased to be electronically registered in the Participant’s name (or the name of the person exercising the Participant’s Stock Option in the event of his death), promptly after the Exercise Date. The Company shall not issue certificates for Common Stock unless the Participant (or the person exercising the Participant’s Stock Option in the event of his death) requests delivery of the certificates for the Common Stock in writing and in accordance with the procedures established by the Committee. The Company shall deliver the certificates as soon as administratively practicable following the Company’s receipt of the written request from the Participant (or the person exercising the Participant’s Stock Option in the event of his death) for delivery of the certificates.
The obligation of the Company to register or deliver such shares of Common Stock shall, however, be subject to the condition that, if at any time the Company shall determine in its discretion that the listing, registration, or qualification of the Stock Option or the Common Stock upon any securities exchange or inter-dealer quotation system or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with, the Stock Option or the issuance or purchase of shares of Common Stock thereunder, then the Stock Option may not be exercised in whole or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not reasonably acceptable to the Committee.
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If the Participant fails to pay for any of the Optioned Shares specified in such notice or fails to accept delivery thereof, then that portion of the Participant’s Stock Option and the right to purchase such Optioned Shares may be forfeited by the Participant.
8. Nonassignability . The Stock Option is not assignable or transferable by the Participant except by will or by the laws of descent and distribution.
9. Rights as Stockholder . The Participant will have no rights as a stockholder with respect to any of the Optioned Shares until the issuance of a certificate or certificates to the Participant or the registration of such shares in the Participant’s name for the shares of Common Stock. The Optioned Shares shall be subject to the terms and conditions of this Agreement. Except as otherwise provided in Section 10 hereof, no adjustment shall be made for dividends or other rights for which the record date is prior to the issuance of such certificate or certificates or the registration of such shares in the Participant’s name. The Participant, by his execution of this Agreement, agrees to execute any documents requested by the Company in connection with the issuance of the shares of Common Stock.
10. Adjustment of Number of Optioned Shares and Related Matters . The number of shares of Common Stock covered by the Stock Option, and the Option Prices thereof, shall be subject to adjustment in accordance with Articles 11 - 13 of the Plan.
11. Nonqualified Stock Option . The Stock Option shall not be treated as an Incentive Stock Option.
12. Voting . The Participant, as record holder of some or all of the Optioned Shares following exercise of this Stock Option, has the exclusive right to vote, or consent with respect to, such Optioned Shares until such time as the Optioned Shares are transferred in accordance with this Agreement; provided , however , that this Section shall not create any voting right where the holders of such Optioned Shares otherwise have no such right.
13. Specific Performance . The parties acknowledge that remedies at law will be inadequate remedies for breach of this Agreement and consequently agree that this Agreement shall be enforceable by specific performance. The remedy of specific performance shall be cumulative of all of the rights and remedies at law or in equity of the parties under this Agreement.
14. Participant’s Representations . Notwithstanding any of the provisions hereof, the Participant hereby agrees that he will not exercise the Stock Option granted hereby, and that the Company will not be obligated to issue any shares to the Participant hereunder, if the exercise thereof or the registration or issuance of such shares shall constitute a violation by the Participant or the Company of any provision of any law or regulation of any governmental authority. Any determination in this connection by the Company shall be final, binding, and conclusive. The obligations of the Company and the rights of the Participant are subject to all Applicable Laws, rules, and regulations.
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15. Investment Representation . Unless the shares of Common Stock are issued to the Participant in a transaction registered under applicable federal and state securities laws, by his execution hereof, the Participant represents and warrants to the Company that all Common Stock which may be purchased hereunder will be acquired by the Participant for investment purposes for his own account and not with any intent for resale or distribution in violation of federal or state securities laws. Unless the Common Stock is issued to him in a transaction registered under the applicable federal and state securities laws, all certificates issued with respect to the Common Stock shall bear an appropriate restrictive investment legend and shall be held indefinitely, unless they are subsequently registered under the applicable federal and state securities laws or the Participant obtains an opinion of counsel, in form and substance satisfactory to the Company and its counsel, that such registration is not required.
16. Participant’s Acknowledgments . The Participant acknowledges that a copy of the Plan has been made available for his review by the Company and represents that he is familiar with the terms and provisions thereof, and hereby accepts this Stock Option subject to all the terms and provisions thereof. The Participant hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee or the Board, as appropriate, upon any questions arising under the Plan or this Agreement.
17. Law Governing . This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Delaware (excluding any conflict of laws rule or principle of Delaware law that might refer the governance, construction, or interpretation of this Agreement to the laws of another state).
18. No Right to Continue Service or Employment . Nothing herein shall be construed to confer upon the Participant the right to continue in the employ or to provide services to the Company or any Subsidiary, whether as an Employee, Contractor, or Outside Director, or to interfere with or restrict in any way the right of the Company or any Subsidiary to discharge the Participant as an Employee, Contractor, or Outside Director at any time (subject to any contract rights of the Participant).
19. Legal Construction. In the event that any one or more of the terms, provisions, or agreements that are contained in this Agreement shall be held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect for any reason, the invalid, illegal, or unenforceable term, provision, or agreement shall not affect any other term, provision, or agreement that is contained in this Agreement, and this Agreement shall be construed in all respects as if the invalid, illegal, or unenforceable term, provision, or agreement had never been contained herein.
20. Covenants and Agreements as Independent Agreements . Each of the covenants and agreements that is set forth in this Agreement shall be construed as a covenant and agreement independent of any other provision of this Agreement. The existence of any claim or cause of action of the Participant against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements that are set forth in this Agreement.
21. Entire Agreement . This Agreement together with the Plan supersede any and all other prior understandings and agreements, either oral or in writing, between the parties with respect to the subject matter hereof and constitute the sole and only agreements between the parties with respect to the said subject matter. All prior negotiations and agreements between the parties with respect to the subject matter hereof are merged into this Agreement. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement or the Plan and that any agreement, statement, or promise that is not contained in this Agreement or the Plan shall not be valid or binding or of any force or effect.
22. Parties Bound . The terms, provisions, and agreements that are contained in this Agreement shall apply to, be binding upon, and inure to the benefit of the parties and their respective heirs, executors, administrators, legal representatives, and permitted successors and assigns, subject to the limitation on assignment expressly set forth herein.
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23. Modification . No change or modification of this Agreement shall be valid or binding upon the parties unless the change or modification is in writing and signed by the parties; provided, however, that the Company may change or modify this Agreement without the Participant’s consent or signature if the Company determines, in its sole discretion, that such change or modification is necessary for purposes of compliance with or exemption from the requirements of Section 409A of the Code or any regulations or other guidance issued thereunder. Notwithstanding the preceding sentence, the Company may amend the Plan to the extent permitted by the Plan.
24. Headings . The headings that are used in this Agreement are used for reference and convenience purposes only and do not constitute substantive matters to be considered in construing the terms and provisions of this Agreement.
25. Gender and Number . Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise.
26. Notice . Any notice required or permitted to be delivered hereunder shall be deemed to be delivered only when actually received by the Company or by the Participant, as the case may be, at the addresses set forth below, or at such other addresses as they have theretofore specified by written notice delivered in accordance herewith:
a. Notice to the Company shall be addressed and delivered as follows:
AquaMed Technologies, Inc. | |||
[Address] | |||
Attn: | |||
Facsimile: |
b. Notice to the Participant shall be addressed and delivered as set forth on the signature page.
27. Tax Requirements . The Participant is hereby advised to consult immediately with his own tax advisor regarding the tax consequences of this Agreement. The Company or, if applicable, any Subsidiary (for purposes of this Section 27 , the term “ Company ” shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form in connection with the Plan and this Agreement, any federal, state, local, or other taxes required by law to be withheld in connection with this Award. The Company may, in its sole discretion, also require the Participant receiving shares of Common Stock issued under the Plan to pay the Company the amount of any taxes that the Company is required to withhold in connection with the Participant’s income arising with respect to this Award. Such payments shall be required to be made when requested by the Company and may be required to be made prior to the registration of such shares in the Participant’s name or the delivery of any certificate representing shares of Common Stock, if such certificate is requested by the Participant in accordance with Section 8.3(c) of the Plan. Such payment may be made by (a) the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the required tax withholding obligations of the Company; (b) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising Participant to the Company of shares of Common Stock that the Participant has not acquired from the Company within six (6) months prior to the date of exercise, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the required tax withholding payment; (c) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the exercise of the Stock Option, which shares so withheld have an aggregate Fair Market Value that equals (but does not exceed) the required tax withholding payment; or (d) any combination of (a), (b), or (c). The Company may, in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant.
[ Remainder of Page Intentionally Left Blank;
Signature Page Follows. ]
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Participant, to evidence his consent and approval of all the terms hereof, has duly executed this Agreement, as of the date specified in Section 1 hereof.
COMPANY: | ||
AQUAMED TECHNOLOGIES, INC. | ||
By: | ||
Name: | ||
Title: |
PARTICIPANT: | ||
Signature | ||
Name: | ||
Address: | ||
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Exhibit 10.25
RESTRICTED STOCK AWARD AGREEMENT
AQUAMED TECHNOLOGIES, INC.
2019 LONG-TERM INCENTIVE PLAN
1. Grant of Award . Pursuant to the AquaMed Technologies, Inc. 2019 Long-Term Incentive Plan (the “ Plan ”) for key Employees, key Contractors, and Outside Directors of AquaMed Technologies, Inc., a Delaware corporation (the “ Company ”), the Company grants to
_________________________________
(the “ Participant ”)
an Award of Restricted Stock in accordance with Section 6.4 of the Plan. The number of shares of Common Stock awarded under this Restricted Stock Award Agreement (this “ Agreement ”) is _____________________ (__________) shares (the “ Awarded Shares ”). The “ Date of Grant ” of this Award is ______________, 20___.
2. Subject to Plan . This Agreement is subject to the terms and conditions of the Plan, and the terms of the Plan shall control to the extent not otherwise inconsistent with the provisions of this Agreement. The capitalized terms used herein that are defined in the Plan shall have the same meanings assigned to them in the Plan. This Agreement is subject to any rules promulgated pursuant to the Plan by the Board or the Committee and communicated to the Participant in writing.
3. Vesting . Except as specifically provided in this Agreement and subject to certain restrictions and conditions set forth in the Plan, the Awarded Shares shall vest as follows:
a. ____________________ of the total Awarded Shares shall vest on _______________________, provided the Participant is employed by (or, if the Participant is a Contractor or an Outside Director, is providing services to) the Company or a Subsidiary on that date.
b. ____________________ of the total Awarded Shares shall vest on _______________________, provided the Participant is employed by (or, if the Participant is a Contractor or an Outside Director, is providing services to) the Company or a Subsidiary on that date.
c. ____________________ of the total Awarded Shares shall vest on _______________________, provided the Participant is employed by (or, if the Participant is a Contractor or an Outside Director, is providing services to) the Company or a Subsidiary on that date.
d. ____________________ of the total Awarded Shares shall vest on _______________________, provided the Participant is employed by (or, if the Participant is a Contractor or an Outside Director, is providing services to) the Company or a Subsidiary on that date.
4. Forfeiture of Awarded Shares . Awarded Shares that are not vested in accordance with Section 3 shall be forfeited on the date of the Participant’s Termination of Service. Upon forfeiture, all of the Participant’s rights with respect to the forfeited Awarded Shares shall cease and terminate, without any further obligations on the part of the Company.
5. Restrictions on Awarded Shares . Subject to the provisions of the Plan and the terms of this Agreement, from the Date of Grant until the date the Awarded Shares are vested in accordance with Section 3 and are no longer subject to forfeiture in accordance with Section 4 (the “ Restriction Period ”), the Participant shall not be permitted to sell, transfer, pledge, hypothecate, margin, assign, or otherwise encumber any of the Awarded Shares. Except for these limitations, the Committee may in its sole discretion, remove any or all of the restrictions on such Awarded Shares whenever it may determine that, by reason of changes in Applicable Laws or other changes in circumstances arising after the date of this Agreement, such action is appropriate.
6. Legend . Awarded Shares electronically registered in the Participant’s name shall note that such shares are Restricted Stock. If certificates for Awarded Shares are issued, the following legend shall be placed on all such certificates:
On the face of the certificate:
“Transfer of this stock is restricted in accordance with conditions printed on the reverse of this certificate.”
On the reverse:
“The shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain AquaMed Technologies, Inc. 2019 Long-Term Incentive Plan, a copy of which is on file at the principal office of the Company in Langhorne, Pennsylvania, and that certain Restricted Stock Award Agreement, by and between the Company and the Participant dated, ________________. No transfer or pledge of the shares evidenced hereby may be made except in accordance with and subject to the provisions of said Plan and the Award Agreement. By acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Plan and the Award Agreement.”
The following legend shall be inserted on a certificate, if issued, evidencing Common Stock issued under the Plan if the shares were not issued in a transaction registered under the applicable federal and state securities laws:
“Shares of stock represented by this certificate have been acquired by the holder for investment and not for resale, transfer or distribution, have been issued pursuant to exemptions from the registration requirements of applicable state and federal securities laws, and may not be offered for sale, sold or transferred other than pursuant to effective registration under such laws, or in transactions otherwise in compliance with such laws, and upon evidence satisfactory to the Company of compliance with such laws, as to which the Company may rely upon an opinion of counsel satisfactory to the Company.”
All Awarded Shares owned by the Participant shall be subject to the terms of this Agreement and shall be represented by a certificate or certificates bearing the foregoing legend.
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7. Delivery of Certificates; Registration of Shares . The Company shall electronically register the Awarded Shares in the Participant’s name or, if requested in writing by the Participant in accordance with Section 6.4(a) of the Plan, shall deliver certificates for the Awarded Shares free of restriction under this Agreement as soon as administratively practicable after, and only after, the Restriction Period has expired without forfeiture pursuant to Section 4 . In connection with the issuance of a certificate for Restricted Stock, the Participant shall endorse such certificate in blank or execute a stock power in a form satisfactory to the Company in blank and deliver such certificate and executed stock power to the Company.
8. Rights of a Stockholder . Except as provided in Section 4 and Section 5 above, the Participant shall have, with respect to his Awarded Shares, all of the rights of a stockholder of the Company, including the right to vote the shares and the right to receive any dividends thereon.
9. Voting . The Participant, as record holder of the Awarded Shares, has the exclusive right to vote, or consent with respect to, such Awarded Shares until such time as the Awarded Shares are transferred in accordance with this Agreement; provided , however , that this Section 9 shall not create any voting right where the holders of such Awarded Shares otherwise have no such right.
10. Adjustment to Number of Awarded Shares . The number of Awarded Shares shall be subject to adjustment in accordance with Articles 11-13 of the Plan.
11. Specific Performance . The parties acknowledge that remedies at law will be inadequate remedies for a breach of this Agreement and consequently agree that this Agreement shall be enforceable by specific performance. The remedy of specific performance shall be cumulative of all of the rights and remedies at law or in equity of the parties under this Agreement.
12. Participant’s Representations . Notwithstanding any of the provisions hereof, the Participant hereby agrees that he will not acquire any Awarded Shares, and that the Company will not be obligated to issue any Awarded Shares to the Participant hereunder, if the issuance of such shares shall constitute a violation by the Participant or the Company of any provision of any law or regulation of any governmental authority. Any determination in this connection by the Company shall be final, binding, and conclusive. The rights and obligations of the Company and the rights and obligations of the Participant are subject to all Applicable Laws.
13. Participant’s Acknowledgments . The Participant acknowledges that a copy of the Plan has been made available for his review by the Company and represents that he is familiar with the terms and provisions thereof, and hereby accepts this Award subject to all the terms and provisions thereof. The Participant hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee or the Board, as appropriate, upon any questions arising under the Plan or this Agreement.
14. Law Governing . This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Delaware (excluding any conflict of laws rule or principle of Delaware law that might refer the governance, construction, or interpretation of this Agreement to the laws of another state).
15. No Right to Continue Service or Employment . Nothing herein shall be construed to confer upon the Participant the right to continue in the employ or to provide services to the Company or any Subsidiary, whether as an Employee, Contractor, or Outside Director, or to interfere with or restrict in any way the right of the Company or any Subsidiary to discharge the Participant as an Employee, Contractor, or Outside Director at any time.
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16. Legal Construction. In the event that any one or more of the terms, provisions, or agreements that are contained in this Agreement shall be held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect for any reason, the invalid, illegal, or unenforceable term, provision, or agreement shall not affect any other term, provision, or agreement that is contained in this Agreement, and this Agreement shall be construed in all respects as if the invalid, illegal, or unenforceable term, provision, or agreement had never been contained herein.
17. Covenants and Agreements as Independent Agreements . Each of the covenants and agreements that is set forth in this Agreement shall be construed as a covenant and agreement independent of any other provision of this Agreement. The existence of any claim or cause of action of the Participant against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements that are set forth in this Agreement.
18. Entire Agreement . This Agreement together with the Plan supersede any and all other prior understandings and agreements, either oral or in writing, between the parties with respect to the subject matter hereof and constitute the sole and only agreements between the parties with respect to the said subject matter. All prior negotiations and agreements between the parties with respect to the subject matter hereof are merged into this Agreement. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement or the Plan and that any agreement, statement, or promise that is not contained in this Agreement or the Plan shall not be valid or binding or of any force or effect.
19. Parties Bound . The terms, provisions, and agreements that are contained in this Agreement shall apply to, be binding upon, and inure to the benefit of the parties and their respective heirs, executors, administrators, legal representatives, and permitted successors and assigns, subject to the limitation on assignment expressly set forth herein. No person shall be permitted to acquire any Awarded Shares without first executing and delivering an agreement in the form satisfactory to the Company making such person or entity subject to the restrictions on transfer contained herein.
20. Modification . No change or modification of this Agreement shall be valid or binding upon the parties unless the change or modification is in writing and signed by the parties. Notwithstanding the preceding sentence, the Company may amend the Plan to the extent permitted by the Plan.
21. Headings . The headings that are used in this Agreement are used for reference and convenience purposes only and do not constitute substantive matters to be considered in construing the terms and provisions of this Agreement.
22. Gender and Number . Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise.
23. Notice . Any notice required or permitted to be delivered hereunder shall be deemed to be delivered only when actually received by the Company or by the Participant, as the case may be, at the addresses set forth below, or at such other addresses as they have theretofore specified by written notice delivered in accordance herewith:
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a. Notice to the Company shall be addressed and delivered as follows:
AquaMed Technologies, Inc. | |||
Attn: | |||
Fax: |
b. Notice to the Participant shall be addressed and delivered as set forth on the signature page.
24. Tax Requirements . The Participant is hereby advised to consult immediately with his own tax advisor regarding the tax consequences of this Agreement, the method and timing for filing an election to include this Agreement in income under Section 83(b) of the Code, and the tax consequences of such election. By execution of this Agreement, the Participant agrees that if the Participant makes such an election, the Participant shall provide the Company with written notice of such election in accordance with the regulations promulgated under Section 83(b) of the Code. The Company or, if applicable, any Subsidiary (for purposes of this Section 24 , the term “ Company ” shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form in connection with the Plan, any federal, state, local, or other taxes required by law to be withheld in connection with this Award. The Company may, in its sole discretion, also require the Participant receiving shares of Common Stock issued under the Plan to pay the Company the amount of any taxes that the Company is required to withhold in connection with the Participant’s income arising with respect to this Award. Such payments shall be required to be made when requested by Company and may be required to be made prior to the removal of any restrictions on such shares or the delivery of any certificate representing shares of Common Stock, if such certificate is requested by the Participant in accordance with Section 6.4(a) of the Plan. Such payment may be made by (a) the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the required tax withholding obligations of the Company; (b) if the Company, in its sole discretion, so consents in writing, the actual delivery by the Participant to the Company of shares of Common Stock, that the Participant has not acquired from the Company within six (6) months prior thereto, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the required tax withholding payment; (c) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the vesting of this Award, which shares so withheld have an aggregate Fair Market Value that equals (but does not exceed) the required tax withholding payment; or (d) any combination of (a), (b), or (c). The Company may, in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant.
[ Remainder of Page Intentionally Left Blank;
Signature Page Follows. ]
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Participant, to evidence his consent and approval of all the terms hereof, has duly executed this Agreement, as of the date specified in Section 1 hereof.
COMPANY: | ||
AQUAMED TECHNOLOGIES, INC. | ||
By: | ||
Name: | ||
Title: |
PARTICIPANT: | ||
Signature | ||
Name: | ||
Address: | ||
6 |
Exhibit 23.1
Independent Registered Public Accounting Firm’s Consent
We consent to the inclusion in this Registration Statement of AquaMed Technologies, Inc. (a segment of Alliqua BioMedical, Inc.) (the “Company”) on Amendment No. 1 to Form S-1 File No. 333-229173 of our report dated March 11, 2019, which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, with respect to our audits of the financial statements of AquaMed Technologies, Inc. as of December 31, 2018 and 2017 and for each of the two years in the period ended December 31, 2018, which report appears in the Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading “Experts” in such Prospectus.
/s/ Marcum llp
Marcum llp
New York, NY
March 11, 2019
Exhibit 23.2
Independent Registered Public Accounting Firm’s Consent
We consent to the inclusion in this Registration Statement of AquaMed Technologies, Inc. on Amendment No. 1 to Form S-1 File No. 333-229173 of our report dated March 11, 2019, which includes an explanatory paragraph as to TO Pharmaceuticals LLC’s ability to continue as a going concern, with respect to our audits of the consolidated financial statements of TO Pharmaceuticals LLC and Subsidiaries as of December 31, 2018 and 2017 and for each of the two years in the period ended December 31, 2018, which report appears in the Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading “Experts” in such Prospectus.
/s/ Marcum llp
Marcum llp
New York, NY
March 11, 2019
Exhibit 99.1
CONSENT OF PROPOSED DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as amended, the undersigned hereby consents to be named in this Registration Statement on Form S-1 (the “Registration Statement”) of AquaMed Technologies, Inc., and any amendments thereto, as a person who is about to become a director on the Board of Directors of AquaMed Technologies, Inc. in connection with the spin-off by Alliqua BioMedical, Inc. of AquaMed Technologies, Inc. and the subsequent merger of AQ TOP, LLC and TO Pharmaceuticals, LLC. The undersigned also consents to the filing of this consent as an exhibit to the Registration Statement.
/s/ Berel Farkas
Berel Farkas
Exhibit 99.2
CONSENT OF PROPOSED DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as amended, the undersigned hereby consents to be named in this Registration Statement on Form S-1 (the “Registration Statement”) of AquaMed Technologies, Inc., and any amendments thereto, as a person who is about to become a director on the Board of Directors of AquaMed Technologies, Inc. in connection with the spin-off by Alliqua BioMedical, Inc. of AquaMed Technologies, Inc. and the subsequent merger of AQ TOP, LLC and TO Pharmaceuticals, LLC. The undersigned also consents to the filing of this consent as an exhibit to the Registration Statement.
/s/ Bernard Sucher
Bernard Sucher
Exhibit 99.3
CONSENT OF PROPOSED DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as amended, the undersigned hereby consents to be named in this Registration Statement on Form S-1 (the “Registration Statement”) of AquaMed Technologies, Inc., and any amendments thereto, as a person who is about to become a director on the Board of Directors of AquaMed Technologies, Inc. in connection with the spin-off by Alliqua BioMedical, Inc. of AquaMed Technologies, Inc. and the subsequent merger of AQ TOP, LLC and TO Pharmaceuticals, LLC. The undersigned also consents to the filing of this consent as an exhibit to the Registration Statement.
/s/ George Kegler
George Kegler
Exhibit 99.4
CONSENT OF PROPOSED DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as amended, the undersigned hereby consents to be named in this Registration Statement on Form S-1 (the “Registration Statement”) of AquaMed Technologies, Inc., and any amendments thereto, as a person who is about to become a director on the Board of Directors of AquaMed Technologies, Inc. in connection with the spin-off by Alliqua BioMedical, Inc. of AquaMed Technologies, Inc. and the subsequent merger of AQ TOP, LLC and TO Pharmaceuticals, LLC. The undersigned also consents to the filing of this consent as an exhibit to the Registration Statement.
/s/ Tsachi Cohen
Tsachi Cohen
Exhibit 99.5
CONSENT OF PROPOSED DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as amended, the undersigned hereby consents to be named in this Registration Statement on Form S-1 (the “Registration Statement”) of AquaMed Technologies, Inc., and any amendments thereto, as a person who is about to become a director on the Board of Directors of AquaMed Technologies, Inc. in connection with the spin-off by Alliqua BioMedical, Inc. of AquaMed Technologies, Inc. and the subsequent merger of AQ TOP, LLC and TO Pharmaceuticals, LLC. The undersigned also consents to the filing of this consent as an exhibit to the Registration Statement.
/s/ David I Johnson
David I. Johnson